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Thursday, August 6, 2009

Returns -- Through July 2009

This report on the Covered Calls Advisor Portfolio (CCAP) performance results for the month of July 2009 were delayed a few days since I just returned from vacation. The results shown below are as of the market close on July 31st.

1. Month of July 2009 Result:

The Covered Calls Advisor Portfolio increased by 3.14% for the month of July 2009. In comparison, the benchmark Russell 3000 index (IWV) increased by 7.04% for the month.

2. Year-to-Date Through July 2009 Results:

The 2009 Year-to-Date results are as follows:

CCAP Absolute Return (Jan 1st through July 31, 2009) = +30.36%
= ($260,372.06 - $199,733.10)/$199,733.10

Benchmark Russell 3000(IWV) Absolute Return (Jan 1st through July 31,2009) = +10.88%
= ($57.66 - $52.00)/$52.00

For the first seven months of 2009, the table below shows that CCAP has outperformed the Russell 3000 benchmark by 19.47 percentage points (30.36% - 10.88%):

3. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) was begun in September, 2007. The annualized returns achieved for 2007 and 2008 compared with the Russell 3000 benchmark results were as follows:

Note: This Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. A simple example demonstrates how it is calculated:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.

Regards and Godspeed,



  1. Great Blog Jeff!

    I have learned a lot from your site and I admire your dedication to tracking the results.

    I have a general question and would appreciate your thoughts. If I understand correctly, the returns since inception on the CCAP would be stated as:

    ($260,372.06 - $250,000)/$250,000

    = 4.15%

    Is that correct? I attempted covered calls during 2008 and had returns of roughly 20%, starting with $40,000. Because I wrote calls against stock I intended to hold long, I never closed positions at a loss. As a result, my capital is invested in good companies, but I'm unable to write more calls until the market conditions improve!

    My question to you: Do you think my returns were better than expected, and/or were they due in part to not closing positions at a loss?

    I'm trying to figure out what my next steps are (continue what I was doing or undertake a strategy similar to your own), but there's a lot to figure out!

    I look forward to your comments.

    Kind regards, Rob

  2. Rob,
    Thanks for your comments. Your calculation of my returns is correct.
    Regarding your own performance, your comment "but I'm unable to write more calls until the market conditions improve" is puzzling to me. As you know, I continue to be 100% invested in next-month covered calls at all times (regardless of the price of the underlying stock) and there is nothing to prevent you from continuing to sell calls against your stock holdings at any time if you wish to do so.

  3. Hi Jeff,

    Thank you for the feedback! Your comment (about my comment) has made me look at this again, and perhaps I missed something obvious.

    I currently have shares of PCAR with a basis of $49, and the stock is trading around $33.

    Are you suggesting that I might sell calls against my holdings, using, say a slightly out-of-the-money strike of $34?

    If so, the only reason I haven't done that is because I'm not sure how to protect myself from being called out on stock that I paid quite a bit more than $34 for.

    What ideas do you have for protecting the position? Would I simply monitor it and buy back the call for a small loss if PCAR moves higher than $34?

    I look forward to your reply, and sorry for such a basic question!

    Cheers, Rob

  4. Rob,
    My sense is that you believe that despite the price decline in PCAR, it remains a fundamentally sound company that you would like to continue to own going forward. If so, then I would agree with your approach of selling next-month (now you would look at Sep09 expiration) strike prices that are $1 or $2 above the current stock price.
    But I'd also like you to read the following items related to 'sunk costs' and also 'the disposition effect'. Deciding when to sell a stock is a very important decision and we should not allow the price we originally paid for the stock to influence our current perspective on its current investment-worthiness when compared against other stock ownership alternatives.

  5. Hi Jeff,

    Thanks for the links to articles. All good content! You're correct in your assessment that I still believe that my investments are fundamentally sound. If I didn't think that was true, I would sell and take the loss.

    I will continue to write slightly OTM calls on these positions and see where that takes me. For new money I may take a different approach than previously.

    Thanks for the discussion. It's been informative! Keep up the good work on your excellent blog too.

    Cheers, Rob

  6. Hi Jeff

    Are the negative returns you had during January and in 2008 a result of realized losses or unrealized losses?