Thursday, September 17, 2009

Roll Up and Out -- iShares MSCI China Fund ETF (FXI), iShares MSCI Emerging Markets ETF (EEM), and Noble Corporation (NE)

With only one day remaining until September expiration, it was decided to retain positions in FXI, EEM, and NE and to roll them up to a higher strike price and out to the Oct09 expiration. In each case, the Sep09 covered calls positions were substantially in-the-money and the time value remaining in each case was only $.05 or less on the Sep09 options. Most importantly, the Covered Calls Advisor decided to retain positions in these equities to establish next month (Oct09) covered call positions, so a roll-up-and-out debit spread transaction was executed in each instance to achieve this result. The transactions history to date and the profit potential for each of these equities is detailed below.

1. iShares MSCI China ETF Fund (FXI) -- Continuation Transaction
The following debit spread transaction was made today to establish an Oct09 covered calls position against the 1000 shares owned in iShares MSCI China ETF Fund (FXI):
09/17/09 Buy-to-Close (BTC) 10 FXI Sep09 $39.00s @ $4.97
09/17/09 Sell-to-Open (STO) 10 FXI Oct09 $43.00s @ $2.02
The price of FXI was $43.93 today when this transaction was executed and the remaining time value in the Sep09 option was only $.04 [$4.97-($43.93-$39.00)].

The transactions history to date is as follows:
08/28/09 Bought 1000 FXI @ $40.04
08/28/09 Sold 10 FXI Sep09 $39.00 Calls @ $1.95
Roll-Up-and-Out Transaction:
09/17/09 Buy-to-Close (BTC) 10 FXI Sep09 $39.00s @ $4.97
09/17/09 Sell-to-Open (STO) 10 FXI Oct09 $43.00s @ $2.02
Note: The price of FXI was $43.93 today when this debit-spread was transacted.

The overall performance results(including commissions) for this FXI covered calls position would be as follows:
Stock Purchase Cost: $40,048.95
($40.04*1000+$8.95 commission)

Net Profit:
(a) Options Income: -$1,032.90
= (1000*($1.95-$4.97+$2.02) - 2*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $43.00): +$2,951.05
= ($43.00-$40.04)*1000 - $8.95 commissions

Total Net Profit(If stock price exercised at $43.00): +$1,918.15
= (-$1,032.90 +$0.00 +$2,951.05)

Absolute Return if Exercised at $43.00: +4.8%
= +$1,918.15/$40,048.95
Annualized Return If Exercised (ARIE) +35.0%
= (+$1,918.15/$40,048.95)*(365/50 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation Transaction
The following debit spread transaction was made today to establish an Oct09 covered calls position against the 500 shares owned in iShares MSCI Emerging Markets ETF (EEM):
09/17/09 Buy-to-Close (BTC) 5 EEM Sep09 $36.00s @ $3.29
09/17/09 Sell-to-Open (STO) 5 EEM Oct09 $38.00s @ $2.14
The price of EEM was $39.24 today when this transaction was executed.

The transactions history to date is as follows:
08/25/09 Bought 500 EEM @ $36.64
08/25/09 Sold 5 EEM Sep09 $36.00 Calls @ $1.56
Roll-Up-and-Out Transaction:
09/17/09 Buy-to-Close (BTC) 5 EEM Sep09 $36.00s @ $3.29
09/17/09 Sell-to-Open (STO) 5 EEM Oct09 $38.00s @ $2.14
Note: The price of EEM was $39.24 today when this debit-spread was transacted and the remaining time value in the Sep09 option was only $.05 [$3.29-($39.24-$36.00)].

The overall performance results(including commissions) for this EEM covered calls position would be as follows:
Stock Purchase Cost: $18,328.95
($36.64*500+$8.95 commission)

Net Profit:
(a) Options Income: +$179.60
= (500*($1.56-$3.29+$2.14) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $38.00): +$671.05
= ($38.00-$36.64)*500 - $8.95 commissions

Total Net Profit(If stock price exercised at $38.00): +$850.65
= (+$179.60 +$0.00 +$671.05)

Absolute Return if Exercised at $38.00: +4.6%
= +$850.65/$18,328.95
Annualized Return If Exercised (ARIE) +32.0%
= (+$850.65/$18,328.95)*(365/53 days)


3. Noble Corporation (NE) -- Continuation Transaction
The following debit spread transaction was made today to establish an Oct09 covered calls position against the 300 shares owned in Noble Corporation (NE):
09/17/09 Buy-to-Close (BTC) 3 NE Sep09 $34.00s @ $5.22
09/17/09 Sell-to-Open (STO) 3 NE Oct09 $36.00s @ $3.87
The price of NE was $39.19 today when this transaction was executed.

The transactions history to date is as follows:
09/02/09 Bought 300 NE @ $33.98
09/02/09 Sold 3 NE Sep09 $34.00 Calls @ $1.30
Roll-Up-and-Out Transaction:
09/17/09 Buy-to-Close (BTC) 3 NE Sep09 $34.00s @ $5.22
09/17/09 Sell-to-Open (STO) 3 NE Oct09 $36.00s @ $3.87
Note: The price of NE was $39.19 today when this debit-spread was transacted and the remaining time value in the Sep09 option was only $.03 [$5.22-($39.19-$34.00)].

The overall performance results(including commissions) for this NE covered calls position would be as follows:
Stock Purchase Cost: $10,202.95
($33.98*300+$8.95 commission)

Net Profit:
(a) Options Income: -$37.40
= (300*($1.30-$5.22+$3.87) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $36.00): +$597.05
= ($36.00-$33.98)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $36.00): +$559.65
= (-$37.40 +$0.00 +$597.05)

Absolute Return if Exercised at $36.00: +5.5%
= +$559.65/$10,202.95
Annualized Return If Exercised (ARIE) +44.5%
= (+$559.65/$10,202.95)*(365/45 days)

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