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Thursday, October 29, 2009

Cal Dive International (DVR) -- Closed

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Cal Dive International (DVR) was closed out today (10/29/09).

The transactions history was as follows:
10/26/09 Bought 500 DVR @ $10.21
10/26/09 Sold 5 DVR Nov09 $10.00 Calls @ $.55
10/29/09 Bought-to-Close 5 DVR Nov09 $10.00 Calls @ $.15
10/29/09 Sold 500 DVR @ $8.64

Cal Dive reported quarterly earnings today that were very disappointing. Earnings per share were $.03 lower than expected and revenue numbers missed analysts' forecast by an alarming 20.7%. Moreover, the company stated that "the fourth quarter is shaping up to be slower as our customers look to avoid the winter weather in the Gulf of Mexico and have already spent the majority of their capital budgets for the year". For this advisor, this represents a fundamental breakdown in the company's prospects, and as such is a sufficient reason to immediately exit the position despite the fact that this position was established only three days ago. Fortunately, this position was only 2.0% of the the overall Covered Calls Advisor Portfolio.

The overall performance results(including commissions) for the DVR transactions were as follows:
Stock Purchase Cost: $5,113.95
($10.21*500+$8.95 commission)

Net Profit:
(a) Options Income: +$174.60 [500*($.55 - $.15)- 2*($8.95 + 5*$.75)] commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$793.95
= ($8.64-$10.21)*500 - $8.95 commissions

Total Net Profit: -$619.35
= (+$174.60 +$0.00 -$793.95)

Absolute Return = -12.1%
= -$619.35/$5,113.95

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