The Covered Calls Advisor Portfolio (CCAP) covered calls position in ProShares Short S&P 500 ETF (SH) was closed out today (10/12/09).
The transactions history was as follows:
08/25/09 Bought 900 SH @ $57.74
08/25/09 Sold 9 SH Sep09 $59.00 Calls @ $.80
09/19/09 Sep09 Options Expired
The price of SH closed at $55.73 on expiration Friday.
09/24/09 Sell-to-Open (STO) 9 SH Oct09 $58.00s @ $.75
The price of SH was $56.57 today when this transaction was executed.
10/12/09 Bought-to-Close 9 SH Oct09 $58.00 Calls @ $.13
10/12/09 Sold 900 SH @ $55.20
This is the Covered Calls Advisor's first experience with covered calls using this S&P 500 inverse ETF. The good news is that the price of SH moved almost exactly one-for-one inversely (i.e. opposite) to its counterpart S&P 500 index on a percentage movement basis. Consequently, it is likely that out-of-the-money SH covered calls positions will be established whenever this advisor has either (1) a strong conviction regarding the likelihood of a bearish near-term stock market; and/or (2) a desire to hedge a bullish overall portfolio stance toward a more neutral status. The bad news in this instance is that this advisor's expected pullback in the overall market did not occur; instead,the market was bullish during the period the current position was held, so a substantial loss occurred in this position as shown below.
The overall performance results(including commissions) for the SH transactions were as follows:
Stock Purchase Cost: $51,974.95
(a) Options Income: +$1,230.90 [900*($.80 +$.75 - $.13)- 3*($8.95 + 9*$.75)] commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$2,294.95
= ($55.20-$57.74)*900 - $8.95 commissions
Total Net Profit: -$1,064.05
= (+$1,230.90 +$0.00 -$2,294.95)
Absolute Return = -2.0%
Annualized Return: -15.6%
= (-$1,064.05/$51,974.95)*(365/48 days)