Tuesday, November 24, 2009

Continuation Transactions to Re-Establish Covered Calls For Seven Holdings

Last Friday was expiration Friday for November 2009. In a Covered Calls Advisor's blog recent post, it was noted that of the seventeen covered calls positions for November 2009: (1) Four were in-the-money at expiration and were therefore exercised and the stocks were called away; and (2) Thirteen positions ended out-of-the-money. Yesterday it was decided to retain seven equities in the CCAP and to establish Dec09 covered calls positions. The seven equities are Accenture Ltd(ACN), Amgen Inc(AMGN), EMCOR Group(EME), ITT Corporation(ITT), Noble Corporation(NE), Sohu.com Inc(SOHU), and UnitedHealth Group Inc(UNH). The results so far for these seven holdings are as follows:

1. Accenture Ltd.(ACN) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in ACN is as follows:
08/24/09 Bought 300 ACN @ $35.51
08/24/09 Sold 3 ACN Sep09 $35.00 Calls @ $1.15
Roll-Out Transaction:
09/18/09 Buy-to-Close (BTC) 10 ACN Sep09 $35.00s @ $1.10
09/18/09 Sell-to-Open (STO) 10 ACN Oct09 $35.00s @ $1.90
Note: The price of ACN was $36.08 today when this debit-spread was transacted.
10/13/09 Buy-to-Close (BTC) 3 ACN Oct09 $35.00s @ $4.20
10/13/09 Sell-to-Open (STO) 3 ACN Nov09 $40.00s @ $.80
Note: The price of ACN was $39.18 today when this debit-spread was transacted.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 ACN Dec09 $40.00s @ $1.25

Stock Purchase Cost: $10,661.95
= ($35.51*300+$8.95 commission)

Net Profit:
(a) Options Income: -$104.80
= (300*($1.15-$1.10+$1.90-$4.20+$.80+$1.25) - 4*$11.20 commissions)
(b) Dividend Income: +$225.00 ($.75 * 300 shares)
(c) Capital Appreciation (If exercised at $40.00): +$1,338.05
= ($40.00-$35.51)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $40.00): +$1,458.25
= (-$104.80 +$225.00 +$1,338.05)

Absolute Return if Exercised at $40.00: +13.7%
= +$1,458.25/$10,661.95
Annualized Return If Exercised (ARIE): +42.7%
= (+$1,458.25/$10,661.95)*(365/117 days)

2. Amgen Inc.(AMGN) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in AMGN is as follows:
10/22/09 Bought 200 AMGN @ $56.40
10/22/09 Sold 2 AMGN Nov09 $57.50 Calls @ $1.20
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 AMGN Dec09 $57.50s @ $.93
Note: Price of AMGN was $56.15 when the Dec09 options were sold.

Stock Purchase Cost: $11,288.95
= ($56.40*200+$8.95 commission)

Net Profit:
(a) Options Income: +$405.10
= (200*($1.20+$.93) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged at $56.15): -$58.95
= ($56.15-$56.40)*200 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $57.50): +$211.05
= ($57.50-$56.40)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $56.15): +$346.15
= (+$405.10 +$0.00 -$58.95)
Total Net Profit(If stock exercised at $57.50): +$616.15
= (+$405.10 +$0.00 +$211.05)

Absolute Return if Stock Price Unchanged at $56.15: +3.1%
= +$346.15/$11,288.95
Annualized Return If Unchanged (ARIU): +19.3%
= (+$346.15/$11,288.95)*(365/58 days)

Absolute Return if Stock Exercised at $57.50: +5.5%
= +$616.15/$11,288.95
Annualized Return If Exercised (ARIE): +34.3%
= (+$616.15/$11,288.95)*(365/58 days)

3. EMCOR Group(EME) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in EME is as follows:
10/20/09 Bought 400 EME @ $24.35
10/20/09 Sold 4 EME Nov09 $25.00 Calls @ $.85
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 4 EME Dec09 $25.00s @ $1.25
Note: Price of EME was $25.30 when the Dec09 options were sold.

Stock Purchase Cost: $9,748.95
= ($24.35*400+$8.95 commission)

Net Profit:
(a) Options Income: +$816.10
= (400*($.85+$1.25) - 2*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $25.00): +$251.05
= ($25.00-$24.35)*400 - $8.95 commissions

Total Net Profit(If stock exercised at $25.00): +$1,067.15
= (+$816.10 +$0.00 +$251.05)

Absolute Return if Stock Exercised at $25.00: +10.9%
= +$1,067.10/$9,748.95
Annualized Return If Exercised (ARIE): +66.6%
= (+$1,067.10/$9,748.95)*(365/60 days)

4. ITT Corporation(ITT) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in ITT is as follows:
10/23/09 Bought 300 ITT @ $55.28
10/23/09 Sold 3 ITT Nov09 $55.00 Calls @ $2.60
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 ITT Jan10 $55.00s @ $.85
Note: Price of ITT was $51.55 when the Jan10 options were sold.

Stock Purchase Cost: $16,592.95
($55.28*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,012.60 (300*($2.60+$.85) - 2*$11.20 commissions)
(b) Dividend Income: +$63.90 ($.213 * 300 shares)
c) Capital Appreciation(If stock price unchanged at $51.55): -$1,127.95
= ($51.55-$55.28)*300 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $55.00): -$92.95
= ($55.00-$55.28)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $51.55): -$51.45
= (+$1,012.60 +$63.90 -$1,127.95)
Total Net Profit(If stock exercised at $55.00): +$983.55
= (+$1,012.60 +$63.90 -$92.95)

Absolute Return if Stock Price Unchanged at $51.55: -0.3%
= -$51.45/$16,592.95
Annualized Return If Unchanged (ARIU): -1.3%
= (-$51.45/$16,592.95)*(365/85 days)

Absolute Return if Stock Exercised at $55.00: +5.9%
= +$983.55/$16,592.95
Annualized Return If Exercised (ARIE): +25.5%
= (+$983.55/$16,592.95)*(365/85 days)

5. Noble Corporation(NE) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in NE 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)].
Roll-Up-and-Out Transaction:
10/16/09 Buy-to-Close (BTC) 3 NE Oct09 $36.00s @ $5.60
10/16/09 Sell-to-Open (STO) 3 NE Nov09 $42.00s @ $1.75
Note: The price of NE was $41.56 today when this transaction occurred.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 NE Dec09 $42.00s @ $1.45
Note: Price of NE was $41.30 when the Dec09 options were sold.

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: -$779.80
= (300*($1.30-$5.22+$3.87-$5.60+$1.75+$1.45) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $41.30): +$2,187.05
= ($41.30-$33.98)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $42.00): +$2,397.05
= ($42.00-$33.98)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $41.30): +$1,407.25
= (-$779.80 +$0.00 +$2,187.05)
Total Net Profit(If stock price exercised at $42.00): +$1,617.25
= (-$779.80 +$0.00 +$2,397.05)

Absolute Return if Stock Price Unchanged at $41.30: +13.8%
= +$1,407.25/$10,202.95
Annualized Return If Unchanged (ARIU) +46.6%
= (+$1,061.45/$10,202.95)*(365/108 days)

Absolute Return if Exercised at $42.00: +15.9%
= +$1,617.25/$10,202.95
Annualized Return If Exercised (ARIE) +53.6%
= (+$1,617.25/$10,202.95)*(365/108 days)

6. Sohu.com Inc.(SOHU) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in SOHU is as follows:
10/16/09 Bought 200 SOHU @ $64.05
10/16/09 Sold 2 SOHU Nov09 $65.00 Calls @ $3.50
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 2 SOHU Dec09 $60.00s @ $.75
Note: Price of SOHU was $55.10 when the Dec09 options were sold.

Some possible overall performance results(including commissions) for the SOHU transactions would be as follows:
Stock Purchase Cost: $12,818.95
= ($64.05*200+$8.95 commission)

Net Profit:
(a) Options Income: +$829.10
= (200*($3.50+$.75) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $55.10):
-$1,798.95 = ($55.10-$64.05)*200 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $60.00): -$818.95
= ($60.00-$64.05)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $55.10): -$969.85
= (+$829.10 +$0.00 -$1,798.95)
Total Net Profit(If stock exercised at $60.00): +$10.15
= (+$829.10 +$0.00 -$818.95)

Absolute Return if Stock Price Unchanged at $55.10: -7.6%
= -$969.85/$12,818.95
Annualized Return If Unchanged (ARIU): -43.1%
= (-$969.85/$12,818.95)*(365/64 days)

Absolute Return if Stock Exercised at $60.00: +0.1%
= +$10.15/$12,818.95
Annualized Return If Exercised (ARIE): +0.5%
= (+$10.15/$12,818.95)*(365/64 days)

7. UnitedHealth Group Inc.(UNH) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in UNH is as follows:
09/23/09 Bought 400 UNH @ $27.05
09/23/09 Sold 4 UNH Oct09 $26.00 Calls @ $1.95
10/17/09 Oct09 Options Expired
The closing price of UNH was $24.45 on expiration Friday.
10/19/09 Sell-to-Open (STO) 4 UNH Nov09 $26.00s @ $.80
The price of UNH was $24.77 today when this transaction was executed.
Roll-Up Transaction:
11/09/09 Buy-to-Close (BTC) 4 UNH Nov09 $26.00s @ $3.15
11/09/09 Sell-to-Open (STO) 4 UNH Nov09 $29.00s @ $.92
Note: Net Debit-Spread upon Roll-Up was $2.23 ($3.15 - $.92) and the price of UNH was $29.02 when this debit-spread was transacted.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 4 UNH Dec09 $30.00s @ $.80
Note: Price of UNH was $29.34 when the Dec09 options were sold.

Some potential overall performance results(including commissions) for this UNH covered calls position would be as follows:
Stock Purchase Cost: $10,828.95
= ($27.05*400+$8.95 commission)

Net Profit:
(a) Options Income: +$480.20
= (400*($1.95+$.80-$3.15+$.92+$.80) - 4*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.34):
+$907.05 = ($29.34-$27.05)*400 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $30.00): +$1,171.05
= ($30.00-$27.05)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.34): +$1,387.25
= (+$480.20 +$0.00 +$907.05)
Total Net Profit(If stock exercised at $30.00): +$1,651.25
= (+$480.20 +$0.00 +$1,171.05)

Absolute Return if Stock Price Unchanged at $29.34: +12.8%
= +$1,387.25/$10,828.95
Annualized Return If Unchanged (ARIU): +53.7%
= (+$1,171.05/$10,828.95)*(365/87 days)

Absolute Return if Stock Exercised at $30.00: +15.2%
= +$1,651.25/$10,828.95
Annualized Return If Exercised (ARIE): +64.0%
= (+$1,651.25/$10,828.95)*(365/87 days)

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