Monday, December 28, 2009

Continuation Transaction -- Sohu.com Inc.

Today, the Covered Calls Advisor Portfolio(CCAP) established a covered calls position in Sohu.com Inc.(SOHU) by selling 2 Jan2010 options against the 200 shares owned in Sohu.com Inc. as follows:

12/28/09 Sell-to-Open (STO) 2 SOHU Jan2010 $60.00s @ $.85

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.
12/19/09 Dec09 Options Expired
12/28/09 Sell-to-Open (STO) 2 SOHU Jan2010 $60.00s @ $.85
Note: Price of SOHU was $57.52 when the Jan2010 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: +$988.65
= (200*($3.50+$.75+$.85) - 3*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $57.52):
-$1,314.95 = ($57.52-$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 $57.52): -$326.30
= (+$988.65 +$0.00 -$1,314.95)
Total Net Profit(If stock exercised at $60.00): +$169.70
= (+$988.65 +$0.00 -$818.95)

Absolute Return if Stock Price Unchanged at $57.52: -2.5%
= -$326.30/$12,818.95
Annualized Return If Unchanged (ARIU): -10.1%
= (-$326.30/$12,818.95)*(365/92 days)

Absolute Return if Stock Exercised at $60.00: +1.3%
= +$169.70/$12,818.95
Annualized Return If Exercised (ARIE): +5.3%
= (+$169.70/$12,818.95)*(365/92 days)

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