Monday, December 21, 2009

Continuation Transactions -- Amgen Inc.(AMGN) and Noble Corporation (NE)

This past Friday was expiration Friday for December 2009 options. In a Covered Calls Advisor's blog recent post, it was noted that of the thirteen covered calls positions for December 2009: (1) Six were in-the-money at expiration and were therefore exercised and the stocks were called away; and (2) Seven positions ended out-of-the-money. Today, it was decided to retain two of the total of seven out-of-the-money equities (Amgen and Noble Corp) in the CCAP and to establish Jan2010 covered calls positions. Decisions regarding the remaining five equities to either sell them or to retain them and establish Jan2010 covered calls positions will be made in the next few days and the associated actual transactions will be posted on this blog site on the same day they occur. Detailed explanations of the covered calls positions established today for AMGN and NE are as follows:

1. Amgen Inc.(AMGN) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in Amgen Inc.(AMGN) was out-of-the-money at Dec09 expiration. Today it was decided to retain the 200 shares of Amgen Inc.(AMGN) and to establish a Jan2010 covered calls position as follows:

12/21/09 Sell-to-Open (STO) 2 AMGN Jan2010 $57.50s @ $1.14

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.
12/19/09 Dec09 Options Expired
12/21/09 Sell-to-Open (STO) 2 AMGN Jan2010 $57.50s @ $1.14
Note: Price of AMGN was $56.80 when the Jan2010 options were sold.

Some possible overall performance results(including commissions) for the AMGN transactions would be as follows:
Stock Purchase Cost: $11,288.95
= ($56.40*200+$8.95 commission)

Net Profit:
(a) Options Income: +$622.65
= (200*($1.20+$.93+$1.14) - 3*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged at $56.80): +$71.05
= ($56.80-$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 $56.80): +$693.70
= (+$622.65 +$0.00 +$71.05)
Total Net Profit(If stock exercised at $57.50): +$833.70
= (+$622.65 +$0.00 +$211.05)

Absolute Return if Stock Price Unchanged at $56.80: +6.1%
= +$693.70/$11,288.95
Annualized Return If Unchanged (ARIU): +26.1%
= (+$693.70/$11,288.95)*(365/86 days)

Absolute Return if Stock Exercised at $57.50: +7.4%
= (+$833.70/$11,288.95)
Annualized Return If Exercised (ARIE): +31.3%
= (+$833.70/$11,288.95)*(365/86 days)

2. Noble Corporation(NE) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in Noble Corp.(NE) was out-of-the-money at Dec09 expiration. Today it was decided to retain the 300 shares of Noble Corp.(NE) and to establish a Jan2010 covered calls position as follows:

12/21/09 Sell-to-Open (STO) 3 NE Jan2010 $43.00s @ $.90

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.
12/19/09 Dec09 Options Expired
12/21/09 Sell-to-Open (STO) 3 NE Jan2010 $43.00s @ $.90
Note: Price of NE was $41.75 when the Jan2010 options were sold.

Some possible overall performance results(including commissions) for the NE transactions would be as follows:
Stock Purchase Cost: $10,202.95
($33.98*300+$8.95 commission)

Net Profit:
(a) Options Income: -$521.00
= (300*($1.30-$5.22+$3.87-$5.60+$1.75+$1.45+$.90) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $41.75): +$2,322.05
= ($41.75-$33.98)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $43.00): +$2,697.05
= ($43.00-$33.98)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $41.75): +$1,801.05
= (-$521.00 +$0.00 +$2,322.05)
Total Net Profit(If stock price exercised at $43.00): +$2,176.05
= (-$521.00 +$0.00 +$2,697.05)

Absolute Return if Stock Price Unchanged at $41.75: +17.7%
= +$1,801.05/$10,202.95
Annualized Return If Unchanged (ARIU) +47.4%
= (+$1,801.05/$10,202.95)*(365/136 days)

Absolute Return if Exercised at $43.00: +21.3%
= +$2,176.05/$10,202.95
Annualized Return If Exercised (ARIE) +57.2%
= (+$2,176.05/$10,202.95)*(365/136 days)

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