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Monday, December 21, 2009

Establish Ensco International Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Ensco International Inc.(ESV) covered calls as follows:

Established Ensco International Inc.(ESV) Covered Calls for Jan2010:
12/21/09 Bought 200 ESV @ $42.40
12/21/09 Sold 2 ESV Jan2010 $45.00 Calls @ $.70

Some possible overall performance results(including commissions) for the ESV transactions would be as follows:
Stock Purchase Cost: $8,488.95
= ($42.40*200+$8.95 commission)

Net Profit:
(a) Options Income: +$129.55
= (200*$.70 - $10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $42.40):
-$8.95 = ($42.40-$42.40)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $45.00): +$511.05
= ($45.00-$42.40)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $42.40): +$120.60
= (+$129.55 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $45.00): +$640.60
= (+$129.55 +$0.00 +$511.05)

Absolute Return if Unchanged at $42.40: +1.4%
= +$120.60/$8,488.95
Annualized Return If Unchanged (ARIU) +19.9%
= (+$120.60/$8,488.95)*(365/26 days)

Absolute Return if Exercised at $45.00: +7.5%
= +$640.60/$8,488.95
Annualized Return If Exercised (ARIE) +105.9%
= (+$640.60/$8,488.95)*(365/26 days)

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