Monday, December 21, 2009

Establish Market Vectors Russia ETF Covered Calls


A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Market Vectors Russia ETF (RSX) covered calls as follows:

Established Market Vectors Russia ETF (RSX) Covered Calls for Jan2010:
12/21/09 Bought 300 RSX @ $31.32
12/21/09 Sold 3 RSX Jan2010 $32.00 Calls @ $.85

Some possible overall performance results(including commissions) for the RSX transactions would be as follows:
Stock Purchase Cost: $9,404.95
= ($31.32*300+$8.95 commission)

Net Profit:
(a) Options Income: +$243.80
= (300*$.85 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $31.32):
-$8.95 = ($31.32-$31.32)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $32.00): +$195.05
= ($32.00-$31.32)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $31.32): +$234.85
= (+$243.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $32.00): +$438.85
= (+$243.80 +$0.00 +$195.05)

Absolute Return if Unchanged at $31.32: +2.5%
= +$234.85/$9,404.95
Annualized Return If Unchanged (ARIU) +35.1%
= (+$234.85/$9,404.95)*(365/26 days)

Absolute Return if Exercised at $32.00: +4.7%
= +$438.85/$9,404.95
Annualized Return If Exercised (ARIE) +65.5%
= (+$438.85/$9,404.95)*(365/26 days)

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