Thursday, April 30, 2009

Returns -- Through April 2009

As shown in the table below, the Covered Calls Advisor Portfolio (CCAP) has outperformed the Russell 3000 benchmark by 15.0 percentage points (13.02%+1.98%) so far in 2009:











1. April 2009 Year-to-Date Results:

CCAP Absolute Return (Jan 1st through Apr 30th, 2009) = +13.02%
($225,738.35-$199,733.10)/$199,733.10

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Apr 30th,2009) = -1.98%
($50.97-$52.00)/$52.00


2. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) was begun in September, 2007. The annualized returns achieved for 2007 and 2008 compared with the Russell 3000 benchmark results were as follows:

Bank of America Corp (BAC) -- Closed

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Bank of America(BAC) was closed out today (4/30/09). The federal government's banking stress test results will be released soon. If it is determined that BAC requires additional capital to be raised, that news could have a substantial negative effect on the price of BAC stock. Consequently, with the stock now above the current strike price, it was decided that the current risk/reward position favors taking profits and closing out the BAC covered calls position at this time.

The transactions history was as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 500 BAC @ $7.16
03/23/09 Inital Calls Sold Transaction -- Sold 5 BAC Apr09 $6.00 Calls @ $1.76
04/09/09 Debit Spread Transaction:
04/09/09 Buy-to-Close (BTC) 5 BAC Apr09 $6.00s @ $3.05
04/09/09 Sell-to-Open (STO) 5 BAC May09 $9.00s @ $1.35
04/30/09 Closing Transaction:
04/30/09 Bought-to-Close 5 BAC May09 $9.00s @ $1.09
04/30/09 Sold 500 BAC @ $9.231

The overall performance results(including commissions) for the BAC transactions are as follows:
Stock Purchase Cost: $3,588.95
($7.16*500+$8.95 commission)

Net Profit:
(a) Options Income: -$540.40 (500*($1.76-$3.05+$1.35-$1.09) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$1,026.55
= ($9.231-$7.16)*500 - $8.95 commissions

Total Net Profit: +$486.15
= (-$540.40 +$0.00 +$1,026.55)

Absolute Return = +13.5%
+$486.15/$3,588.95

Annualized Return: +130.1%
= (+$486.15/$3,588.95)*(365/38 days)

Saturday, April 25, 2009

The Covered Calls Monthly Cycle

There is a readily identifiable monthly cycle in the covered calls investing process, and this article will describe aspects of the cycle as it applies to the Covered Calls Advisor's approach. Hopefully, it will encourage you to analyze and to further refine your own covered calls investing style and process.

The primary factor that drives the monthly cycle is, of course, the fact that stock options have monthly expiration dates which occur on the third Friday of each calendar month. In addition, for the Covered Calls Advisor Portfolio (CCAP), this monthly cycle has an even more pronounced effect since this advisor's preference is to establish only near-month covered calls positions. For example, the CCAP now contains 15 covered call positions and all of them are for the near-month expiration, which is May 2009. If you are interested in pursuing this topic further, this advisor's rationale for investing exclusively in near-month covered calls was presented in a prior post on this blog:
http://tinyurl.com/yojr2u

We have just completed the first week of the May09 expiration month. When considering what typically occurs during an expiration month cycle, it is instructive to consider each week within the month and the primary activities during that week.
For ease of reference going forward, this article will address the weeks within any expiration month as follows:

(a) Week 1: The first trading week (Monday through Friday) after the end of the prior expiration month. For example, I am writing this article on April 25th during the weekend immediately following the completion of 'week 1' of the May09 expiration month.
(b) Mid-Month Weeks: There are either two or three 'mid-month weeks' since every expiration month contains either 4 or 5 trading weeks. In a 4-week month, the mid-month weeks are weeks 2 and 3; In a 5-week month they will be weeks 2 through 4.
(c) Expiration Week: The final trading week that concludes with expiration Friday each month. For example, in the current expiration month scenario of May09, 'expiration week' will occur between Monday, May 11th and Friday May 15th.

Now, let's consider the primary activities that occur during each of these three monthly time periods (i.e. week 1, mid-month, and expiration week) in the context of the current expiration month, which is May09.

Week 1:
As I write this article, we are at the end of week 1 for May09. This week's activities were primarily devoted to establishing new covered calls positions using the cash available at the end of the Apr09 expiration, which occurred one week earlier on Friday (April 17th). These new positions were established during this past week at a rate of approximately one or two per day for each day from Monday through Friday. There is no rush to reinvest all available cash on the Monday following expiration. But on the other hand, there is normally no need to delay establishing new positions beyond week 1; in fact, doing so begins to adversely affect the advantages of capturing the most time-value available from the call options being sold. For the Covered Calls Advisor, using all of week 1 to establish new positions is the happy medium -- a deliberate, disciplined pace that allows for a calm, rational decision-making process. This pace is neither too frenetic nor too prolonged. For this Advisor, it is just right.

Mid-Month Weeks:
There are four weeks for May09, so this month there are two mid-month weeks which will run from this Monday, April 27th through Friday, May 8th. During this period, position management is paramount. Existing positions are monitored to identify any that should be rolled-up or rolled-down to a different strike price. During the two mid-month weeks, any rolls transacted will be done with the current expiration month (now May09). A more detailed explanation of the specific criteria used by the Covered Calls Advisor for decision-making related to rolling covered calls positions will be the topic of a separate post on this blog in the near future.

Expiration Week:
Expiration Week for May09 will start Monday, May 11th and conclude Friday, May 15th. During expiration week, the primary activities include:

1. Deciding whether to keep or sell the existing positions. That is, which stocks do we want to retain for next month's covered calls and which stocks do we prefer to sell? This topic was addressed in a prior post: http://tinyurl.com/6arhfs
Expiration week is the time frame when the Covered Calls Advisor takes action to keep those underlying stocks that will be retained to establish June09 positions and to sell those underlying stocks we want to eliminate from next-month's portfolio.
(a) For the 'keepers', if the stock is below the current strike price, we simply allow the May09 options to expire and thereby retain the underlying stock which can be established as a June09 covered call position early the following week. If the stock is priced above the current strike price, one of two alternatives will be implemented. Either a roll-out to June09 transaction will be done (by buying-to-close the current option and simultaneously selling-to-open a June09 option); or the stock will be allowed to be called away on expiration Friday on May 15th. At that pooint, the stock in the same company would be re-purchased on the following Monday, May 18th as the foundation for establishing a new covered calls position for the June09 expiration. To retain an in-the-money stock for the following month, either of these two approaches is satisfactory.
(b) For the stocks we wish to sell:
- If the stock is out-of-the-money, we will allow the May09 option to expire worthless on expiration Friday and then sell the stock soon after the market opens on the following Monday morning.
- If the stock is in-the-money, we will allow it to be called away on expiration Friday, May 15th.

2. The second primary activity during expiration week is stock selection. Although stock research can and should occur throughout the month, expiration week is the primary time to analyze and decide what new stock positions will be established for next month's covered calls. This activity is the single most important task for covered calls investors -- good stock selection is essential to achieving success with covered calls investing. The preferred stock selection methods used by this advisor are described in a prior post: http://tinyurl.com/6m4as9

Hopefully, these comments have provided some food-for-thought as related to your own investing process. As always, your comments and questions are welcomed. Please provide them by either clicking the 'comments' link below or by posting them at the justcoveredcalls Yahoo!Group site. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Godspeed to All,

Jeff

Friday, April 24, 2009

Establish Fluor Corporation Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Fluor Corporation(FLR) covered calls as follows:

Established Fluor Corporation(FLR) Covered Calls for May09:
04/24/09 Bought 500 FLR @ $39.975
04/24/09 Sold 5 FLR May09 $40.00 Calls @ $2.40

Fluor provides engineering, procurement, construction management, and project management services worldwide. Its business is well-balanced with approximately half coming from the oil & gas industry and half from other industrial and government infrastructure projects. As a highly-respected contractor, Flour is poised to benefit from both government infrastructure stimulus efforts and eventually from a recovery from the current recession. In addition, with the current price of oil near the $50 level, this advisor believes that oil is more likely to trade higher over the next several years. If the oil price does trend higher, Flour's stock price would also likely move significantly higher as well. Fluor's business is also geographically well-diversified with about half coming from within the U.S. and the other half from numerous countries worldwide. Another very important consideration for the Covered Calls Advisor is a company's valuation characteristics, and Fluor is very attractive on this basis as well.

Some potential results from this Fluor covered calls transaction are as follows:

Absolute Return if Unchanged at $39.975: +6.0%
Annualized Return If Unchanged (ARIU): +99.6%
= ($2.40/$39.975)*(365/22 days)

Absolute Return if Exercised at $40.00: +6.1%
=[$2.40+($40.00-$39.975)]/$39.975
Annualized Return If Exercised (ARIE): +100.6%

Downside Breakeven Price Point: $37.575
Downside Breakeven Protection: 6.0%

Amgen Inc.(AMGN) -- Continuation Transaction

The following transaction was made today to establish a covered calls position against the 300 shares already owned in Amgen Inc (AMGN):
04/24/09 Sell-to-Open (STO) 3 AMGN May09 $50s @ $1.05

The Transactions History to date is as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 300 AMGN @ $48.95
03/23/09 Inital Calls Sold Transaction -- Sold 3 AMGN Apr09 $50.00 Calls @ $1.70
04/18/09 Apr09 Options Expired
04/24/09 Continuation Transaction -- Sell-to-Open (STO) 3 AMGN May09 $50s @ $1.05
Note: The price of AMGN was $48.95 today when the call options were sold.

The overall performance results(including commissions) for the AMGN transactions would be as follows:
Stock Purchase Cost: $14,693.95
($48.95*300+$8.95 commission)

Net Profit:
(a) Options Income: +$802.60 [300*($1.70+$1.05) - 2*$11.20 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $48.95): -$8.95
= ($48.95-$48.95)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $50.00): +$306.05
= ($50.00-$48.95)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $48.95): +$793.65
= (+$802.60 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $50.00): +$1,108.65
= (+$802.60 +$0.00 +$306.05)

Absolute Return if Stock Price Unchanged at $48.95: +5.4%
= +$793.65/$14,693.95
Annualized Return If Stock Price Unchanged (ARIU) +37.2%
(+$793.65/$14,693.95)*(365/53 days)

Absolute Return if Exercised at $45.00: +7.5%
= +$1,108.65/$14,693.95
Annualized Return If Exercised (ARIE) +52.0%
(+$1,108.65/$14,693.95)*(365/53 days)

Thursday, April 23, 2009

Establish iShares Russell 2000 Small Cap Index ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares Russell 2000 Small Cap Index ETF (IWM) covered calls.

The iShares Russell 2000 Small Cap Index ETF (ticker symbol IWM) is an index fund that represents the small cap sector of the U.S. equity market. This ETF was selected in order to obtain additional portfolio diversification in the Covered Calls Advisor Portfolio through greater exposure to small cap companies. Historically, small cap stocks have slightly outperformed large cap stocks and this outperformance is especially pronounced in the early stages of a post-recession economic recovery.

Established iShares Russell 2000 Value Index ETF Covered Calls for Feb09:
04/23/09 Bought 400 IWM @ $46.62
04/23/09 Sold 4 IWM May09 $47.00 Calls @ $1.98

Some potential results from this transaction are as follows:

Absolute Return if Unchanged at $46.62: +4.2%
Annualized Return If Unchanged (ARIU): +67.4%

Absolute Return if Exercised: +5.1%
=[$1.98+($47.00-$46.62)]/$46.62
Annualized Return If Exercised (ARIE): +80.3%

Downside Breakeven Price Point: $44.64
Downside Breakeven Protection: 4.2%

Tuesday, April 21, 2009

Establish Endo Pharmaceutical Holdings Inc Covered Calls


A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Endo Pharmaceutical Holdings Inc (ENDP) covered calls.

A summary of the transactions is as follows:
Established Endo Pharmaceutical Holdings Inc. Covered Calls for May09:
04/21/09 Bought 500 ENDP @ $17.61
04/21/09 Sold 5 ENDP May09 $17.50 Calls @ $.85

Endo Pharmaceuticals is involved in the research, development, sale, and marketing of branded and generic prescription pharmaceuticals for treating and managing pain primarily in the United States.
On the Covered Calls Advisor's 'Buy Alerts' spreadsheet, ENDP received a total of 9 points (out of a maximum of 9 points). It is very unusual for a potential investment to achieve a 9-out-of-9 result and the Covered Calls Advisor normally establishes a covered calls position in companies whenever this occurs. One caveat -- if you are thinking about establishing a covered calls position in ENDP, recognize that the options liquidity is very limited. Consequently, the bid/ask spread is wider than normal and the accompanying trading friction in establishing an attractively priced initial position as well as the feasibility of rolling the position at a later date are somewhat cumbersome.




Some potential results from this transaction are as follows:

Absolute Return if Exercised at $17.50: +4.2%
= [$.85-($17.61-$17.50)]/$17.61
Annualized Return if Exercised: +61.2%

Downside Breakeven Price Point: $16.76
Downside Breakeven Protection: 4.2%

Establish Noble Corporation Covered Calls

A new covered call position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Noble Corp(NE) covered calls as follows:

Established Noble Corp Covered Calls for May09:
04/21/09 Bought 500 NE @ $26.37
04/21/09 Sold 5 NE May09 $27.50 Calls @ $1.02

Noble Corporation provides contract drilling services for the oil and gas industry. It supplies its 43 jack-ups and 20 deepwater rigs to a worldwide exploration and production market for corporate and state-owned customers in the Gulf of Mexico, Brazil, Middle East, W. Africa, and India.

Noble Corp's stock is now very attractively priced -- the entire company is valued slightly below the liquidation value of its rig fleet. And it is also attractive on several other key valuation metrics, including: (1) lowest P/E ratio in 20 years; (2) strong balance sheet with debt-to-capitalization declining to 11.7%; and a good cash position; (3) an ongoing commitment to share buybacks; (4) strong and increasing cash flow; (5) very strong recent cost control performance. These results are a testimony to the capabilities being demonstrated by the relatively new senior management team. This Covered Calls Advisor believes that the decision to re-domicile to Switzerland (from the Caymans) was one important demonstration of management's good strategic vision. And in the highly cyclical oil & gas industry, their prudent, conservative approach to cost controls as well as contract management seems very sensible. If oil pricing can show some stability at $45+ over the next few months (which this advisor believes is very likely), then the current softness in rig demand should begin to improve -- and Noble is well positioned to benefit as this occurs. In addition, management's future growth focus on worldwide deepwater rigs should serve it well.

Some potential results from this covered calls transaction are as follows:

Absolute Return if Stock Price Unchanged at $26.37: +3.9%
= $1.02/$26.37
Annualized Return if Unchanged(ARIU): +56.4%

Absolute Return if Exercised at $27.50: +8.2%
= [($1.02+($27.50-$26.37)]/$47.05
Annualized Return if Exercised(ARIE): +119.0%

Downside Breakeven Price Point: $25.35
Downside Breakeven Protection: 3.9%

Establish iShares MSCI China ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI China ETF (FXI). A summary of the transactions today is as follows:


Established iShares MSCI China ETF (FXI) Covered Calls for May09:
04/21/09 Bought 1200 FXI @ $31.52
04/21/09 Sold 12 FXI May09 $33.00 Calls @ $1.10

China ranks #1 in this advisor's '2009 Country Value Rankings'(see chart below). Some of the key value-oriented metrics for China are as follows:
- Real GDP growth of approximately 6.0% in 2009. This compares with a projection of negative growth this year in most of the world's major countries.
- Estimated inflation of 0%
- Price/Book ratio of 2.66 is a below-average valuation relative to other countries (for example, U.S. is currently at 3.86).


The FXI ETF was selected as the primary investment vehicle for achieving wide exposure to China's stock market performance. It consists of market-cap-weighted positions in the 25 largest companies in China, and although it is most heavily weighted in the financial, energy, and telecommunications sectors, it still provides a relatively good way to diversify across the Chinese economy. Since China remains as the Covered Calls Advisor's top investment idea, a major commitment of 19% of the total CCAP is now allocated to FXI covered calls. Moreover, as a direct reflection of this Advisor's current bullishness regarding China, a bullish covered calls position(4.7% out-of-the-money) was established.

Some key indicators for this FXI covered calls position is:

Absolute Return if Stock Price Unchanged at $31.52: +3.5%
=$1.10/$31.52
Annualized Return if Unchanged (ARIU): +51.0%
=($1.10/$31.52)/(365/25 days)

Absolute Return if Exercised at $33.00: +8.2%
= [$1.10 + ($33.00 - $31.52)]/$31.52
Annualized Return if Exercised(ARIE): +119.5%
= [$1.10 + ($33.00 - $31.52)]/(365/25 days)

Downside Breakeven Price Point: $30.42
Downside Breakeven Protection: 3.5%

Monday, April 20, 2009

Establish China Mobile LTD ADR Covered Calls

A new covered call position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of China Mobile LTD ADR (CHL) covered calls. China Mobile is the one of the world's largest companies with a current market capitaliziation of $183 billion. It is by far the world's largest mobile telecommunications service provider with 464 million subscribers in China, and it continues to experience significant sequential quarterly subscriber growth.

You might recall that this Advisor had an Apr09 covered calls position in CHL which was assigned at Apr09 expiration last Friday. Because CHL continues to rate very highly on the CCAP 'Buy Alerts' spreadsheet, it was decided to re-establish a covered calls position in CHL with a May09 expiration. A summary of the transactions today is as follows:

Established China Mobile LTD ADR Covered Calls for May09:
04/20/09 Bought 400 CHL @ $45.65
04/20/09 Sold 4 CHL May09 $45.00 Calls @ $2.40

Absolute Return if Exercised (at $45.00 on May 16th expiration date): +5.8%
= ($2.40-($45.65-$45.00)+$.9058 ex-div)/$45.65
Annualized Return If Exercised (ARIE): +81.6%
Downside Breakeven Price Point: $42.3442
Downside Breakeven Protection: 7.2%
Note: Since there is a $.9058 ex-div scheduled for 5/11, if the stock is in-the-money on 5/10 and the time-value remaining in the call option is greater than $.9058, then it would be expected that the call would be exercised early and the stock called away on 5/10 at the $45.00 strike price. In this event, the annualized return achieved would still be a very attractive 69.9%.

Establish Archer Daniels Midland Co. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Archer Daniels Midland Co.(ADM) covered calls.

A summary of the transactions is as follows:
Established Archer Daniels Midland Co. Covered Calls for May09:
04/20/09 Bought 400 ADM @ $25.27
04/20/09 Sold 4 ADM May09 $25.00 Calls @ $1.70

Archer Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products primarily in the United States.

On the Covered Calls Advisor's 'Buy Alerts' spreadsheet, ADM received a total of 7 points (out of a maximum of 9 points). This Advisor likes to see at total of at least 7 points for a company to qualify as a potential investment. The two categories in which ADM did not meet the desired thresholds are:
(1) Return-on-Equity of 18.4% is below the desired 20.0% threshold, but it is reasonably close and is still well above the S&P 500 ROE average.
(2) The 51.4% debt-ratio is well above the maximum desired of 30.0%, but this deficiency is more than compensated for by the very high cash position and free-cash-flow results.

In addition to the 'Buy Alerts' worksheet indicators, a review of the call option chain for ADM revealed that the premiums are very attractive at this time -- the implied volatility for the May09 $25 strike was 57.5% at the time this transaction was executed, which is substantially higher than the 47.6% historic volatility for ADM over the prior two-month period. As shown below, this provides a very attractive potential annualized return for these ADM covered calls:

Absolute Return if Exercised at $25.00: +5.7%
= [$1.70-($25.27-$25.00)]/$25.27
Annualized Return if Exercised: +87.1%
Downside Breakeven Price Point: $23.57
Downside Breakeven Protection: 6.7%

Saturday, April 18, 2009

April 2009 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of eleven positions with April 2009 expirations, with the following results:
- Ten positions (BHP,CHL,ESV,FLR,HD,FXI,JCOM,POT,TTEC, and INT) closed in-the-money.
The calls were exercised and the stock was called away. The annualized percent return-on-investment(ROI) results for these investments were:

BHP Billiton LTD ADR(BHP): +123.2%
China Mobile LTD ADR(CHL): +70.0%
ENSCO International Inc(ESV): +114.1%
Fluor Corporation(FLR): +54.6%
Home Depot Inc(HD): +69.3%
iShares MSCI China ETF(FXI): +29.3%
j2 Global Communications Inc(JCOM): +117.0%
Potash Corp of Saskatchewan Inc(POT): +126.9%
TeleTec Holdings Inc(TTEC): +153.4%
World Fuel Services Inc(INT): +138.0%

- One position in the CCAP (AMGN) ended out-of-the-money. A decision will be made to either sell AMGN, or to keep the stock and sell calls to establish a May09 covered calls position. The related transactions will be made during the next few days and the actual transactions will be posted on this blog site on the same day they occur.

- During the week prior to Apr09 expiration, there were six in-the-money covered calls positions (HPQ,UNH,ESRX,SOHU,GE,and BAC) in which the Covered Calls Advisor had decided to retain the existing stock for an additional month. For these six positions, roll-up-and-forward transactions were executed to continue covered calls positions and to extend them from Apr09 expirations to May09. The details of each of these roll-up-and-forward transactions were each posted earlier this week on this blog.


Detailed results for the ten positions that were assigned (called away) upon Apr09 expiration are as follows:

1. BHP Billiton LTD ADR (BHP) -- Closed
The Transactions History to date for the BHP covered calls is as follows:
02/25/09 Initial Stock Purchase Transaction -- Bought 100 BHP @ $36.75
02/25/09 Inital Calls Sold Transaction -- Sold 1 BHP Mar09 $37.50 Call @ $2.90
03/19/09 Buy-to-Close (BTC) 1 BHP Mar09 $37.50s @ $7.50
03/19/09 Sell-to-Open (STO) 1 BHP Apr09 $45s @ $3.10
Note: The price of BHP was $44.90 today when this transaction was executed.
04/18/09 Apr09 Options Exercised (100 shares of BHP called away)
Note: Closing price of BHP was $47.88 on expiration Friday.

The overall performance results(including commissions) for the BHP transactions through the Apr09 expiration are as follows:

Stock Purchase Cost: $3,683.95
($36.75*100+$8.95 commission)

Net Profit:
(a) Options Income: -$169.40 (100*($2.90-$7.50+$3.10) - 2*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$816.05
= ($45.00-$36.75)*100 - $8.95 commissions

Total Net Profit: +$646.65
= (-$169.40 +$0.00 +$816.05)

Absolute Return: +17.6%
+$646.65/$3,683.95
Annualized Return: +123.2%
(+$646.65/$3,683.95)*(365/52 days)


2. China Mobile LTD ADR (CHL) -- Closed
The Transactions History to date for the CHL covered calls is as follows:
03/13/09 Initial Stock Purchase Transaction -- Bought 200 CHL @ $44.15
03/13/09 Inital Calls Sold Transaction -- Sold 2 CHL Mar09 $45.00 Calls @ $1.00
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 2 CHL Apr $45s @ $1.35
Note: The price of CHL was $43.16 today when the call options were sold.
04/18/09 Apr09 Options Exercised (200 shares of CHL called away)
Note: Closing price of CHL was $48.00 on expiration Friday.

The overall performance results(including commissions) for the CHL transactions are as follows:
Stock Purchase Cost: $8,838.95
($44.15*200+$8.95 commission)

Net Profit:
(a) Options Income: +$449.10 (200*($1.00+$1.35) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$161.05
= ($45.00-$44.15)*200 - $8.95 commissions

Total Net Profit: +$610.15
= (+$449.10 +$0.00 +$161.05)

Absolute Return: +6.9%
= +$610.15/$8,838.95
Annualized Return: +70.0%
(+$610.15/$8,838.95)*(365/36 days)


3. ENSCO International Inc (ESV) -- Closed
The Transactions History to date for the ESV covered calls is as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 400 ESV @ $29.36
03/23/09 Inital Calls Sold Transaction -- Sold 4 ESV Apr09 $30.00 Calls @ $1.80
04/18/09 Apr09 Options Exercised (400 shares of ESV called away)
Note: Closing price of ESV was $32.05 on expiration Friday.

The overall performance results(including commissions) for the ESV transactions are as follows:
Stock Purchase Cost: $11,752.95
($29.36*400+$8.95 commission)

Net Profit:
(a) Options Income: +$708.05 (400*$1.80 - $11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$247.05
= ($30.00-$29.36)*400 - $8.95 commissions

Total Net Profit: +$955.10
= (+$708.05 +$0.00 +$247.05)

Absolute Return: +8.1%
= +$955.10/$11,752.95
Annualized Return: +114.1%
(+$955.10/$11,752.95)*(365/26 days)


4. Fluor Corporation (FLR) -- Closed
The transactions history to date for the FLR covered calls is as follows:
11/24/08 Initial Stock Purchase Transaction -- Bought 600 FLR @ $35.35
11/24/08 Initial Calls Sold Transaction -- Sold 6 FLR Dec08 $35 Calls @ $3.50
12/03/08 Ex-Dividend of $75.00 ($.125*600 shares)
12/05/08 Roll-Up-And-Out Transaction:
Bought to Close 6 FLR Dec08 $35 Calls @ $10.10
Sold to Open 6 FLR Jan09 $45 Calls @ $5.30
01/17/09 Jan09 Options Expired
01/28/09 Continuation Transaction -- Sell-to-Open (STO) 6 FLR Feb09 $45s @ $2.10
Note: The price of FLR was $43.35 when the calls were sold.
02/21/09 Feb09 Options Expired
03/04/09 Ex-Dividend of $75.00 ($.125*600 shares)
03/09/09 Sell-to-Open (STO) 6 FLR Mar09 $40s @ $.65
Note: The price of FLR was $37.04 today when the calls were sold.
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 6 FLR Apr $40s @ $1.45
Note: The price of FLR was $37.05 today when the call options were sold.
04/18/09 Apr09 Options Exercised (600 shares of FLR called away)
Note: Closing price of FLR was $41.18 on expiration Friday.

The overall performance results(including commissions) for the FLR transactions are as follows:
Stock Purchase Cost: $21,218.95
($35.35*600+$8.95 commission)

Net Profit:
(a) Options Income: +$1,672.75 (600*($3.50-$10.10+$5.30+$2.10+$.65+$1.45) - 5*$13.45 commissions)
(b) Dividend Income: +$150.00 ($.125*600 shares)* 2 distributions
(c) Capital Appreciation: +$2,781.05
= ($40.00-$35.35)*600 - $8.95 commissions

Total Net Profit: +$4,603.80
= (+$1,672.75 +$150.00 +$2,781.05)

Absolute Return: +21.7%
= +$4,603.80/$21,218.95
Annualized Return: +54.6%
(+$4,603.80/$21,218.95)*(365/145 days)


5. Home Depot Inc (HD) -- Closed
The transactions history to date for the HD covered calls is as follows:
01/27/09 Initial Stock Purchase Transaction -- Bought 300 HD @ $21.95
01/27/09 Initial Calls Sold Transaction -- Sold 3 HD Feb09 $22.50 Calls @ $.89
02/21/09 Feb09 Options Expired
02/26/09 Sell-to-Open (STO) 3 HD Apr09 $22.50s @ $.65
Note: The price of HD stock was $20.69 today when the calls were sold.
03/10/09 $67.50 Ex-dividend ($.225*300 shares)
04/18/09 Apr09 Options Exercised (300 shares of HD called away)
Note: Closing price of HD was $26.10 on expiration Friday.

The overall performance results(including commissions) for the HD transactions are as follows:
Stock Purchase Cost: $6,593.95
($21.95*300+$8.95 commission)

Net Profit:
(a) Options Income: +$439.60 (300*($.89+$.65) - 2*$11.20 commissions)
(b) Dividend Income: +$67.50
(c) Capital Appreciation: +$156.05
= ($22.50-$21.95)*300 - $8.95 commissions

Total Net Profit: +$663.15
= (+$439.60 +$67.50 +$156.05)

Absolute Return: +10.1%
=+$663.15/$6,593.95
Annualized Return: +69.3%
=(+$663.15/$6,593.95)*(365/53 days)


6. iShares MSCI China ETF (FXI) -- Closed
The transactions history to date for the FXI covered calls is as follows:
12/22/08 Initial Stock Purchase Transaction -- Bought 700 FXI @ $29.23
12/22/08 Initial Calls Sold Transaction -- Sold 7 FXI Jan09 $32.00 Calls @ $.95
01/17/09 Jan09 Options Expired
02/06/09 Continuation Transaction -- Sell-to-Open (STO) 7 FXI Feb09 $30s @ $.50
Note: The price of FXI was $28.33 today when the calls were sold.
02/21/09 Feb09 Options Expired
03/13/09 Sell-to-Open (STO) 7 FXI Apr09 $30s @ $.60
Note: The price of FXI was $26.40 today when the calls were sold.
04/18/09 Apr09 Options Exercised (700 shares of FXI called away)
Note: Closing price of FXI was $32.44 on expiration Friday.

The overall performance results(including commissions) for the FXI transactions are as follows:
Stock Purchase Cost: $20,469.95
($29.23*700+$8.95 commission)

Net Profit:
(a) Options Income: +$1,392.40 (700*($.95+$.50+$.60) - 3*$14.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$530.05
= ($30.00-$29.23)*700 - $8.95 commissions

Total Net Profit: +$1,922.45
= (+$1,392.40 +$0.00 +$530.05)

Absolute Return: +9.4%
Annualized Return: +29.3%
(+$1,922.45/$20,469.95)*(365/117 days)


7. j2 Global Communications Inc (JCOM) -- Closed
The transactions history to date for the JCOM covered calls is as follows:
01/23/09 Initial Stock Purchase Transaction -- Bought 300 JCOM @ $16.76
01/23/09 Inital Calls Sold Transaction -- Sold 3 JCOM Feb09 $17.50 Calls @ $1.00
Roll-Up Spread Transaction:
02/03/09 Buy-to-Close (BTC) 3 JCOM Feb09 $17.5s @ $2.76
02/03/09 Sell-to-Open (STO) 3 JCOM Feb09 $20s @ $1.06
Note: The price of JCOM was $19.90 today when this transaction was executed.
02/21/09 Feb09 Options Expired
02/25/09 Sell-to-Open (STO) 3 JCOM Mar09 $20s @ $.75
Note: JCOM stock was priced at $19.37 today when the calls were sold.
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 3 JCOM Apr $20s @ $.90
Note: The price of JCOM was $19.75 today when the call options were sold.
Roll-Up Spread Transaction:
04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit on Roll Up $1.90 ($3.10 - $1.20)
Note: The price of JCOM was $22.90 today when the roll-up debit-spread transaction was transacted.
04/18/09 Apr09 Options Exercised (300 shares of JCOM called away)
Note: Closing price of JCOM was $24.80 on expiration Friday.

The overall performance results(including commissions) for the JCOM transactions through the Apr09 expiration are as follows:
Stock Purchase Cost: $5,036.95
($16.76*300+$8.95 commission)

Net Profit:
(a) Options Income: -$341.00 (300*($1.00-$2.76+$1.06+$.75+$.90-$3.10+$1.20) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $22.50): +$1,713.05
= ($22.50-$16.76)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $22.50): +$1,372.05
= (-$341.00 +$0.00 +$1,713.05)

Absolute Return: +27.2%
+$1,372.05/$5,036.95
Annualized Return: +117.0%
(+$1,372.05/$5,036.95)*(365/85 days)


8. Potash Corp of Saskatchewan Inc (POT) -- Closed
The transactions history to date for the POT covered calls is as follows:
03/02/09 Initial Stock Purchase Transaction -- Bought 100 POT @ $79.078
03/02/09 Inital Calls Sold Transaction -- Sold 1 POT Mar09 $80.00 Call @ $6.30
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 1 POT Apr $80s @ $6.00
Note: The price of POT was $79.85 today when the call option was sold.
04/18/09 Apr09 Options Exercised (100 shares of POT called away)
Note: Closing price of POT was $86.77 on expiration Friday.

The overall performance results(including commissions) for the POT transactions are as follows:
Stock Purchase Cost: $7,916.75
($79.078*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,210.60 (100*($6.30+$6.00) - 2*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$83.25
= ($80.00-$79.078)*100 - $8.95 commissions

Total Net Profit: +$1,293.85
= (+$1,210.60 +$0.00 +$83.25)

Absolute Return: +16.3%
= +$1,293.85/$7,916.75
Annualized Return: +126.9%
(+$1,293.85/$7,916.75)*(365/47 days)


9. TeleTec Holdings Inc (TTEC) -- Closed
The transactions history to date for the TTEC covered calls is as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 600 TTEC @ $10.14
03/23/09 Inital Calls Sold Transaction -- Sold 6 TTEC Apr09 $10.00 Calls @ $.64
04/07/09 Buy-to-Close (BTC) 6 TTEC Apr09 $10s @ $2.20
04/09/09 Sell-to-Open (STO) 6 TTEC Apr09 $12.50s @ $.45
Net Debit-Spread upon Roll-Up was $1.75 ($2.20 - $.45)
Note: The price of TTEC was $12.62 today when the roll-up transaction was completed.
04/18/09 Apr09 Options Exercised (600 shares of TTEC called away)
Note: Closing price of TTEC was $12.89 on expiration Friday.

The overall performance results(including commissions) for the TTEC transactions through the Apr09 expiration was as follows:
Stock Purchase Cost: $6,092.95
($10.14*600+$8.95 commission)

Net Profit:
(a) Options Income: -$706.35 (600*($.64-$2.20+$.45) - 3*$13.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$1,407.05
= ($12.50-$10.14)*600 - $8.95 commissions

Total Net Profit: +$665.70
= (-$706.35 +$0.00 +$1,372.05)

Absolute Return: +10.9%
+$665.70/$6,092.95
Annualized Return: +153.4%
(+$665.70/$6,092.95)*(365/26 days)


10. World Fuel Services Corp (INT) -- Closed
The transactions history to date for the INT covered calls is as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 400 INT @ $31.45
03/23/09 Inital Calls Sold Transaction -- Sold 4 INT Apr09 $30.00 Calls @ $3.00
04/18/09 Apr09 Options Exercised (400 shares of INT called away)
Note: Closing price of INT was $35.80 on expiration Friday.

The overall performance results(including commissions) for the INT transactions through the Apr09 expiration is as follows:
Stock Purchase Cost: $6,092.95
($31.45*400+$8.95 commission)

Net Profit:
(a) Options Income: +$1,188.05 (400*$3.00 - $11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$588.95
= ($30.00-$31.45)*400 - $8.95 commissions

Total Net Profit: +$599.10
= (+$1,188.05 +$0.00 -$588.95)

Absolute Return: +9.8%
+$599.10/$6,092.95
Annualized Return: +138.0%
(+$665.70/$6,092.95)*(365/26 days)

Friday, April 17, 2009

Roll-Up-and-Forward -- Hewlett-Packard Company

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Hewlett-Packard Company (HPQ) was rolled-up-and-forward today (04/17/09) from the Apr09 $32.50s to the May09 $35.00s. The debit-spread transaction was executed as follows:

04/17/09 Buy-to-Close (BTC) 6 HPQ Apr09 $32.50s @ $3.10
04/17/09 Sell-to-Open (STO) 6 HPQ May09 $35.00s @ $1.95
Net Debit-Spread upon Roll-Up-and-Forward was $1.15 ($3.10 - $1.95)
Note: The price of HPQ was $35.55 today when the debit-spread was transacted, so the remaining time-value was only $.05 [$3.10-($35.55-$32.50)] when this transaction was executed.

The transactions history to date is as follows:
01/20/09 Initial Stock Purchase Transaction -- Bought 300 HPQ @ $33.89
01/20/09 Inital Calls Sold Transaction -- Sold 3 HPQ Feb09 $37.50 Calls @ $.80
02/21/09 Feb09 Options Expired
02/25/09 Bought 300 HPQ @ $29.79
02/25/09 Sell-to-Open (STO) 6 HPQ Mar09 $32.50s @ $.55
03/09/09 $48.00 Ex-dividend ($.08 * 600 shares)
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 6 HPQ Apr $32.50s @ $.55
Note: The price of HPQ was $30.24 today when the call options were sold.
Roll-Up-and-Forward debit-spread transaction:
04/17/09 Buy-to-Close (BTC) 6 HPQ Apr09 $32.50s @ $3.10
04/17/09 Sell-to-Open (STO) 6 HPQ May09 $35.00s @ $1.95


The overall performance results(including commissions) for the HPQ transactions are as follows:
Stock Purchase Cost: $19,121.90
($33.89*300+$29.79*300+2*$8.95 commission)

Net Profit:
(a) Options Income: +$158.45 = (300*$.80 + 600*($.55+$.55-$3.10+$1.95) - $51.55 commissions)
(b) Dividend Income: +$48.00
(c) Capital Appreciation (If exercised at $35.00): +$1,887.05
= [$35.00-$31.84(avg cost basis)]*600 - $8.95 commissions

Total Net Profit(If stock price exercised at $35.00): +$2,093.50
= (+$158.45 +$48.00 +$1,887.05)

Absolute Return if Exercised at $35.00: +10.9%
=+$2,093.50/$19,121.90
Annualized Return If Exercised (ARIE) +40.8%
=(+$1,296.95/$19,121.90)*(365/(116+80)/2 days)

Thursday, April 16, 2009

Gymboree Corp -- Closed

The covered calls position in Gymboree Corp(GYMB) was closed today by buying back the Apr09 $20 call and then selling the 300 shares owned. GYMB stock experienced a very bullish move when the company recently provided a revised 1st quarter earnings forecast that was substantially higher than their prior estimate. The Covered Calls Advisor decided to take profits by closing out the covered calls position since it was determined that the stock had increased to fair value. Proceeds from the transactions will be allocated to a new covered calls position for May09 expiration within the next few days.

The transactions history for GYMB was as follows:
03/23/09 Initial Stock Position -- Bought 300 GYMB @ $18.07
03/23/09 Initial Call Options -- Sold 3 GYMB Apr09 $20.00 Calls @ $.50
04/16/09 Bought to Close 3 Apr09 $20.00 calls at $9.10
Note: Price of GYMB was $29.04 when this transaction was executed.
04/16/09 Sold 300 GYMB at $29.15

The overall performance results (including commissions) for the GYMB transactions were as follows:
Stock Purchase Cost: $5,429.95
($18.07*300+$8.95 commission)

Net Profit:
(a) Options Income: -$2,602.40 [300*($.50 - $9.10)-$2*$11.20 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$3,315.05
= 300*($29.15-$18.07)-$8.95 commissions

Total Net Profit: +$712.65
= -$2,602.40+$0+$3,315.05

Absolute Return: +13.1%
= +$712.65/$5,429.95
Annualized Return: +199.6%
=(+$712.65/$5,429.95)*(365/24 days)

Wednesday, April 15, 2009

Roll-Up-and-Forward -- UnitedHealth Group Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in UnitedHealth Group Inc(UNH) was rolled-up-and-forward today (04/15/09) from the Apr09 $22.00s to the May09 $25.00s. The debit-spread transaction was executed as follows:

04/15/09 Buy-to-Close (BTC) 3 UNH Apr09 $22.00s @ $3.11
04/15/09 Sell-to-Open (STO) 3 UNH May09 $25.00s @ $1.94
Net Debit-Spread upon Roll-Up-and-Forward was $1.17 ($3.11 - $1.94)
Note: The price of UNH was $25.06 today when the debit-spread was transacted.

The Transactions History to date for the UNH covered calls is as follows:
03/10/09 Bought 300 UNH @ $18.96
03/10/09 Sold 3 UNH Mar09 $19.00 Calls @ $1.20
Roll-Up-and-Forward debit-spread transaction:
03/19/09 Buy-to-Close (BTC) 3 UNH Mar09 $19.00s @ $3.05
03/19/09 Sell-to-Open (STO) 3 UNH Apr09 $45s @ $1.75
03/31/09 $9.00 Ex-Dividend ($.03*300 shares)
Roll-Up-and-Forward debit-spread transaction:
04/15/09 Buy-to-Close (BTC) 3 UNH Apr09 $22.00s @ $3.11
04/15/09 Sell-to-Open (STO) 3 UNH May09 $25.00s @ $1.94

The Roll-Up Analyzer used to evaluate the potential roll-up for UNH is shown below:
This 'Analyzer' shows that the roll-up-and-forward transaction was the preferred alternative. With only three days remaining until Apr09 expiration, the payback remaining for rolling-up to the Apr09 $25 strike is insufficient to justify the transaction. There are now 31 days until May09 expiration. The Covered Calls Advisor's key criterion in analyzing whether or not to roll-up to the next strike price is if the potential 'Annualized Return if Stock Price Unchanged' (ARIU) increase is greater than 50%? That is, what is the difference between the ARIU for the remaining 3 days of the current position compared with the ARIU for the remaining 31 days for the proposed new position? In this case, and as shown on the worksheet, the difference is +66.8%(91.1%-24.3%). Since 66.8% exceeds the 50% threshold, the decision was made to execute the roll-up-and-forward transaction in this instance.

The overall performance results(including commissions) for the UNH transactions through the May09 expiration would be as follows:

Stock Purchase Cost: $5,696.95
($18.96*300+$8.95 commission)

Net Profit:
(a) Options Income: -$414.60 (300*($1.20-$3.05+$1.75-$3.11+$1.94) - 3*$11.20 commissions)
(b) Dividend Income: +$9.00
(c) Capital Appreciation (If exercised at $25.00): +$1,803.05
= ($25.00-$18.96)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $25.00): +$1,397.45
= (-$414.60 +$9.00 +$1,803.05)

Absolute Return If Exercised = +24.5%
+$1,397.45/$5,696.95
Annualized Return If Exercised (ARIE) +133.6%
(+$1,397.45/$5,696.95)*(365/67 days)

Tuesday, April 14, 2009

Roll-Up-and-Forward -- Express Scripts Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Express Scripts (ESRX) was rolled-up-and-forward today (04/14/09) from the Apr09 $50.00s to the May09 $55.00s. The debit-spread transaction was executed as follows:

04/14/09 Buy-to-Close (BTC) 2 ESRX Apr09 $50.00s @ $9.60
04/14/09 Sell-to-Open (STO) 2 ESRX May09 $55.00s @ $6.50
Net Debit-Spread upon Roll-Up-and-Forward was $3.10 ($9.60 - $6.50)
Note: The price of ESRX was $59.52 today when the debit-spread was transacted.

The transactions history to date is as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 200 ESRX @ $47.05
03/23/09 Inital Calls Sold Transaction -- Sold 2 ESRX Apr09 $50.00 Calls @ $1.40
Roll-Up-and-Forward debit-spread transaction:
04/14/09 Buy-to-Close (BTC) 2 ESRX Apr09 $50.00s @ $9.60
04/14/09 Sell-to-Open (STO) 2 ESRX May09 $55.00s @ $6.50

The overall performance results(including commissions) for the ESRX transactions through the May09 expiration would be as follows:
Stock Purchase Cost: $9,418.95
($47.05*200+$8.95 commission)

Net Profit:
(a) Options Income: -$360.90 (200*($1.40-$9.60+$6.50) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $55.00): +$1,581.05
= ($55.00-$47.05)*200 - $8.95 commissions

Total Net Profit(If stock price exercised at $55.00): +$1,220.15
= (-$360.90 +$0.00 +$1,581.05)

Absolute Return If Stock Price Exercised at $55.00 = +13.0%
+$1,220.15/$9,418.95
Annualized Return If Exercised (ARIE) +87.6%
(+$1,220.15/$9,418.95)*(365/54 days)

Monday, April 13, 2009

Roll-Up-and-Forward -- Sohu.com Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Sohu.com Inc(SOHU) was rolled-up-and-forward today (04/13/09) from the Apr09 $45.00s to the May09 $50.00s. The debit-spread transaction was executed as follows:
04/13/09 Buy-to-Close (BTC) 4 SOHU Apr09 $45.00s @ $5.20
04/13/09 Sell-to-Open (STO) 4 SOHU May09 $50.00s @ $4.30
Net Debit-Spread upon Roll-Up-and-Forward was $.90 ($5.20 - $4.30)

The transactions history to date is as follows:
02/24/09 Bought 400 SOHU @ $44.617
02/24/09 Sold 4 SOHU Mar09 $45.00 Calls @ $3.20
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 4 SOHU Apr $45s @ $1.45
Note: The price of SOHU was $40.10 today when the call options were sold.
04/13/09 Buy-to-Close (BTC) 4 SOHU Apr09 $45.00s @ $5.20
04/13/09 Sell-to-Open (STO) 4 SOHU May09 $50.00s @ $4.30
Net Debit-Spread upon Roll-Up-and-Forward was $.90 ($5.20 - $4.30)
Note: The price of SOHU was $49.90 today when the call options were sold.

The overall performance results(including commissions) for the SOHU transactions are as follows:
Stock Purchase Cost: $17,855.75
($44.617*400+$8.95 commission)

Net Profit:
(a) Options Income: +$1,468.65 (400*($3.20+$1.45-$5.20+$4.30) - 3*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $49.90): +$2,104.25
= ($49.90-$44.617)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $50.00): +$2,144.25
= ($50.00-$44.617)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $49.90): +$3,572.90
= (+$1,468.65 +$0.00 +$2,104.25)
Total Net Profit(If stock price exercised at $45.00): +$3,612.90
= (+$1,468.65 +$0.00 +$2,144.25)

Absolute Return if Stock Price Unchanged at $49.90: +20.0%
= +$3,572.90/$17,855.75
Annualized Return If Stock Price Unchanged (ARIU) +90.2%
(+$23.35/$17,855.75)*(365/81 days)

Absolute Return if Exercised at $50.00: +20.2%
= +$3,612.90/$17,855.75
Annualized Return If Exercised (ARIE) +91.2%
(+$3,612.90/$17,855.75)*(365/81 days)

Roll-Up-and-Forward -- General Electric

The Covered Calls Advisor Portfolio (CCAP) covered calls position in General Electric(GE) was rolled-up-and-forward today (04/13/09) from the Apr09 $10.00s to the May09 $12.00s. The debit-spread transaction was executed as follows:

04/13/09 Buy-to-Close (BTC) 10 GE Apr09 $10.00s @ $2.34
04/13/09 Sell-to-Open (STO) 10 GE May09 $12.00s @ $1.24
Net Debit-Spread upon Roll-Up-and-Forward was $1.10 ($2.34 - $1.24)

The transactions history to date is as follows:
02/23/09 Initial Stock Purchase Transaction -- Bought 1000 GE @ $8.96
02/23/09 Inital Calls Sold Transaction -- Sold 10 GE Mar09 $10.00 Calls @ $.63
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 10 GE Apr $10s @ $.99
Note: The price of GE was $10.09 today when the call options were sold.
Roll-Up-and-Forward debit-spread transaction:
04/13/09 Buy-to-Close (BTC) 10 GE Apr09 $10.00s @ $2.34
04/13/09 Sell-to-Open (STO) 10 GE May09 $12.00s @ $1.24
Net Debit-Spread upon Roll-Up-and-Forward was $1.10 ($2.34 - $1.24)
Note: The price of GE was $12.20 today when the transaction was completed.

The overall performance results(including commissions) for the GE transactions through the May09 expiration would be as follows:
Stock Purchase Cost: $8,968.95
($8.96*1000+$8.95 commission)

Net Profit:
(a) Options Income: +$470.65 (1000*($.63+$.99-$2.34+$1.24) - 3*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $12.00): +$3,031.05
= ($12.00-$8.96)*1000 - $8.95 commissions

Total Net Profit(If stock price exercised at $12.00): +$3,501.70
= (+$470.65 +$0.00 +$3,031.05)

Absolute Return If Stock Price Exercised at $12.00 = +39.0%
+$3,501.70/$8,968.95
Annualized Return If Exercised (ARIE) +173.8%
(+$3,501.70/$8,968.95)*(365/82 days)

Thursday, April 9, 2009

Roll-Up-and-Forward -- Bank of America

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Bank of America(BAC) was rolled-up-and-forward today (04/09/09) from the Apr09 $6.00s to the May09 $9.00s. The debit-spread transaction was executed as follows:

04/09/09 Buy-to-Close (BTC) 5 BAC Apr09 $6.00s @ $3.05
04/09/09 Sell-to-Open (STO) 5 BAC May09 $9.00s @ $1.35
Net Debit-Spread upon Roll-Up-and-Forward was $1.70 ($3.05 - $1.35)

The transactions history to date is as follows:
03/23/09 Bought 500 BAC @ $7.16
03/23/09 Sold 5 BAC Apr09 $6.00 Calls @ $1.76
04/09/09 Buy-to-Close (BTC) 5 BAC Apr09 $6.00s @ $3.05
04/09/09 Sell-to-Open (STO) 5 BAC May09 $9.00s @ $1.35
Net Debit-Spread upon Roll-Up-and-Forward was $1.70 ($3.05 - $1.35)
Note: The price of BAC was $8.95 today when the roll-up-and-out transaction was executed.

The Roll-Up Analyzer used to evaluate the potential roll-up for BAC is shown below:

This 'Analyzer' shows that either roll-up alternative (either rolling-up to the current Apr09 expiration or simulataneously rolling-up-and-forward to the May09 expiration) would be a good decision. The Covered Calls Advisor decided that rolling-up-and-forward to the May09 $9.00 strike price was the preferable alternative. The thought process in support of this decision was as follows: Bank of America stock was up 27% today alone, primarily in sympathy with the upside earnings surprise reported this morning by Wells Fargo. As a result of today's quick, bullish price move by BAC, the implied volatility in the options increased to 121. Consequently, this Advisor decided to lock in this currently available high options premium for another month [the chart above shows that the corresponding potential 'annualized return if the stock price was unchanged'(ARIU) between today and May expiration would be an extremely attractive 148.8%].

The overall performance results(including commissions) for the BAC transactions through the May09 expiration would be as follows:
Stock Purchase Cost: $3,588.95
($7.16*500+$8.95 commission)

Net Profit:
(a) Options Income: +$4.60 (500*($1.76-$3.05+$1.35) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $8.95): +$886.05
= ($8.95-$7.16)*500 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $9.00): +$911.05
= ($9.00-$7.16)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $8.95): +$890.65
= (+4.60 +$0.00 +$886.05)
Total Net Profit(If stock price exercised at $9.00): +$915.65
= (+$4.60 +$0.00 +$911.05)

Absolute Return If Stock Price Unchanged at $8.95 = +24.8%
+$890.65/$3,588.95
Annualized Return If Unchanged (ARIU) +167.7%
(+$890.65/$3,588.95)*(365/54 days)

Absolute Return If Stock Price Exercised at $9.00 = +25.5%
+$915.65/$3,588.95
Annualized Return If Exercised (ARIE) +172.4%
(+$915.65/$3,588.95)*(365/54 days)

Roll Up -- TeleTec Holdings Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Teletec Holdings Inc(TTEC) was rolled-up today (04/09/09) from the Apr09 $10s to the Apr09 $12.50s. The transactions were executed as follows:

04/07/09 Buy-to-Close (BTC) 6 TTEC Apr09 $10s @ $2.20
04/09/09 Sell-to-Open (STO) 6 TTEC Apr09 $12.50s @ $.45
Net Debit-Spread upon Roll-Up was $1.75 ($2.20 - $.45)

The transactions history to date is as follows:
03/23/09 Bought 600 TTEC @ $10.14
03/23/09 Sold 6 TTEC Apr09 $10.00 Calls @ $.64
04/07/09 Buy-to-Close (BTC) 6 TTEC Apr09 $10s @ $2.20
04/09/09 Sell-to-Open (STO) 6 TTEC Apr09 $12.50s @ $.45
Net Debit-Spread upon Roll-Up was $1.75 ($2.20 - $.45)
Note: The price of TTEC was $12.62 today when the roll-up transaction was completed.

The overall performance results(including commissions) for the TTEC transactions through the Apr09 expiration would be as follows:
Stock Purchase Cost: $6,092.95
($10.14*600+$8.95 commission)

Net Profit:
(a) Options Income: -$706.35 (600*($.64-$2.20+$.45) - 3*$13.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $12.50): +$1,407.05
= ($12.50-$10.14)*600 - $8.95 commissions

Total Net Profit(If exercised at $12.50): +$665.70
= (-$706.35 +$0.00 +$1,372.05)

Absolute Return If Exercised at $12.50 = +10.9%
+$665.70/$6,092.95
Annualized Return If Exercised (ARIE) +153.4%
(+$665.70/$6,092.95)*(365/26 days)

Thursday, April 2, 2009

Roll Up -- j2 Global Communications Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in j2 Global Communications Inc(JCOM) was rolled-up today (04/02/09) from the Apr09 $20s to the Apr09 $22.50s. The spread transaction was executed as follows:

04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit-Spread upon Roll-Up was $1.90 ($3.10 - $1.20)

The 'Roll-Up Analyzer' worksheet for this transaction is shown below:

The Covered Calls Advisor's key criterion in analyzing whether or not to roll-up to the next strike price is if the potential 'Annualized Return if Stock Price Unchanged' (ARIU) increase is greater than 40%? That is, what is the difference between the ARIU for the remaining 16 days of the current position compared with the ARIU for the remaining 16 days for the proposed new position? In this case, and as shown on the worksheet above, the difference is +59.8%(79.7%-19.9%). Since 59.8% is greater than the 40% threshold, the decision was made to execute the roll-up transaction in this instance. There is confirmation of this decision from the ongoing underlying value in the JCOM stock, which remains buy-rated by both Schwab Equity Ratings and StockGrader.com.

The transactions history to date is as follows:
01/23/09 Initial Stock Purchase Transaction -- Bought 300 JCOM @ $16.76
01/23/09 Inital Calls Sold Transaction -- Sold 3 JCOM Feb09 $17.50 Calls @ $1.00
Roll-Up Spread Transaction:
02/03/09 Buy-to-Close (BTC) 3 JCOM Feb09 $17.5s @ $2.76
02/03/09 Sell-to-Open (STO) 3 JCOM Feb09 $20s @ $1.06
Note: The price of JCOM was $19.90 today when this transaction was executed.
02/21/09 Feb09 Options Expired
02/25/09 Sell-to-Open (STO) 3 JCOM Mar09 $20s @ $.75
Note: JCOM stock was priced at $19.37 today when the calls were sold.
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 3 JCOM Apr $20s @ $.90
Note: The price of JCOM was $19.75 today when the call options were sold.
Roll-Up Spread Transaction:
04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit on Roll Up $1.90 ($3.10 - $1.20)
Note: The price of JCOM was $22.90 today when the roll-up debit-spread transaction was transacted.

The overall performance results(including commissions) for the JCOM transactions through the Apr09 expiration would be as follows:
Stock Purchase Cost: $5,036.95
($16.76*300+$8.95 commission)

Net Profit:
(a) Options Income: -$341.00 (300*($1.00-$2.76+$1.06+$.75+$.90-$3.10+$1.20) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $22.50): +$1,713.05
= ($22.50-$16.76)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $22.50): +$1,372.05
= (-$341.00 +$0.00 +$1,713.05)

Absolute Return If Exercised at $22.50 = +27.2%
+$1,372.05/$5,036.95
Annualized Return If Exercised (ARIE) +117.0%
(+$1,372.05/$5,036.95)*(365/85 days)