Tuesday, January 19, 2010

Continuation Transactions -- Amgen Inc.(AMGN), Ensco International Inc.(ESV), iShares MSCI Brazil ETF(EWZ), and Sohu.com Inc.(SOHU)

This past Friday was expiration Friday for January 2010 options. In a Covered Calls Advisor's blog recent post, it was noted that of the eleven covered calls positions for January 2010: (1) Three were in-the-money at expiration and were therefore exercised and the stocks were called away; and (2) Eight positions ended out-of-the-money. Today, it was decided to retain four of these eight out-of-the-money equities (Amgen, Ensco, iShares Brazil ETF, and Sohu.com Inc.) in the CCAP and to establish Feb2010 covered calls positions. Decisions regarding the remaining four equities, to either sell them or to retain them and establish Feb2010 covered calls positions will be made in the next few days and the associated 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, ESV, EWZ, and SOHU 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 Jan2010 expiration. Today it was decided to retain the 200 shares of Amgen Inc.(AMGN) and to establish a Feb2010 covered calls position as follows:

01/19/2010 Sell-to-Open (STO) 2 AMGN Feb2010 $57.50s @ $1.45

The transactions history to date for the 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.
01/16/2010 Jan2010 Options Expired
01/19/2010 Sell-to-Open (STO) 2 AMGN Feb2010 $57.50s @ $1.45
Note: Price of AMGN was $57.02 when the Feb2010 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: +$902.20
= (200*($1.20+$.93+$1.14+$1.45) - 4*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged at $57.02): +$115.05
= ($57.02-$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 $57.02): +$1,017.25
= (+$902.20 +$0.00 +$115.05)
Total Net Profit(If stock exercised at $57.50): +$1,113.25
= (+$902.20 +$0.00 +$211.05)

Absolute Return if Stock Price Unchanged at $57.02: +9.0%
= +$1,017.25/$11,288.95
Annualized Return If Unchanged (ARIU): +27.2%
= (+$693.70/$11,288.95)*(365/121 days)

Absolute Return if Stock Exercised at $57.50: +9.9%
= (+$1,113.25/$11,288.95)
Annualized Return If Exercised (ARIE): +29.7%
= (+$833.70/$11,288.95)*(365/121 days)


2. Ensco International Inc.(ESV) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in Ensco International Inc.(ESV) was out-of-the-money at Jan2010 expiration. Today it was decided to retain the 200 shares of Ensco and to establish a Feb2010 covered calls position as follows:

01/19/2010 Sell-to-Open (STO) 2 ESV Feb2010 $45.00s @ $1.40

The transactions history to date for the covered calls position in ESV is as follows:
12/21/09 Bought 200 ESV @ $42.40
12/21/09 Sold 2 ESV Jan2010 $45.00 Calls @ $.70
01/16/2010 Jan2010 Options Expired
01/19/2010 Sell-to-Open (STO) 2 ESV Feb2010 $45.00s @ $1.40
Note: Price of ESV was $44.22 when the Feb2010 options were sold.

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: +$399.10
= (200*($.70+$1.40) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $44.22):
+$355.05 = ($44.22-$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 $44.22): +$754.15
= (+$399.10 +$0.00 +$355.05)
Total Net Profit(If stock price exercised at $45.00): +$910.15
= (+$399.10 +$0.00 +$511.05)

Absolute Return if Unchanged at $44.22: +8.9%
= +$754.15/$8,488.95
Annualized Return If Unchanged (ARIU) +53.2%
= (+$120.60/$8,488.95)*(365/61 days)

Absolute Return if Exercised at $45.00: +10.7%
= +$910.15/$8,488.95
Annualized Return If Exercised (ARIE) +64.2%
= (+$640.60/$8,488.95)*(365/61 days)


3. iShares MSCI Brazil ETF(EWZ) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in iShares MSCI Brazil ETF(EWZ) was out-of-the-money at Jan2010 expiration. Today it was decided to retain the 200 shares of iShares MSCI Brazil ETF(EWZ) and to establish a Feb2010 covered calls position as follows:

01/19/2010 Sell-to-Open (STO) 2 EWZ Feb2010 $76.00s @ $1.80

The transactions history to date for the covered calls position in EWZ is as follows:
12/21/09 Bought 200 EWZ @ $74.48
12/21/09 Sold 2 EWZ Jan2010 $76.00 Calls @ $1.67
01/16/2010 Jan2010 Options Expired
01/19/2010 Sell-to-Open (STO) 2 EWZ Feb2010 $76.00s @ $1.80
Note: Price of EWZ was $74.32 when the Feb2010 options were sold.

Some possible overall performance results(including commissions) for the EWZ transactions would be as follows:
Stock Purchase Cost: $14,904.95
= ($74.48*200+$8.95 commission)

Net Profit:
(a) Options Income: +$673.10
= (200*($1.67+$1.80) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $74.32):
-$40.95 = ($74.32-$74.48)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $76.00): +$327.05
= ($76.00-$74.32)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $74.32): +$632.15
= (+$673.10 +$0.00 -$40.95)
Total Net Profit(If stock price exercised at $76.00): +$1,000.15
= (+$673.10 +$0.00 +$327.05)

Absolute Return if Unchanged at $74.32: +4.2%
= +$632.15/$14,904.95
Annualized Return If Unchanged (ARIU) +25.4%
= (+$234.85/$14,904.95)*(365/61 days)

Absolute Return if Exercised at $76.00: +6.7%
= +$1,000.15/$14,904.95
Annualized Return If Exercised (ARIE) +40.2%
= (+$618.60/$14,904.95)*(365/61 days)


4. Sohu.com Inc.(SOHU) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in Sohu.com Inc.(SOHU) was out-of-the-money at Jan2010 expiration. Today it was decided to retain the 200 shares of Sohu.com and to establish a Feb2010 covered calls position as follows:

01/19/2010 Sell-to-Open (STO) 2 SOHU Feb2010 $60.00s @ $3.10

The transactions history to date for the 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.
01/16/2010 Jan2010 Options Expired
01/19/2010 Sell-to-Open (STO) 2 SOHU Feb2010 $60.00s @ $3.10
Note: Price of SOHU was $60.37 when the Feb2010 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: +$1,598.20
= (200*($3.50+$.75+$.85+$3.10) - 4*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $60.00): -$818.95
= ($60.00-$64.05)*200 - $8.95 commissions

Total Net Profit(If stock exercised at $60.00): +$779.25
= (+$1,598.20 +$0.00 -$818.95)

Absolute Return if Stock Exercised at $60.00: +6.1%
= +$779.25/$12,818.95
Annualized Return If Exercised (ARIE): +17.5%
= (+$779.25/$12,818.95)*(365/127 days)

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