Wednesday, January 20, 2010

Establish National Oilwell Varco Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of National Oilwell Varco Inc.(NOV) covered calls as follows:

Established National Oilwell Varco Inc.(NOV) Covered Calls for Feb2010:
01/20/2010 Bought 300 NOV @ $45.80
01/20/2010 Sold 3 NOV Feb2010 $46.00 Calls @ $1.75

National Oilwell Varco, Inc. designs, constructs, manufactures, and sells systems, components, and products used in oil and gas drilling and production; provides oilfield services and supplies; and distributes products, and provides supply chain integration services to the upstream oil and gas industry worldwide. It serves drilling contractors, shipyards and other rig fabricators, well servicing companies, national oil companies, independent oil and gas companies, supply stores, and pipe-running service providers. It is estimated that 90% of the mobile offshore rig fleet and the majority of the world's larger land rigs use drilling components manufactured by NOV. The company was founded in 1862 and is based in Houston, Texas.

The 'Buy Alerts' spreadsheet below shows that NOV has a 'Total Points' rating of 22.23 which exceeds the desired threshold of 20.0 points for the financial metrics used by the Covered Calls Advisor.

Note: For expanded view, left click on the spreadsheet above.

Some possible overall performance results(including commissions) for the NOV transactions would be as follows:
Stock Purchase Cost: $13,748.95
= ($45.80*300+$8.95 commission)

Net Profit:
(a) Options Income: +$513.80
= (300*$1.75 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $45.80):
-$8.95 = ($45.80-$45.80)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $46.00): +$51.05
= ($46.00-$45.80)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $45.80): +$504.85
= (+$513.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $46.00): +$564.85
= (+$513.80 +$0.00 +$51.05)

Absolute Return if Unchanged at $45.80: +3.7%
= +$504.85/$13,748.95
Annualized Return If Unchanged (ARIU) +43.2%
= (+$504.85/$13,748.95)*(365/31 days)

Absolute Return if Exercised at $46.00: +4.2%
= +$564.85/$13,748.95
Annualized Return If Exercised (ARIE) +48.4%
= (+$564.85/$13,748.95)*(365/31 days)