Monday, February 22, 2010

Ensco International Inc.(ESV) -- Closed

This past Friday was expiration Friday for February 2010. In a Covered Calls Advisor's blog recent post, it was noted that of the twelve covered calls positions for February 2010, two were in-the-money at expiration and were therefore exercised and the stocks were called away, and ten positions ended out-of-the-money. Today, it was decided to sell the 200 shares of Ensco International Inc.(ESV) as follows:

1. Ensco International Inc.(ESV) -- Closed
The transactions history was 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.
02/20/2010 Feb2010 Options Expired
02/22/2010 Sold 200 ESV @ $43.80

With the price of oil near $80, it is trading at the upper end of its recent range. Since the CCAP is currently strongly overweighted in oil equities, it was decided to lighten up slightly on energy-related exposure in the portfolio. Although ESV is transitioning to a greater exposure to the greater growth opportunity in deepwater drilling, its current mix remains heavily jackup oriented. In addition, senior management is soon transitioning to its new London headquarters and this could provide a slightly disruptive short-term impact. Additionally, this advisor views ESV's management as somewhat less capable than other energy-related companies in the portfolio (especially vis-a-vis Noble Corp's management).

The overall performance results(including commissions) for the ESV transactions were 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 (Stock sold at $43.80): +$271.05
= ($43.80-$42.40)*200 - $8.95 commissions

Total Net Profit(Stock sold at $43.80): +$670.15
= (+$399.10 +$0.00 +$271.05)

Absolute Return (Stock sold at $43.80): +7.9%
= +$670.15/$8,488.95
Annualized Return If Unchanged (ARIU) +45.7%
= (+$670.15/$8,488.95)*(365/63 days)