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Monday, March 29, 2010

Continuation Transactions -- iShares MSCI China ETF, National Oilwell Varco, and Noble Corporation

In a recent post on this Covered Calls Advisor's blog, it was noted that of the nine covered calls positions held until expiration for March 2010: (1) Three were in-the-money at expiration and were therefore exercised and the stocks were called away; and (2) Six positions ended out-of-the-money. As of this morning, decisions remained to me made for three of the six out-of-the-money positions. A decision was made to retain all three equities in the Covered Calls Advisor Portfolio (CCAP) and to re-establish covered calls positions for Apr2010 expirations. Detailed explanations of the covered calls positions established today for iShares MSCI China ETF (FXI), National Oilwell Varco (NOV), and Noble Corporation (NE) are as follows:

1. iShares MSCI China ETF (FXI) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in iShares MSCI China ETF (FXI)was out-of-the-money at Mar2010 expiration. Today it was decided to retain the 1,000 shares of iShares MSCI China ETF and to establish an Apr2010 covered calls position as follows:

03/29/2010 Sell-to-Open (STO) 10 FXI Apr2010 $43.00s @ $.33

The transactions history to date for the covered calls position in iShares MSCI China ETF(FXI) is as follows:
11/18/09 Bought 600 FXI @ $45.54
11/18/09 Sold 6 FXI Dec09 $46.00 Calls @ $1.44
11/27/09 Bought 400 FXI @ $42.54
11/27/09 Sold 4 FXI Dec09 $44.00 Calls @ $1.13
12/19/09 Dec09 Options Expired
12/24/09 Sell-to-Open (STO) 10 FXI Jan2010 $43.00s @ $.63
Note: Price of FXI was $42.22 when the Jan2010 options were sold.
03/01/2010 Sell-to-Open (STO) 10 FXI Mar2010 $42.00s @.46
Note: Price of FXI was $40.54 when the Mar2010 options were sold.
03/20/2010 Mar2010 Options Expired
03/29/2010 Sell-to-Open (STO) 10 FXI Apr2010 $43.00s @ $.33
Note: Price of FXI was $41.49 when the Apr2010 options were sold.

Two possible performance results (including commissions) for the FXI transactions would be as follows:
Stock Purchase Cost: $44,357.90
= ($45.54*600+$42.54*400+2*$8.95 commission)

Net Profit:
(a) Options Income: +$2,683.75
= (600*($1.44+$.63+$.46+$.33)+400*($1.13+$.63+$.46+$.33) - 5*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $41.49):
-$2,858.95 = [($41.49-$45.54)*600-($41.49-$42.54)*400] - $8.95 commissions
(c) Capital Appreciation (If exercised at $43.00): -$1,948.95
= [($42.00-$45.54)*600-($43.00-$42.54)*400] - $8.95 commissions

Total Net Profit(If stock price unchanged at $41.49): -$175.20
= (+$2,683.75 +$0.00 -$2,858.95)
Total Net Profit(If stock exercised at $43.00): +$734.80
= (+$2,683.75 +$0.00 -$1,948.95)

Absolute Return if Stock Price Unchanged at $41.49: -0.4%
= -$175.20/$44,357.90
Annualized Return If Unchanged (ARIU): -1.0%
= (-$175.20/$44,357.90)*(365/150 days)

Absolute Return if Stock Exercised at $43.00: +1.7%
= +$734.80/$44,357.90
Annualized Return If Exercised (ARIE): +4.0%
= (+$734.80/$44,357.90)*(365/150 days)


2. National Oilwell Varco (NOV) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in National Oilwell Varco (NOV) was out-of-the-money at Mar2010 expiration. Today it was decided to retain the 300 shares of National Oilwell Varco and to establish an Apr2010 covered calls position as follows:

03/29/2010 Sell-to-Open (STO) 3 NOV Apr2010 $42.00s @ $.50

The transactions history to date for the covered calls position in National Oilwell Varco (NOV) is as follows:
01/20/2010 Bought 300 NOV @ $45.80
01/20/2010 Sold 3 NOV Feb2010 $46.00 Calls @ $1.75
02/20/2010 Feb2010 Options Expired
03/01/2010 Sold 3 NOV Mar2010 $44.00 Calls @ $.95
Note: The price of NOV was $43.55 today when these Mar2010 options were sold.
03/20/2010 Mar2010 Options Expired
03/29/2010 Sell-to-Open (STO) 3 NOV Apr2010 $42.00s @ $.50
Note: Price of NOV was $40.31 when the Apr2010 options were sold.

Two possible 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: +$926.40
= (300*($1.75+$.95+$.50) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $40.31):
-$1,655.95 = ($40.31-$45.80)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $42.00): -$1,148.95
= ($42.00-$45.80)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $40.31): -$729.55
= (+$926.40 +$0.00 -$1,655.95)
Total Net Profit(If stock price exercised at $42.00): -$222.55
= (+$926.40 +$0.00 -$1,148.95)

Absolute Return if Unchanged at $40.31: -5.3%
= -$729.55/$13,748.95
Annualized Return If Unchanged (ARIU) -22.3%
= (-$729.55/$13,748.95)*(365/87 days)

Absolute Return if Exercised at $42.00: -1.6%
= -$222.55/$13,748.95
Annualized Return If Exercised (ARIE) -6.8%
= (-$222.55/$13,748.95)*(365/87 days)


3. Noble Corporation (NE) -- Continuation
The Covered Calls Advisor Portfolio(CCAP) position in Noble Corporation (NE) was out-of-the-money at Mar2010 expiration. Today it was decided to retain the 300 shares of Noble Corp. and to establish an Apr2010 covered calls position as follows:

03/29/2010 Sell-to-Open (STO) 3 NE Apr2010 $42.00s @ $.45

The reader might recall that a new covered calls position was established in Noble Corp. on March 24, 2010 which doubled the holdings in NE from 300 to 600 shares. This transaction is a continuation of the covered calls position in the 300 shares of NE that were originally purchased in September 2009.

The transactions history to date for the covered calls position originally established in Sept2009 in Noble Corporation (NE) is as follows:
09/02/09 Bought 300 NE @ $33.98
09/02/09 Sold 3 NE Sep09 $34.00 Calls @ $1.30
Roll-Up-and-Out Transaction:
09/17/09 Buy-to-Close (BTC) 3 NE Sep09 $34.00s @ $5.22
09/17/09 Sell-to-Open (STO) 3 NE Oct09 $36.00s @ $3.87
Note: The price of NE was $39.19 today when this debit-spread was transacted and the remaining time value in the Sep09 option was only $.03 [$5.22-($39.19-$34.00)].
Roll-Up-and-Out Transaction:
10/16/09 Buy-to-Close (BTC) 3 NE Oct09 $36.00s @ $5.60
10/16/09 Sell-to-Open (STO) 3 NE Nov09 $42.00s @ $1.75
Note: The price of NE was $41.56 today when this transaction occurred.
11/05/09 Ex-Dividend = $14.70 (300 shares*$.049)
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 NE Dec09 $42.00s @ $1.45
Note: Price of NE was $41.30 when the Dec09 options were sold.
12/19/09 Dec09 Options Expired
12/21/09 Sell-to-Open (STO) 3 NE Jan2010 $43.00s @ $.90
Note: Price of NE was $41.75 when the Jan2010 options were sold.
01/15/2010 Buy-to-Close (BTC) 3 NE Jan2010 $43.00s @ $.70
01/15/2010 Sell-to-Open (STO) 3 NE Feb2010 $45.00s @ $1.30
Note: Price of NE was $43.67 when the Feb2010 options were sold.
02/20/2010 Feb2010 Options Expired
03/01/2010 Sold 3 NE Mar2010 $44.00 Calls @ $.60
Note: The price of NE was $42.84 today when these Mar2010 options were sold.
03/20/2010 Mar2010 Options Expired
03/29/2010 Sell-to-Open (STO) 3 NE Apr2010 $42.00s @ $.45
Note: Price of NE was $40.44 when the Apr2010 options were sold.

Two possible overall performance results (including commissions) for this NE covered calls position would be as follows:
Stock Purchase Cost: $10,202.95
($33.98*300+$8.95 commission)

Net Profit:
(a) Options Income: -$59.60
= (300*($1.30-$5.22+$3.87-$5.60+$1.75+$1.45+$.90-$.70+$1.30+$.60+$.45) - 8*$11.20 commissions)
(b) Dividend Income: +$14.70 ($.049 *300 shares)
(c) Capital Appreciation (If stock price unchanged at $40.44): +$1,929.05
= ($40.44-$33.98)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $42.00): +$2,397.05
= ($42.00-$33.98)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $40.44): +$1,884.15
= (-$59.60 +$14.70 +$1,929.05)
Total Net Profit(If stock price exercised at $42.00): +$2,352.15
= (-$59.60 +$14.70 +$2,397.05)

Absolute Return if Stock Price Unchanged at $40.44: +18.5%
= +$1,884.15/$10,202.95
Annualized Return If Unchanged (ARIU) +29.7%
= (+$1,884.15/$10,202.95)*(365/227 days)

Absolute Return if Exercised at $42.00: +23.1%
= +$2,352.15/$10,202.95
Annualized Return If Exercised (ARIE) +37.1%
= (+$2,352.15/$10,202.95)*(365/227 days)

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