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Wednesday, April 21, 2010

Continuation Transaction -- Noble Corporation

The Covered Calls Advisor Portfolio(CCAP) positions in Noble Corporation (NE) were out-of-the-money at Apr2010 expiration. Today it was decided to retain the 600 shares of Noble Corp. and to establish a May2010 covered calls position as follows:

04/21/2010 Sell-to-Open (STO) 6 NE May2010 $43.00s @ $1.00

The reader might recall that a second 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 for the total of 600 shares of NE that are currently held in the CCAP.

The transactions history to date for the combined covered calls positions 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
03/24/2010 Bought 300 NE @ $40.08
03/24/2010 Sold 3 NE Apr2010 $41.00 Calls @ $.80
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.
04/17/2010 Apr2010 Options Expired
04/21/2010 Sell-to-Open (STO) 6 NE May2010 $43.00s @ $1.00
Note: Price of NE was $42.15 when the May2010 options were sold.


Two possible overall performance results (including commissions) for this NE covered calls position would be as follows:
Stock Purchase Cost: $22,235.90
($33.98*300+$40.08*300+2*$8.95 commission)

Net Profit:
(a) Options Income: +$746.80
= (300*($1.30-$5.22+$3.87-$5.60+$1.75+$1.45+$.90-$.70+$1.30+$.60+$.45+$1.00)+300*($.80+$1.00) - 11*$11.20 commissions)
(b) Dividend Income: +$14.70 ($.049 *300 shares)
(c) Capital Appreciation (If stock price unchanged at $42.15): +$3,054.10
= ($42.15-$33.98)*300+($42.15-$40.08)*300 - 2*$8.95 commissions
(c) Capital Appreciation (If exercised at $43.00): +$3,576.10
= ($43.00-$33.98)*300+($43.00-$40.04)*300 - 2*$8.95 commissions

Total Net Profit(If stock price unchanged at $42.15): +$3,815.60
= (+$746.80 +$14.70 +$3,054.10)
Total Net Profit(If stock price exercised at $43.00): +$4,337.60
= (+$746.80 +$14.70 +$3,576.10)

Absolute Return if Stock Price Unchanged at $42.15: +17.2%
= +$3,815.60/$22,235.90
Annualized Return If Unchanged (ARIU): +38.9%
= (+$3,815.60/$22,235.90)*(365/161 days)

Absolute Return if Exercised at $43.00: +19.5%
= +$4,337.60/$22,235.90
Annualized Return If Exercised (ARIE) +44.2%
= (+$4,337.60/$22,235.90)*(365/161 days)

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