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Wednesday, April 21, 2010

Continuation Transaction -- Quanta Services Inc.

Last Friday was options expiration for Apr2010. Today it was decided to retain the 300 shares of Quanta Services Inc.(PWR) and to establish a May2010 covered calls position as follows:

04/21/2010 Sell-to-Open (STO) 3 PWR May2010 $20.00s @ $.75

The transactions history to date for the covered calls position in PWR is as follows:
12/21/09 Bought 300 PWR @ $20.80
12/21/09 Sold 3 PWR Feb2010 $22.50 Calls @ $.50
02/20/2010 Feb2010 Options Expired
02/22/2010 Sell-to-Open (STO) 3 PWR Mar2010 $20.00s @ $.35
Note: Price of PWR was $19.20 today when the Mar2010 call options were sold.
03/20/2010 Mar2010 Options Expired
03/22/2010 Sell-to-Open (STO) 3 PWR Apr2010 $20.00s @ $.45
Note: Price of PWR was $19.72 today when the Apr2010 call options were sold.
04/17/2010 Apr2010 Options Expired
04/21/2010 Sell-to-Open (STO) 3 PWR May2010 $20.00s @ $.75
Note: Price of PWR was $20.15 when the May2010 options were sold.

A potential result (including commissions) for this PWR covered calls position would be as follows:
Net Profit:
(a) Options Income: +$570.20
= (300*($.50 +$.35 +$.45+$.75) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock assigned at $20.00): -$248.95
= ($20.00-$20.80)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $20.00): +$321.25
= (+$570.20 +$0.00 -$248.95)

Absolute Return if Exercised at $20.00: +5.1%
= +$321.25/$6,248.95
Annualized Return If Exercised (ARIE) +12.3%
= (+$321.25/$6,248.95)*(365/152 days)

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