Monday, June 21, 2010

SPDR S&P 500 ETF (SPY) -- Closed

Last Friday was expiration Friday for June 2010. In a Covered Calls Advisor's blog recent post, it was noted that of the six covered calls positions held until Jun2010 expiration, four were in-the-money at expiration and were therefore exercised and the stocks were called away, and two positions ended out-of-the-money. One of the out-of-the-money positions was in the SPDR S&P 500 ETF (SPY). A decision was made today to sell the 900 shares owned in SPY. Along with the bullish stock movement of the past two weeks, the implied volatility (IV) of SPY has declined, and the IV of the near-month at-the-money strike price has declined to its current level of around 20. The Covered Calls Advisor has decided to trade out of this position and with the cash proceeds will establish new positions for Jul2010 expiration in individual companies with higher option premium income opportunities (i.e. IVs > 25.0%).

Soon after the market opened today, the following transaction was made to close out the existing long position in SPY:
06/21/2010 Sold 900 SPY @ $113.20

1. SPDR S&P 500 ETF (SPY) -- Closed
The transactions history was as follows:
06/03/2010 Bought 900 SPY @ $110.519
06/03/2010 Sold 9 SPY Jun2010 $112.00 Call Options @ $1.54
06/21/2010 Sold 900 SPY @ $113.20

The performance result(including commissions) for the SPY transactions was as follows:
Stock Purchase Cost: $99,476.05
= ($110.519*900+$8.95 commission)

Net Profit:
(a) Options Income: +$1,370.30
= 900*$1.54 - $15.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock sold at $113.20): +$2,403.95
= ($113.20-$110.519)*900 - $8.95 commissions

Total Net Profit(Stock sold at $113.20): +$3,774.25
= (+$1,370.30 +$0.00 +$2,403.95)

Absolute Return (Stock sold at $113.20): +3.8%
= +$3,774.25/$99,476.05
Annualized Return: +76.9%
= (+$2,694.25/$99,476.05)*(365/18 days)