Monday, September 20, 2010

Domtar Corp. (UFS), iShares MSCI China ETF (FXI), and Petrobras (PBR) -- Continuation Transactions

This past Friday was expiration Friday for September 2010 options. In the Covered Calls Advisor's most recent blog post, it was noted that of the nine covered calls positions with Sep2010 expirations, six were in-the-money at expiration and were therefore exercised and the stocks were called away, and three positions ended out-of-the-money. The three out-of-money positions were Domtar Corp. (UFS), iShares MSCI China ETF (FXI), and Petrobras (PBR). Today, a decision was made to retain the shares in these three positions and to establish covered calls position with Oct2010 expirations. The transactions history for each position as well as some possible results for each of these investments are as follows:

1. Domtar Corp.(UFS) -- Continuation
The transactions history is as follows:
06/23/2010 Bought 400 UFS @ $55.10
06/23/2010 Sold 4 UFS Jul2010 $60.00 Calls @ $1.10
07/17/2010 Jul2010 Options Expired
Note: The closing price of UFS was $47.77 on expiration Friday.
07/22/2010 Sold 4 UFS Aug2010 $55.00 Calls @ $1.20
Note: The price of UFS was $50.80 today when these options were sold.
08/13/2010 Buy-to-Close (BTC) 4 UFS Aug2010 $55.00 Call Options @ $5.70
08/12/2010 Sell-to-Open (STO) 4 UFS Sep2010 $65.00 Call Options @ $1.85
Note: The price of UFS was $61.38 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 4 UFS Oct2010 $65.00 Call Options @ $2.10
Note: The price of UFS was $63.70 today when these options were sold.

Two possible overall performance results(including commissions) for Domtar Corp.(UFS) transactions would be as follows:
Stock Purchase Cost: $22,048.95
= ($55.10*400+$8.95 commission)

Net Profit:
(a) Options Income: +$160.25
= (400*($1.10+$1.20-$5.70+$1.85+$2.10) - 5*$11.95 commissions)
(b) Dividend Income: +$100.00 =($.25*400) with ex-dividend of 9/13/2010
(c) Capital Appreciation (If UFS unchanged at $63.70): +$3,431.05
= ($63.70-$55.10)*400 - $8.95 commissions
(c) Capital Appreciation (If UFS assigned at $65.00): +$3,951.05
= ($65.00-$55.10)*400 - $8.95 commissions

Total Net Profit(If UFS price unchanged at $63.70): +$3,691.30
= (+$160.25 +$100.00 +$3,431.05)
Total Net Profit(If UFS assigned at $65.00): +$4,211.30
= (+$160.25 +$100.00 +$3,951.05)

Absolute Return (If UFS unchanged at $63.70): +16.7%
= +$3,691.30/$22,048.95
Annualized Return If Unchanged (ARIU): +53.1%
= (+$3,691.30/$22,048.95)*(365/115 days)

Absolute Return (If Assigned at $65.00): +19.1%
= +$4,211.30/$22,048.95
Annualized Return If Exercised (ARIE): +60.6%
= (+$4,211.30/$22,048.95)*(365/115 days)


2. iShares MSCI China ETF (FXI) -- Continuation
The transactions history is as follows:
06/21/2010 Bought 1,100 FXI @ $41.85
06/21/2010 Sold 11 FXI Jul2010 $43.00 Calls @ $.71
7/17/2010 Jul2010 Options Expired
Note: The closing price of FXI was $38.74 on expiration Friday.
07/22/2010 Sold 7 FXI Aug2010 $42.00 Calls @ $.73
07/22/2010 Sold 4 FXI Aug2010 $43.00 Calls @ $.42
Note: The price of FXI was $41.02 today when these options were sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of FXI was $40.54 on expiration Friday.
09/02/2010 Sold 11 FXI Sep2010 $42.00 Call Options @ $.20
Note: The price of FXI was $40.52 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 11 FXI Oct2010 $43.00 Call Options @ $.62
Note: The price of FXI was $42.19 today when these options were sold.

Some possible overall performance results(including commissions) for the iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $46,043.95
= ($41.85*1,100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,631.40
= (1,100*($.71+$.20+$.62) + 700*$.73 + 4008$.40 - ($17.20*2 +$14.20 +$11.95) commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI unchanged at $42.19): +$365.05
= ($42.19-$41.85)*1,100 - $8.95 commissions
(c) Capital Appreciation (If all FXI shares are assigned at $43.00): +$1,256.05 = ($43.00-$41.85)*1,100 - $8.95 commissions

Total Net Profit(If FXI price unchanged at $42.19): +$1,996.45
= (+$1,631.40 +$0.00 +$365.05)
Total Net Profit(If FXI assigned at $43.00): +$2,887.45
= (+$1,631.40 +$0.00 +$1,256.05)

Absolute Return (If FXI unchanged at $42.19): +4.3%
= +$1,996.45/$46,043.95
Annualized Return If Unchanged (ARIU): +13.5%
= (+$1,996.45/$46,043.95)*(365/117 days)

Absolute Return (If Assigned at $43.00): +6.3%
= +$2,887.45/$46,043.95
Annualized Return: +19.6%
= (+$2,887.45/$46,043.95)*(365/117 days)


3. Petrobras (PBR) -- Continuation
The transactions history is as follows:
06/21/2010 Bought 300 PBR @ $39.34
06/21/2010 Sold 3 PBR Jul2010 $40.00 Calls @ $1.05
7/17/2010 Jul2010 Options Expired
Note: The closing price of PBR was $34.51 on expiration Friday.
07/22/2010 Sold 3 PBR Aug2010 $38.00 Calls @ $.55
Note: The price of PBR was $36.52 today when these options were sold.
08/21/2010 Aug2010 Options Expired
Note: The closing price of PBR was $34.42 on expiration Friday.
09/01/2010 Sold 3 PBR Sept2010 $36.00 Call Options @ $.58
Note: The price of PBR was $35.20 today when these call options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 3 PBR Oct2010 $37.00 Call Options @ $.63
Note: The price of PBR was $35.24 today when these options were sold.

Two possible overall performance results(including commissions) for the Petrobras (PBR) transactions would be as follows:
Stock Purchase Cost: $11,810.95
= ($39.34*300+$8.95 commission)

Net Profit:
(a) Options Income: +$798.20
= (300*($1.05+$.55+$.58+$.63) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PBR unchanged at $35.24): $-1,238.95
= ($35.24-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $37.00): -$710.95
= ($37.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR price unchanged at $35.24): -$440.75
= (+$798.20 +$0.00 -$1,238.95)
Total Net Profit(If PBR assigned at $37.00): +$87.25
= (+$798.20 +$0.00 -$710.95)

Absolute Return (If PBR unchanged at $35.24): -3.7%
= -$440.75/$11,810.95
Annualized Return If Unchanged (ARIU): -11.6%
= (-$630.55/$11,810.95)*(365/117 days)

Absolute Return (If Assigned at $37.00): +0.7%
= +$87.25/$11,810.95
Annualized Return If Assigned: +2.3%
= (+$87.25/$11,810.95)*(365/117 days)

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