Thursday, September 23, 2010

Establish Medicis Pharmaceutical Corp. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Medicis Pharmaceutical Corp. (MRX) covered calls as follows:

Established Medicis Pharmaceutical Corp. (MRX) Covered Calls for Oct2010:
09/23/2010 Bought 300 MRX @ $29.27
09/23/2010 Sold 3 MRX Oct2010 $30.00 Calls @ $.55

Medicis Pharmaceutical Corporation, a specialty pharmaceutical company, engages in the development and marketing of dermatology products in the United States, Canada, and Europe. Acne and acne-related dermatological products accounted for 70% of net revenues, but its relatively new aesthetic product Dysport is an injectable anti-wrinkle treatment that is showing good potential as a Botox competitor. The company's growth strategy centers on expanding the market share of existing products, introducing new products, making synergistic acquisitions, and forming collaborative partnerships. Medicis was founded in 1987 and is headquartered in Scottsdale, Arizona.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 19.37 is substantially above the minimum purchase threshold of 16.0 points for a new investment. As shown below, the value, profitability, and momentum factors are all very strong for Medicis:

Note: For expanded view, left click on the spreadsheet above.

Some possible overall performance results(including commissions) for the Medicis transactions would be as follows:
Stock Purchase Cost: $8,789.95
= ($29.27*300+$8.95 commission)

Net Profit:
(a) Options Income: +$153.80
= (300*$.55 - $11.20 commissions)
(b) Dividend Income: +$18.00 ($.06*300 shares). Goes Ex-Dividend on 9/29/2010.
(c) Capital Appreciation (If stock price unchanged at $29.27):
-$8.95 = ($29.27-$29.27)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $30.00): +$210.05
= ($30.00-$29.27)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.27): +$162.85
= (+$153.80 +$18.00 -$8.95)
Total Net Profit(If stock price exercised at $30.00): +$381.85
= (+$153.80 +$18.00 +$210.05)

Absolute Return if Unchanged at $29.27: +1.9%
= +$162.85/$8,789.95
Annualized Return If Unchanged (ARIU) +29.4%
= (+$162.85/$8,789.95)*(365/23 days)

Absolute Return if Assigned at $30.00: +4.3%
= +$381.85/$8,789.95
Annualized Return If Assigned (ARIA) +68.9%
= (+$381.85/$8,789.95)*(365/23 days)