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Friday, November 26, 2010

Establish iShares MSCI South Korea ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI South Korea ETF (EWY) covered calls as follows:
Established iShares MSCI South Korea ETF (EWY) Covered Calls for Dec2010:
11/26/2010 Bought 300 EWY @ $53.67
11/26/2010 Sold 3 EWY Dec2010 $55.00 Calls @ $1.18

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $16,109.95
= ($53.67*300+$8.95 commission)

Net Profit:
(a) Options Income: +$342.80
= (300*$1.18 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY unchanged at $53.67): $-8.95
= ($53.67-$53.67)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $55.00): +$390.05
= ($55.00-$53.67)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $53.67): +$333.85
= (+$342.80 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $50.00): +$732.85
= (+$342.80 +$0.00 +$390.05)

Absolute Return (If EWY unchanged at $53.67): +2.1%
= +$333.85/$16,109.95
Annualized Return If Unchanged (ARIU): +34.4%
= (+$333.85/$16,109.95)*(365/22 days)

Absolute Return if Exercised at $55.00: +4.5%
= +$732.85/$16,109.95
Annualized Return If Exercised (ARIE): +75.5%
= (+$732.85/$16,109.95)*(365/22 days)

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