Wednesday, December 22, 2010

Establish UnitedHealth Group Inc. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of UnitedHealth Group Inc.(UNH) covered calls as follows:

Established UnitedHealth Group Inc.(UNH) Covered Calls for Jan2011 as follows:
12/22/2010 Bought 300 UNH @ $35.55
12/22/2010 Sell-to-Open(STO) 3 UNH Jan2011 $35.00 CallS @ $1.38

UNH is a very large U.S. managed healthcare company. It is rated a 'Buy' by each of the investment advisory services preferred by the Covered Calls Advisor, namely Schwab Equity Ratings and Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for UNH. It scored well above the Buy threshold of 16.0 with a Total Points rating of 19.03. At its current price of $35.55, UNH provides a reasonable entry point for this value-oriented investor.

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

A possible overall performance result(including commissions) for the UNH transactions would be as follows:
Stock Purchase Cost: $10,673.95
= ($35.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$402.80
= (300*$1.38 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock assigned at $35.00): -$173.95
= ($35.00-$35.55)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $35.00): +$228.85
= (+$402.80 +$0.00 -$173.95)

Absolute Return if Assigned at $35.00: +2.1%
= +$228.95/$10,673.95
Annualized Return If Assigned (ARIA): +25.2%
= (+$228.95/$10,673.95)*(365/31 days)