Monday, January 24, 2011

Apple Inc, iShares MSCI Emerging Markets ETF, and iShares MSCI China ETF -- Continuation Transactions

This past Friday was expiration Friday for January 2011 options. In the Covered Calls Advisor's Jan2011 options expiration blog post, it was noted that of the ten covered calls positions with Jan2011 expirations, four positions ended out-of-the-money. Today, a decision was made to retain three of these four positions [Apple Inc.(AAPL), iShares MSCI Emerging Markets ETF (EEM), and iShares MSCI China ETF(FXI)] and to establish Feb2011 covered calls positions. The one position that was not retained was Intel Corp, and the selling of this Intel position was described in the previous post on this blog. The detailed transactions history for each position as well as some possible results for each of these investments are as follows:

1. Apple Inc.(AAPL) -- Continuation
The transactions history is as follows:
12/20/2010 Bought 100 AAPL @ $321.10
12/21/2010 Sold 1 AAPL Jan2011 $330.00 Call @ $6.10
Note: The call option was sold today when the AAPL stock was trading at $324.10.
01/22/2011 Jan2011 AAPL options expired
Note: The price of AAPL was $326.72 at closing on expiration Friday.
01/24/2011 Sold 1 AAPL Feb2011 $340.00 Call @ $5.50
Note: The price of AAPL was $333.72 when this Call option was sold.

The overall performance result(including commissions) for the Apple Inc.(AAPL) transactions was as follows:
Stock Purchase Cost: $32,118.95
= ($321.10*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,140.60
= [100*($6.10+$5.50) - 2*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $333.72):
+$1,253.05 = ($333.72-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If assigned at $340.00): +$1,881.05
= ($340.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $333.72): +$2,393.65
= (+$1,140.60 +$0.00 +$1,253.05)
Total Net Profit(If stock assigned at $340.00): +$3,021.65
= (+$1,140.60 +$0.00 +$1,881.05)

Absolute Return if Unchanged at $333.72: +7.5%
= +$2,393.65/$32,118.95
Annualized Return If Unchanged (ARIU) +44.6%
= (+$2,393.65/$32,118.95)*(365/61 days)

Absolute Return if Assigned at $340.00: +9.4%
= +$3,021.65/$32,118.95
Annualized Return If Assigned (ARIA): +56.3%
= (+$3,021.65/$32,118.95)*(365/61 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
The transactions history is as follows:
10/27/2010 Bought 300 EEM @ $45.55
10/27/2010 Sold 3 EEM Nov2010 $46.00 Calls @ $.99
11/19/2010 Buy-to-Close (BTC) 3 EEM Nov2010 $46.00 Call Options @ $.38
11/19/2010 Sell-to-Open (STO) 3 EEM Dec2010 $47.00 Call Options @ $1.02
12/18/2010 Dec2010 Options Expired
Note: The price of EEM was $46.40 upon Dec2010 options expiration.
12/21/2010 Sold 3 EEM Jan2011 $47.00 Calls @ $.77
Note: The price of EEM was $46.43 when these options were sold.
12/21/2010 Distribution Income $107.83 = $.35942 * 300 shares
12/29/2010 Distribution Income $7.54 = $.02512 * 300 shares
01/22/2011 Jan2011 EEM options expired
Note: The price of EEM was $46.49 at closing on expiration Friday.
01/24/2011 Sold 3 EEM Feb2011 $47.00 Calls @ $.92
Note: The price of EEM was $46.65 when these options were sold.

Two possible overall performance results(including commissions) for the EEM transactions would be as follows:
Stock Purchase Cost: $13,673.95
= ($45.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$951.20
= (300*($.99-$.38+$1.02+$.77+$.92) - 4*$11.20 commissions)
(b) Distribution Income: +$115.37 = $107.83 + $7.54
(c) Capital Appreciation (If EEM price unchanged at $46.65):
+$321.05 = ($46.65-$45.55)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): +$426.05
= ($47.00-$45.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $46.65): +$1,387.62
= (+$951.20 +$115.37 +$321.05)
Total Net Profit(If stock assigned at $47.00): +$1,492.62
= (+$951.20 +$115.37 +$426.05)

Absolute Return if Unchanged at $46.65: +10.1%
= +$1,387.62/$13,673.95
Annualized Return If Unchanged (ARIU): +32.2%
= (+$1,387.62/$13,673.95)*(365/115 days)

Absolute Return if Assigned at $47.00: +10.9%
= +$1,492.62/$13,673.95
Annualized Return If Assigned (ARIA): +34.6%
= (+$1,227.81/$13,673.95)*(365/115 days)


3. 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.
10/14/2010 Buy-to-Close (BTC) 11 FXI Oct2010 $43.00 Call Options @ $2.69
10/14/2010 Sell-to-Open (STO) 11 FXI Nov2010 $47.00 Call Options @ $.85
11/20/2010 Nov2010 Options Expired
Note: The closing price of FXI was $44.66 on expiration Friday.
12/01/2010 Sell-to-Open (STO) 11 FXI Jan2011 $47.00 Call Options @ $.63
Note: The price of FXI was $44.41 today when these options were sold.
12/20/2010 Income Distribution $186.11 = ($.16919 * 1100 shares)
01/22/2011 Jan2011 FXI options expired
Note: The price of FXI was $43.23 at closing on expiration Friday.
01/24/2011 Sold 3 FXI Feb2011 $44.00 Calls @ $.55
Note: The price of FXI was $43.04 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: +$1,515.85
= (1,100*($.71+$.20+$.62-$2.69+$.85+$.63+$.55) + 700*$.73 + 400*$.40 - ($17.20*5 +$14.20 +$11.95) commissions)
(b) Distribution Income: +$186.11 = ($.16919 * 1100 shares)
(c) Capital Appreciation (If FXI unchanged at $43.04): +$1,300.05
= ($43.04-$41.85)*1,100 - $8.95 commissions
(c) Capital Appreciation (If all FXI shares are assigned at $44.00): +$2,356.05
= ($44.00-$41.85)*1,100 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $43.04): +$3,002.01
= (+$1,515.85 +$186.11 +$1,300.05)
Total Net Profit (If FXI assigned at $44.00): +$4,058.01
= (+$1,515.85 +$186.11 +$2,356.05)

Absolute Return (If FXI unchanged at $44.66): +6.5%
= +$3,002.01/$46,043.95
Annualized Return If Unchanged (ARIU): +9.8%
= (+$3,002.01/$46,043.95)*(365/243 days)

Absolute Return (If Assigned at $44.00): +8.8%
= +$4,058.01/$46,043.95
Annualized Return If Assigned (ARIA): +13.2%
= (+$4,058.01/$46,043.95)*(365/243 days)

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