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Tuesday, February 22, 2011

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 Mar2011:
02/22/2011 Bought 300 EWY @ $58.03
02/22/2011 Sold 3 EWY Mar2011 $59.00 Calls @ $1.38
Note: these call options were sold with the price of EWY at $58.53

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $17,417.95
= ($58.03*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 EWY unchanged at $58.03): $-8.95
= ($58.03-$58.03)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $59.00): +$282.05
= ($59.00-$58.03)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $58.03): +$393.85
= (+$402.80 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $59.00): +$684.85
= (+$402.80 +$0.00 +$282.05)

Absolute Return (If EWY unchanged at $58.03): +2.3%
= +$393.85/$17,417.95
Annualized Return If Unchanged (ARIU): +34.4%
= (+$393.85/$17,417.95)*(365/24 days)

Absolute Return if Exercised at $59.00: +3.9%
= +$684.85/$17,417.95
Annualized Return If Exercised (ARIE): +59.8%
= (+$684.85/$17,417.95)*(365/24 days)

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