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Tuesday, February 1, 2011

Returns -- Through January 2011

1. January 2011 Year-to-Date Results:

For the month of January 2011, the Covered Calls Advisor Portfolio (CCAP) increased by 2.15% compared with an increase of 2.12% for the benchmark Russell 3000 index.

CCAP Absolute Return (Jan 1st through Jan 31st, 2011) = +2.15%

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Jan 31st, 2011) = +2.12%

2. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) began in September, 2007. The annualized returns achieved each year for 2007 through 2010 compared with the Russell 3000 benchmark were as follows:

As a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in the personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,


  1. Hi Jeff,

    I found my way to your interesting site after you and I swapped a Q & A over on Mark Wolfinger's site. Thanks for sharing the info you have's been quite helpful, educational, and enlightening. I've especially enjoyed your various evaluation tools; it's great that you share all of this information.

    I have a question about how you measure and report your monthly performance achievement. From what I can tell, you report performance at the end of each calendar month, even though this is always between expiration dates. Assuming you don't roll out any of your holdings prior to an upcoming expiration, and that you didn't roll out anything prior to the previous expiration, wouldn't the best performance measure be one post-expiration's financial position versus the previous one? This would measure actual, realized performance...what got "taken to the bank".

    I have this same challenge when evaluating my own portfolio's performance from month-end to month-end. My approach is to treat calendar month-end as if it were expiration day, and value each position as follows:

    1) If an option is at or in the money, then I use the realizable value of the stock (strike x shares) as the value of that position. This makes sense, since I would receive no more than "strike x shares" when the options I sold are exercised.

    2) If an option is out of the money, then I use the market value of the stock (market price x shares) as the value of that position. This makes sense, since it is extremely unlikely that OTM options would be exercised; the options would expire worthless, and I would then be left holding the previously-optioned stock at the market's closing price.

    3) I then add 1 + 2 + any cash in the account.

    That's my month-end value for performance-achievement purposes from calendar month-end to calendar month-end.

    I'd be interested in your thoughts and approach.

  2. Hi Tom,

    Thanks for your comment and question. I do report the performance as of the end of each calendar month. Remember, options always have current market values (just like stocks). So, I simply use the total account value method:
    Total current market value of all stocks minus total market value of all short options (use the current ask price) plus all cash. Your broker probably shows this total account value online for you, so just look at it there. Then, compare the total account value at the market close on the last day of February(Feb 28th this year) against what the total account value was at the market close on Jan 29th(last trading day of January this year) and calculate the percent change.

    Note: To ensure an accurate (apples-to-apples) percent change comparison: (1) if any deposits were made to the account during February, they should be subtracted from the end-of-February total account value before making the percent change calculation; and (2) likewise, if any withdrawals were made from the account in February, they should be added to the end-of-Feb total account value before making the percent change calculation.


  3. Hi Jeff,

    Thanks. It's interesting that you describe the method I was using before I switched to the one I described in my post. My broker's account value screen does, in fact, show that. While I consider that to be my account balance if I wanted to liquidate all positions (i.e., buy back short calls and then sell the underlyings), it can be a little misleading if the option hasn't traded in a while and there is a significant disconnect between the option's last traded price and the bid/ask at market close.

    For instance, I bought BGU at $75.76 in late January and sold $76.00 Feb 2011 calls against it. About a week ago, the underlying crossed the $80.00 mark, and closed yesterday at $84.47. However, the call hasn't traded since February 7, when it was priced at $6.10. Yesterday's bid/ask was $8.00/$9.10. My broker's account value screen uses $6.10 to value the short options, rather than either $8.00 or $9.10. Since this position is ITM, and treating month-end as if it were expiration day, I find that using strike x shares to value this position makes these "disconnects" go away.

    All of that said, though, over time, either method will reflect a reasonable representation of what's happening to the account's balance.

    Thanks again for a great site!