Monday, March 21, 2011

Best Buy Corp, International Paper Co, iShares MSCI Emerging Markets ETF, iShares MSCI South Korea ETF, and Microsoft Corp--Continuation Transactions

In the Covered Calls Advisor's March 2011 options expiration blog post, it was noted that of the six covered calls positions with Mar2011 expirations, five positions ended out-of-the-money. Today, a decision was made to retain these equity positions [Best Buy Corp.(BBY), International Paper Co.(IP), iShares MSCI Emerging Markets ETF (EEM), iShares MSCI South Korea ETF (EWY), and Microsoft Corp.(MSFT)] and to establish Apr2011 covered calls positions. The detailed transactions history for each of these five positions as well as some possible results for each of these investments are as follows:

1. Best Buy Corp.(BBY) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 300 BBY @ $35.13
01/24/2011 Sell-to-Open(STO) 3 BBY Feb2011 $36.00 Calls @ $.57
02/19/2011 Feb 2011 Options Expired
03/21/2011 Sell-to-Open(STO) 3 BBY Apr2011 $34.00 Calls @ $.49
Note: the price of BBY was $31.92 today when the options were sold.

Two possible overall performance results(including commissions) for the Best Buy Corp.(BBY) transactions would be as follows:
Stock Purchase Cost: $10,547.95
= ($35.13*300+$8.95 commission)

Net Profit:
(a) Options Income: +$295.60
= (300*($.57+$.49) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $31.92):
-$971.95 = ($31.92-$35.13)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $34.00): -$347.95
= ($34.00-$35.13)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $31.92): -$676.35
= (+$295.60 +$0.00 -$971.95)
Total Net Profit(If stock assigned at $34.00): -$52.35
= (+$295.60 +$0.00 -$347.95)

1. Absolute Return if Unchanged at $31.92: -6.4%
= -$676.35/$10,547.95
Annualized Return If Unchanged (ARIU): -28.5%
= (-$676.35/$10,547.95)*(365/82 days)

2. Absolute Return if Assigned at $34.00: -0.5%
= -$52.35/$10,547.95
Annualized Return If Assigned (ARIA): -2.2%
= (-$52.35/$10,547.95)*(365/82 days)


2. International Paper Co.(IP) -- Continuation
The transactions history is as follows:
03/03/2011 Bought 700 IP @ $26.97
03/03/2011 Sold 7 IP Mar2011 $28.00 Calls @ $.36
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 7 IP Apr2011 $28.00 Calls @ $.52
Note: price of IP stock was $26.97 when these options were sold.

Two possible overall performance results(including commissions) for the International Paper Co.(IP) transactions would be as follows:
Stock Purchase Cost: $18,887.95
= ($26.97*700+$8.95 commission)

Net Profit:
(a) Options Income: +$587.60
= (700*($.36+$.52) - 2*$14.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $26.97 at expiration): -$8.95
= ($26.97-$26.97)*700 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $28.00): +$712.05
= ($28.00-$26.97)*700 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$578.65
= (+$587.60 +$0.00 -$8.95)
Total Net Profit (If stock assigned at $28.00): +$1,299.65
= (+$587.60 +$0.00 +$712.05)

1. Absolute Return (If stock unchanged at $26.97 at expiration): +3.1%
= +$578.65/$18,887.95
Annualized Return (If stock unchanged at expiration): +25.4%
= (+$578.65/$18,887.95)*(365/44 days)

2. Absolute Return (If stock assigned at $28.00 at expiration): +6.9%
= +$1,299.65/$18,887.95
Annualized Return (If stock assigned at $28.00): +57.1%
= (+$1,299.65/$18,887.95)*(365/44 days)


3. 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.
02/19/2011 Feb2011 EEM options expired
02/28/2011 Sold 3 EEM Mar2011 $46.00 Calls @ $.79
Note: The price of EEM was $45.86 when these Call options were sold.
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 3 EEM Apr2011 $47.00 Calls @ $.67
Note: price of EEM was $46.12 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: +$1,366.80
= (300*($.99-$.38+$1.02+$.77+$.92+$.79+$.67) - 6*$11.20 commissions)
(b) Distribution Income: +$115.37 = $107.83 + $7.54
(c) Capital Appreciation (If EEM price unchanged at $46.12):
+$162.05 = ($46.12-$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 $46.12): +$1,644.22
= (+$1,366.80 +$115.37 +$162.05)
Total Net Profit(If stock assigned at $47.00): +$1,908.22
= (+$1,366.80 +$115.37 +$426.05)

1. Absolute Return if Unchanged at $46.12: +12.0%
= +$1,644.22/$13,673.95
Annualized Return If Unchanged (ARIU): +25.7%
= (+$1,644.22/$13,673.95)*(365/171 days)

2. Absolute Return if Assigned at $47.00: +14.0%
= +$1,908.22/$13,673.95
Annualized Return If Assigned (ARIA): +29.8%
= (+$1,908.22/$13,673.95)*(365/171 days)


4. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
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
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 3 EWY Apr2011 $61.00 Calls @ $1.22
Note: price of EWY was $60.10 when these options were sold.

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: +$757.60
= (300*($1.38+$1.22) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY unchanged at $60.10): $+612.05
= ($60.10-$58.03)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $61.00): +$882.05
= ($61.00-$58.03)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $60.10): +$1,369.65
= (+$757.60 +$0.00 +$612.05)
Total Net Profit(If EWY assigned at $61.00): +$1,639.65
= (+$757.60 +$0.00 +$882.05)

1. Absolute Return (If EWY unchanged at $60.10): +7.9%
= +$1,369.65/$17,417.95
Annualized Return If Unchanged (ARIU): +54.2%
= (+$1,369.65/$17,417.95)*(365/53 days)

2. Absolute Return if Assigned at $61.00: +9.4%
= +$1,639.65/$17,417.95
Annualized Return If Assigned (ARIA): +64.8%
= (+$1,639.65/$17,417.95)*(365/53 days)


5. Microsoft Corp.(MSFT) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 700 MSFT @ $28.15
01/24/2011 Sell-to-Open(STO) 7 MSFT Feb2011 $29.00 CallS @ $.40
02/19/2011 Feb 2011 Options Expired
03/21/2011 Sell-to-Open(STO) 7 MSFT Apr2011 $26.00 Calls @ $.31
Note: the price of MSFT was $25.47 today when the options were sold.

Two possible overall performance results(including commissions) for the Microsoft Corp.(MSFT) transactions would be as follows:
Stock Purchase Cost: $19,713.95
= ($28.15*700+$8.95 commission)

Net Profit:
(a) Options Income: +$468.60
= 700*($.40+$.31) - 2*$14.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $25.47):
-$1,884.95 = ($25.47-$28.15)*700 - $8.95 commissions
(c) Capital Appreciation (If assigned at $26.00): +$1,513.95
= ($26.00-$28.15)*700 - $8.95 commissions

Total Net Profit(If stock price unchanged at $25.47): -$1,416.35
= (+$468.60 +$0.00 -$1,884.95)
Total Net Profit(If stock assigned at $26.00): -$1,045.35
= (+$468.60 +$0.00 +$1,513.95)

1. Absolute Return if Unchanged at $25.47: -7.2%
= -$1,416.35/$19,713.95
Annualized Return If Unchanged (ARIU): -32.0%
= (-$1,416.35/$19,713.95)*(365/82 days)

2. Absolute Return if Assigned at $26.00: -5.3%
= -$1,045.35/$19,713.95
Annualized Return If Assigned (ARIA): -23.6%
= (-$1,045.35/$19,713.95)*(365/82 days)

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