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Tuesday, April 26, 2011

Apple Inc., Best Buy Corp. and Microsoft Corp. -- Continuation Transactions

April 16, 2011 was options expiration Friday for April 2011. The short options in Apple Inc.(AAPL), Best Buy Corp.(BBY), and Microsoft Corp.(MSFT) were below the strike price at expiration and thus expired worthless. Today the Covered Calls Advisor decided to retain the shares in AAPL, BBY, and MSFT and to establish May2011 covered calls positions. The detailed transactions history for these positions as well as possible results for 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.
02/19/2011 Feb2011 AAPL options expired
02/28/2011 Sold 1 AAPL Apr2011 $360.00 Call @ $10.80
Note: The price of AAPL was $354.32 when this Call option was sold.
04/16/2011 Apr2011 AAPL options expired.
04/26/2011 Sold 1 AAPL May2011 $350.00 Call @ $8.95
Note: The price of AAPL was $353.06 when this call option was sold.

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

Net Profit:
(a) Options Income: +$3,096.20
= [100*($6.10+$5.50+$10.80+$8.95) - 4*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $350.00): +$2,881.05
= ($350.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock assigned at $350.00): +$5,977.25
= (+$3,096.20 +$0.00 +$2,881.05)

Absolute Return if Assigned at $350.00: +18.6%
= +$5,977.25/$32,118.95
Annualized Return If Assigned (ARIA): +44.7%
= (+$5,977.25/$32,118.95)*(365/152 days)

2. 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.
04/16/2011 Apr2011 BBY options expired.
04/26/2011 Sold 3 BBY May2011 $31.00 Calls @ $.60
Note: The price of BBY was $30.59 when these call 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: +$464.40
= (300*($.57+$.49+$.60) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $30.59):
-$1,370.95 = ($30.59-$35.13)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $31.00): -$1,247.95
= ($31.00-$35.13)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $30.59): -$906.55
= (+$464.40 +$0.00 -$1,370.95)
Total Net Profit(If stock assigned at $31.00): -$783.55
= (+$464.40 +$0.00 -$1,247.95)

1. Absolute Return if Unchanged at $30.59: -8.6%
= -$906.55/$10,547.95
Annualized Return If Unchanged (ARIU): -26.8%
= (-$906.55/$10,547.95)*(365/117 days)

2. Absolute Return if Assigned at $31.00: -7.4%
= -$783.55/$10,547.95
Annualized Return If Assigned (ARIA): -23.2%
= (-$783.55/$10,547.95)*(365/117 days)

3. Microsoft Corp.(MSFT) -- Continuation
The detailed transactions history for this position as well as possible results for this investment are as follows:
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.
04/16/2011 Apr2011 MSFT options expired.
04/26/2011 Sold 7 MSFT May2011 $26.00 Calls @ $.66
Note: The price of MSFT was $26.06 when these call options were sold.

A possible overall performance result(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: +$916.40
= 700*($.40+$.31+$.66) - 3*$14.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $26.00): -$1,513.95
= ($26.00-$28.15)*700 - $8.95 commissions

Total Net Profit(If stock assigned at $26.00): -$597.55
= (+$916.40 +$0.00 -$1,513.95)

Absolute Return if Assigned at $26.00: -3.0%
= -$597.55/$19,713.95
Annualized Return If Assigned (ARIA): -9.5%
= (-$597.55/$19,713.95)*(365/117 days)

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