Search This Blog

Monday, May 30, 2011

Covered Calls Continuation Transactions

Upon May2011 options expiration, several covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Last Friday, a decision was made to re-establish covered calls for three positions with June 2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. Freeport McMoRan Copper and Gold Inc.(FCX) -- Continuation
The transactions history is as follows:
01/28/2011 Sold 3 Freeport-McMoRan Copper and Gold Inc.(FCX) Feb2011 $110.00 Puts @ $6.35
Note: the price of FCX stock was $106.10 when these puts were sold.
The 100% cash-secured put position in Freeport McMoRan (FCX) ended out-of-the-money and was assigned for purchase. The stock underwent a 2-for-1 split since original sale of the three FCX puts at $110.00 strike price. So the assignment was for the purchase of 600 shares of FCX stock at half of the the original $110 strike price value which is $55.00.
03/17/2011 Sold 6 FCX Apr2011 $55.00 Calls @ $1.43
Note: The price of FCX was $52.15 when these call options were sold.
04/16/2011 Apr2011 FCX Options Expired.
Note: the price of FCX was $51.17 upon options expiration.
04/20/2011 Sold 6 FCX May2011 $55.00 Calls @ $1.95
Note: the price of FCX was $54.73 when these call options were sold.
05/11/2011 $150.00 Ex-Dividend ($.250 per share * 600 shares)
05/15/2011 Supplementary Dividend ($.50 per share) for shares of record on 5/15/2011.
05/21/2011 May2011 Options Expiration Date
05/27/2011 Sold 6 FCX May2011 $55.00 Calls @ $.44
Note: the price of FCX was $51.60 when the calls were sold.

Two possible overall performance results(including commissions) for the Freeport-McMoRan Copper and Gold Inc.(FCX) transactions would be as follows:
Stock Purchase Cost: $33,008.95
= ($110.00*300+$8.95 commission)

Net Profit:
(a) Options Income: +$3,921.30
= [300*$6.35 + 600*($1.43+$1.95+$.44) - 3*$11.20 - 3*6*$13.45 commissions]
(b) Dividend Income: +$450.00 [($.50 + $.25) * 600 shares]
(c) Capital Appreciation (If stock price unchanged at $51.60):
-$2,048.95 = ($51.60-$55.00)*600 - $8.95 commissions
(c) Capital Appreciation (If assigned at $55.00): -$8.95
= ($55.00-$55.00)*600 - $8.95 commissions

Total Net Profit(If stock price unchanged at $51.60): +$2,322.35
= (+$3,921.30 +$450.00 -$2,048.95)
Total Net Profit(If stock assigned at $55.00): +$4,362.35
= (+$3,921.30 +$450.00 -$8.95)

Absolute Return if Unchanged at $51.60: +7.0%
= +$2,322.35/$33,008.95
Annualized Return If Unchanged (ARIU): +18.2%
= (+$2,322.35/$33,008.95)*(365/141 days)

Absolute Return if Assigned at $55.00: +13.2%
= +$4,362.35/$33,008.95
Annualized Return If Assigned (ARIA): +34.2%
= (+$4,362.35/$33,008.95)*(365/141 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 500 EEM @ $47.81
04/19/2011 Sold 5 EEM May2011 $49.00 Calls @ $.83
Note: the price of EEM was $48.32 when the calls were sold.
05/27/2011 Sold 5 EEM Jun2011 $49.00 Calls @ $.44
Note: the price of EEM was $47.83 when the calls were sold.

Two possible overall performance results(including commissions) for these iShares MSCI Emerging Markets ETF (EEM) transactions would be as follows:
Stock Purchase Cost: $23,913.95
= ($47.81*500+$8.95 commission)

Net Profit:
(a) Options Income: +$564.60
= [500*($.83 +$.35) - 2*$12.70 commissions]
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $47.83 at expiration): +1.05
= ($47.83-$47.81)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $49.00): +$586.05
= ($49.00-$47.81)*500 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$565.65
= (+$564.60 +$0.00 +$1.05)
Total Net Profit (If stock assigned at $49.00): +$1,150.65
= (+$564.60 +$0.00 +$586.05)

1. Absolute Return (If stock unchanged at $47.83 at expiration): +2.4%
= +$565.65/$23,913.95
Annualized Return (If stock unchanged at expiration): +14.2%
= (+$565.65/$23,913.95)*(365/61 days)

2. Absolute Return (If stock assigned at $49.00 at expiration): +4.8%
= +$1,150.65/$23,913.95
Annualized Return (If stock assigned at $49.00): +28.8%
= (+$1,150.65/$23,913.95)*(365/61 days)


3. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 600 EWY @ $64.17
04/19/2011 Sold 6 EWY May2011 $66.00 Calls @ $1.39
Note: the price of EWY was $65.20 when the calls were sold.
05/27/2011 Sold 6 EWY Jun2011 $67.00 Calls @ $.59
Note: the price of EWY was $64.84 when the calls were sold.

Two possible overall performance results(including commissions) for these iShares MSCI South Korea ETF (EWY) transactions would be as follows:
Stock Purchase Cost: $38,510.95
= ($64.17*600+$8.95 commission)

Net Profit:
(a) Options Income: +$1,161.10
= [600*($1.39+$.59) - 2*$13.45 commissions]
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $64.84 at expiration): +$393.05
= ($64.84-$64.17)*600 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $67.00): +$1,287.05
= ($67.00-$64.84)*600 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$1,554.15
= (+$1,161.10 +$0.00 +$393.05)
Total Net Profit (If stock assigned at $67.00): +$2,715.25
= (+$1,161.10 +$0.00 +$1,554.15)

1. Absolute Return (If stock unchanged at $64.84 at expiration): +4.0%
= +$1,554.15/$38,510.95
Annualized Return (If stock unchanged at expiration): +24.1%
= (+$1,554.15/$38,510.95)*(365/61 days)

2. Absolute Return (If stock assigned at $67.00 at expiration): +7.1%
= +$2,715.25/$38,510.95
Annualized Return (If stock assigned at $67.00): +42.2%
= (+$2,715.25/$38,510.95)*(365/61 days)

1 comment:

  1. Have you ever looked at writing weekly calls on FCX instead of monthly?

    FCX is active enough that there are new call issues each week. I've been doing this the last 2 months now and was curious if you've ever contemplated it or what your opinion was on the matter.

    ReplyDelete