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Tuesday, May 31, 2011

Covered Calls Continuation Transactions

Upon May2011 options expiration, several covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls -- one with a Jun2011 and three with Jul2011 expirations. 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.
05/31/2011 Sold 1 AAPL Jun2011 $360.00 Call @ $.90
Note: The price of AAPL was $343.63 when this call option was sold.

Two possible overall performance results(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: +$3,176.50
= [100*($6.10+$5.50+$10.80+$8.95+$.90) - 5*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $343.63): +$2,244.05
= ($343.63-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If assigned at $360.00): +$3,881.05
= ($360.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $343.63): +$5,420.55
= (+$3,176.50 +$0.00 +$2,244.05)
Total Net Profit(If stock assigned at $360.00): +$7,057.55
= (+$3,176.50 +$0.00 +$3,881.05)

Absolute Return if Unchanged at $343.63: +16.9%
= +$5,420.55/$32,118.95
Annualized Return If Unchanged (ARIU): +34.2%
= (+$5,420.55/$32,118.95)*(365/180 days)

Absolute Return if Assigned at $360.00: +22.0%
= +$7,057.55/$32,118.95
Annualized Return If Assigned (ARIA): +44.6%
= (+$7,057.55/$32,118.95)*(365/180 days)


2. China Mobile Ltd.(CHL) -- Continuation
The transactions history is as follows:
02/23/2011 Bought 200 CHL @ $46.479
02/23/2011 Sold 2 CHL Mar2011 $47.50 Calls @ $.60
03/19/2011 Mar2011 Options Expired
03/30/2011 Sold 2 CHL May2011 $47.50 Calls @ $.55
Note: price of CHL was $46.22 when these options were sold.
05/10/2011 Ex-dividend payment of approximately $.9128 per share expected.
05/21/2011 May2011 Options Expiration will occur.
05/31/2011 Sold 2 CHL Jul2011 $47.50 Calls @ $.35
Note: The price of CHL was $45.59 when these call options were sold.

Two possible overall performance results(including commissions) for the China Mobile Ltd ADR (CHL) transactions would be as follows:

Stock Purchase Cost: $9,304.75
= ($46.479*200+$8.95 commission)

Net Profit:
(a) Options Income: +$268.65
= ($.60 + $.55 + $.35)*200 shares - 3*$10.45 commissions
(b) Dividend Income: +$182.56 = $.9128 * 200 shares
(c) Capital Appreciation (If stock price unchanged at $45.59): -$186.75
= ($45.59 -$46.479)*200 - $8.95 commissions
(c) Capital Appreciation (If CHL assigned at $47.50 at Jul2011 expiration): +$195.25
+($47.50 -$46.479)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $45.59): +$264.46
= (+$268.65 +$182.56 -$186.75)
Total Net Profit(If stock price above $47.50 at Jul2011 options expiration): +$646.46= (+$268.65 +$182.56 +$195.25)

Absolute Return if Unchanged at $45.59: +2.8%
= +$264.46/$9,304.75
Annualized Return If Unchanged (ARIU): +7.3%
= (+$264.46/$9,304.75)*(365/143 days)

Absolute Return (If stock assigned at $47.50 upon Jul2011 options expiration): +6.9%
= +$646.46/$9,304.75
Annualized Return if stock assigned at expiration (ARIA): +17.7%
= (+$646.46/$9,304.75)*(365/143 days)


3. iShares MSCI China ETF (FXI) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 1,000 FXI @ $44.80
04/20/2011 Sold 10 FXI May2011 $47.00 Calls @ $.49
Note: the price of FXI was $45.88 when the calls were sold.
05/31/2011 Sold 10 FXI Jul2011 $47.00 Calls @ $.37
Note: The price of FXI was $45.18 when these call options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $44,808.95
= ($44.80*1,000+$16.45 commission)

Net Profit:
(a) Options Income: +$834.60
= (1,000*($.49+$.37) - 2*$12.70 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $45.18 at expiration): +$371.05
= ($45.18-$44.80)*1,000 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): +$2,191.05
= ($47.00-$44.80)*1,000 - $8.95 commissions

Total Net Profit (If stock price unchanged at $45.18 at expiration): +$1,205.65
= (+$834.60 +$0.00 +371.05)
Total Net Profit (If stock assigned at $47.00): +$3,025.65
= (+$834.60 +$0.00 +$2,191.05)

1. Absolute Return (If stock unchanged at $45.18 at expiration): +2.7%
= +$1,205.65/$44,808.95
Annualized Return (If stock unchanged at expiration): +11.0%
= (+$1,205.65/$44,808.95)*(365/89 days)

2. Absolute Return (If stock assigned at $47.00 at expiration): +6.8%
= +$3,025.65/$44,808.95
Annualized Return If Assigned (ARIA): +27.7%
= (+$3,025.65/$44,808.95)*(365/89 days)


4. Microsoft Corp.(MSFT) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 700 MSFT @ $28.15
02/17/2011 Ex-Dividend Date $112.00 = $.16 per share x 700 shares
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.
05/17/2011 Ex-Dividend Date $112.00 = $.16 per share x 700 shares
05/31/2011 Sold 7 MSFT Jul2011 $26.00 Calls @ $.29
Note: The price of MSFT was $25.05 when these call 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: +$1,105.20
= 700*($.40+$.31+$.66+$.29) - 4*$14.20 commissions)
(b) Dividend Income: +$224.00 ($.16/share * 700 shares * 2 payments)
(c) Capital Appreciation (If stock price unchanged at $25.05): -$2,178.95
= ($25.05-$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 $25.05): -$849.75
= (+$1,105.20 +$224.00 -$2,178.95)
Total Net Profit(If stock assigned at $26.00): -$184.75
= (+$1,105.20 +$224.00 -$1,513.95)

Absolute Return if Stock Unchanged at $25.05: -4.3%
= -$849.75/$19,713.95
Annualized Return If Unchanged (ARIU): -13.5%
= (-$849.75/$19,713.95)*(365/173 days)

Absolute Return if Assigned at $26.00: -0.9%
= -$184.75/$19,713.95
Annualized Return If Assigned (ARIA): -2.0%
= (-$184.75/$19,713.95)*(365/173 days)

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