Tuesday, June 28, 2011

Covered Call Continuation Transaction -- Apple Inc.(AAPL)

The Jun2011 covered calls position in Apple Inc.(AAPL) expired. Today, a decision was made to retain the 100 shares in Apple Inc. in the Covered Calls Advisor Portfolio and to re-establish a covered calls position with a Jul2011 expiration and at the $345.00 strike price. The detailed transactions history for this Apple Inc. position as well as possible results for this investment 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.
06/18/2011 Jun2011 Options Expired
Note: the price of AAPL was $320.26 upon options expiration.
06/28/2011 Sold 1 AAPL Jul2011 $345.00 Call Option @ $2.77
Note: price of AAPL stock was $335.75 when this 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: +$3,443.80
= [100*($6.10+$5.50+$10.80+$8.95+$.90+$2.77) - 6*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $335.75): +$1,451.05
= ($335.70-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If assigned at $345.00): +$2,381.05
= ($345.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $335.75): +$4,894.85
= (+$3,443.80 +$0.00 +$1,451.05)
Total Net Profit(If stock assigned at $345.00): +$5,824.85
= (+$3,443.80 +$0.00 +$2,381.05)

Absolute Return if Unchanged at $335.75: +15.2%
= +$4,894.85/$32,118.95
Annualized Return If Unchanged (ARIU): +26.7%
= (+$4,894.85/$32,118.95)*(365/208 days)

Absolute Return if Assigned at $345.00: +18.1%
= +$5,824.85/$32,118.95
Annualized Return If Assigned (ARIA): +31.8%
= (+$5,824.85/$32,118.95)*(365/208 days)

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