Monday, June 20, 2011

June 2011 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained a total of seven covered calls positions with June 2011 expirations, with the following results:

- Six covered calls positions in the CCAP (Apple Inc., Best Buy Corp., Freeport McMoRan Copper and Gold Inc., International Paper, iShares MSCI Emerging Markets ETF, and iShares MSCI South Korea ETF) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish July 2011 covered call positions. The related transactions will be made this week and the actual transactions will be posted on this blog site on the same day they occur.

- The three options in the covered calls position in UnitedHealth Group Inc.(UNH) were called away upon option expiration last Friday. Three Jun2011 $50.00 options were exercised despite the fact that UNH closed on Friday at $49.96, slightly below the $50.00 strike price. The detailed results for this position is as follows:

1. UnitedHealth Group Inc.(UNH) -- Closed
The transactions history is as follows:
04/18/2011 Bought 300 UNH @ $43.97
04/20/2011 Sell-to-Open(STO) 3 UNH May2011 $45.00 CallS @ $1.03
Note: the price of UNH was $44.60 when the call options were sold.
05/20/2011 Bought-to-Close(BTC) 3 UNH May3011 $45.00 Calls @ $5.05
Note: The price of UNH was $50.08 when the options were bought back.
05/20/2011 Sell-to-Open(STO) 3 UNH Jun2011 $50.00 Calls @ $1.43
Note: The price of UNH was $50.28 when these options were sold.
06/18/2011 Jun2011 UNH Options Expired.
Note: the price of UNH was $49.96 upon options expiration.

A resulting overall performance (including commissions) for these UnitedHealth Group Inc.(UNH) transactions was as follows:
Stock Purchase Cost: $13,199.95
= ($43.97*300+$8.95 commission)

Net Profit:
(a) Options Income: -$810.60
= (300*($1.03-$5.05+$1.43) - 3*$11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (Stock assigned at $50.00): +$1,800.05
= ($50.00-$43.97)*300 - $8.95 commissions

Total Net Profit (Stock assigned at $50.00): +$989.45
= (-$810.60 +$0.00 +$1,800.05)

Absolute Return (Stock assigned at $50.00 at expiration): +7.5%
= +$989.45/$13,199.95
Annualized Return: +44.9%
= (+$989.45/$13,199.95)*(365/61 days)