Monday, July 18, 2011

Covered Calls Continuation Transactions

Upon Jul2011 options expiration, seven covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions for two equities (iShares MSCI China ETF and Petrobras ADR) with Aug2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. 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.
06/21/2011 FXI ETF distribution of $.68555 per share
07/16/2011 Jul2011 FXI options expired.
07/18/2011 Sold 10 FXI Aug2011 $42.00 Calls @$.71

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: +$1,531.90
= (1,000*($.49+$.37+$.71) - 3*$12.70 commissions)
(b) Distribution Income: $685.55 = $.68555 * 1,000 shares
(c) Capital Appreciation (If FXI price unchanged at $41.08 at expiration): -$3,728.95
= ($41.08-$44.80)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $42.00 at expiration): -$2,808.95
= ($42.00-$44.80)*1,000 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $41.08 at expiration): -$1,511.50
= (+$1,531.90 +$685.55 -$3,728.95)
Total Net Profit (If FXI assigned at $42.00): +20.40
= (+$1,531.90 +$685.55 -$2,197.05)

1. Absolute Return (If FXI unchanged at $41.08 at expiration): -3.4%
= -$1,511.50/$44,808.95
Annualized Return (If FXI unchanged at expiration): -9.9%
= (-$1,511.50/$44,808.95)*(365/124 days)

2. Absolute Return (If FXI assigned at $42.00 at expiration): +0.05%
= +$20.40/$44,808.95
Annualized Return If Assigned (ARIA): +0.13%
= (+$20.40/$44,808.95)*(365/124 days)


2. Petrobras ADR (PBR) -- Continuation
The transactions history to date for Petrobras ADR (PBR) is as follows:
06/21/2010 Bought 300 PBR @ $39.34
06/21/2010 Sold 3 PBR Jul2010 $40.00 Calls @ $1.05
7/17/2010 Jul2010 Options Expired
Note: The closing price of PBR was $34.51 on expiration Friday.
07/22/2010 Sold 3 PBR Aug2010 $38.00 Calls @ $.55
Note: The price of PBR was $36.52 today when these options were sold.
08/02/2010 +$57.90 Ex-Dividend = ($.193 Net Dividend x 300 shares)
08/21/2010 Aug2010 Options Expired
Note: The closing price of PBR was $34.42 on expiration Friday.
09/01/2010 Sold 3 PBR Sept2010 $36.00 Call Options @ $.58
Note: The price of PBR was $35.20 today when these call options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 3 PBR Oct2010 $37.00 Call Options @ $.63
Note: The price of PBR was $35.24 today when these options were sold.
10/16/2010 Oct2010 Options Expired
Note: Price of PBR at expiration was $34.29
10/18/2010 Sell-to-Open (STO) 3 PBR Nov2010 $36.00 Call Options @ $.62
Note: The price of PBR was $34.20 today when these call options were sold.
11/03/2010 +$57.90 Ex-Dividend = ($.193 Net Dividend x 300 shares)
11/20/2010 Nov2010 Options Expired
Note: Price of PBR at expiration was $33.59
12/01/2010 Sell-to-Open (STO) 3 PBR Dec2010 $34.00 Call Options @ $.54
Note: The price of PBR was $33.05 today when these call options were sold.
12/07/2010 $41.42 Dividend = ($.138 Net Dividend x 300 shares)
12/18/2010 Dec2010 Options Expired
Note: The price of PBR was $34.08 upon Dec2010 options expiration.
12/21/2010 Sold 3 PBR Jan2011 $35.00 Calls @ $.59
Note: The price of PBR was $34.18 when these options were sold.
01/06/2011 $61.03 Dividend = ($.203 Net Dividend x 300 shares)
01/21/2011 Buy-to-Close (BTC) 3 PBR Jan2011 $35.00 Call Options @ $1.35
01/21/2011 Sell-to-Open (STO) 3 PBR Feb2011 $37.00 Call Options @ $.89
02/18/2011 Buy-to-Close (BTC) 3 PBR Feb2011 $37.00 Call Options @ $.85
02/18/2011 Sell-to-Open (STO) 3 PBR Mar2011 $37.00 Call Options @ $1.67
03/18/2011 Buy-to-Close (BTC) 3 PBR Mar2011 $37.00 Call Options @ $2.19
03/18/2011 Sell-to-Open (STO) 3 PBR Apr2011 $40.00 Call Options @ $1.01
Note: The price of PBR was $39.23 when these options were sold.
04/16/2011 Apr2011 PBR Options Expired.
Note: the price of PBR was $37.81 upon options expiration.
04/20/2011 Sold 3 PBR May2011 $38.00 Calls @ $.87
Note: the price of PBR was $37.51 when these call options were sold.
05/21/2011 May2011 Options Expired
Note: the price of PBR was $33.87 upon options expiration.
06/28/2011 Sold 3 PBR Jul2011 $33.00 Calls @ $.59
Note: price of PBR was $32.82 when these options were sold.
07/16/2011 Jul2011 PBR options expired.
07/18/2011 Sold 3 PBR Aug2011 $33.00 Calls @$.60

Two possible overall performance results (including commissions) for the Petrobras (PBR) transactions would be as follows:
Stock Purchase Cost: $11,810.95
= ($39.34*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,583.20
= (300*($1.05+$.55+$.58+$.63+$.62+$.54+$.590-$1.35+$.89-$.85+$1.67-$2.19+$1.01+$.87+$.59+$.60) - 14*$11.20 commissions)
(b) Dividend Income: +$186.60 (2*$.193 + $.236)*300 shares -- Three ex-Dividend dates
(c) Capital Appreciation (If PBR price unchanged at $32.18): -$2,156.95
= ($32.18-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $33.00): -$1,910.95
= ($33.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR unchanged at $32.18): -$387.15
= (+$1,583.20 +$186.60 -$2,156.95)
Total Net Profit(If PBR assigned at $33.00): -$141.15
= (+$1,583.20 +$186.60 -$1,910.95)

1. Absolute Return (If Unchanged at $32.18): -3.3%
= -$387.15/$11,810.95
Annualized Return If Unchanged (ARIU): -2.8%
= (-$387.15/$11,810.95)*(365/425 days)

2. Absolute Return (If Assigned at $33.00): -1.2%
= -$141.15/$11,810.95
Annualized Return If Assigned(ARIA): -1.0%
= (-$141.15/$11,810.95)*(365/425 days)

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