Tuesday, July 19, 2011

Establish iShares MSCI Germany ETF Covered Calls

Yesterday, the Covered Calls Advisor established a new covered calls position in iShares MSCI Germany ETF (EWG). The photo on the right shows the bull and bear in front of the Frankfurt Stock Exchange in Germany.

Established iShares MSCI Germany ETF (EWG) Covered Calls for Sep2011:
07/18/2011 Bought 500 EWG @ $25.03
07/18/2011 Sold 5 EWG Sep2011 $26.00 Calls @ $.70
Note: The price of EWG was $25.06 when the options were sold.

EWG currently ranks 5th in the Covered Calls Advisor's Country Value Rankings. European stocks took another 1.5%+ decline in morning trading today as the European debt fears continued. The Covered Calls Advisor took that opportunity to establish a covered calls position in EWG, which provides a well-diversified exposure to the overall German stock market.

Some possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $12,523.95
= ($25.03*500+$8.95 commission)

Net Profit:
(a) Options Income: +$337.30
= (500*$.70 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $26.00): +$476.05
= ($26.00-$25.03)*500 - $8.95 commissions

Total Net Profit(If equity price unchanged at $25.03): +$328.35
= (+$337.30 +$0.00 -$8.95)
Total Net Profit(If ETF price assigned at $26.00): +$804.40
= (+$337.30 +$0.00 +$476.05)

Absolute Return if Unchanged at $25.03: +2.6%
= +$328.35/$12,523.95
Annualized Return If Unchanged (ARIU) +15.7%
= (+$328.35/$12,523.95)*(365/61 days)

Absolute Return if Assigned at $26.00: +6.4%
= +$804.40/$12,523.95
Annualized Return If Assigned (ARIA) +38.4%
= (+$804.40/$12,523.95)*(365/61 days)

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