Wednesday, August 31, 2011

Continuation Transactions -- iShares MSCI Emerging Markets ETF and iShares MSCI Taiwan ETF

Today, a decision was made to re-establish covered calls positions for two covered calls positions (iShares MSCI Emerging Markets ETF and iShares MSCI Taiwan ETF) that expired upon Aug2011 expirations. The new positions are being established with Sep2011 expirations and the detailed transactions history for these positions as well as possible results for these investments are as follows:

1. iShares MSCI Emerging Markets ETF(EEM) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 500 EEM @ $47.81
04/19/2011 Sold 5 EEM May2011 $49.00 Calls @ $.83
Note: the price of EEM was $48.32 when the calls were sold.
05/27/2011 Sold 5 EEM Jun2011 $49.00 Calls @ $.44
Note: the price of EEM was $47.83 when the calls were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of EEM was $45.34 upon options expiration.
6/22/2011 Distribution Income $.46092 per share.
06/28/2011 Sold 5 EEM Jul2011 $47.00 Calls @ $.62
Note: price of EEM was $46.42 when these options were sold.
07/16/2011 Jul2011 EEM options expired.
07/18/2011 Sold 5 EEM Aug2011 $47.00 Calls @$.99
Note: The price of EEM was $46.55 when these call options were sold.
08/20/2011 Aug2011 Options Expired.
08/31/2011 Sold 5 EEM Sep2011 $43.00 Calls @$1.13
Note: The price of EEM was $42.89 when these call options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI Emerging Markets ETF (EEM) transactions would be as follows:
Stock Purchase Cost: $23,913.95
= ($47.81*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,896.50
= [500*($.83 +$.35+$.62+$.99+$1.13) - 5*$12.70 commissions]
(b) Distribution Income: $230.46 = $.46092 * 500 shares
(c) Capital Appreciation (If EEM unchanged at $42.89 at expiration): -$2,468.95
= ($42.89-$47.81)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): -$2,413.95
= ($43.00-$47.81)*500 - $8.95 commissions

Total Net Profit (If EEM price unchanged at $42.89 at expiration): -$341.99
= (+$1,896.50 +$230.46 -$2,468.95)
Total Net Profit (If EEM assigned at $43.00): -$286.99
= (+$1,896.50 +$230.46 -$2,413.95)

1. Absolute Return (If stock unchanged at $42.89 at expiration): -1.4%
= -$341.99/$23,913.95
Annualized Return (If stock unchanged at expiration): -3.4%
= (-$341.99/$23,913.95)*(365/152 days)

2. Absolute Return (If stock assigned at $43.00 at expiration): -1.2%
= -$286.99/$23,913.95
Annualized Return (If stock assigned at $49.00): -2.4%
= (-$286.99/$23,913.95)*(365/152 days)


2. iShares MSCI Taiwan ETF (EWT) -- Continuation
The transactions history is as follows:
07/18/2011 Bought 1,000 EWT @ $14.65
07/19/2011 Sold 10 EWT Aug2011 $15.00 Calls @ $.31
Note: The price of EWT was $14.85 today when the options were sold.
08/20/2011 Aug2011 Options Expired.
08/31/2011 Sold 10 EWT Sep2011 $14.00 Calls @$.29
Note: The price of EWT was $13.89 when these call options were sold.

Two possible overall performance results(including commissions) for the EWT transactions would be as follows:
Stock Purchase Cost: $14,650.95
= ($14.65*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$567.10
= (1,000*($.31+$.29) - 2*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If unchanged at $13.89): -$768.95
= ($13.89-$14.65)*1,000 - $8.95 commissions
(c) Capital Appreciation (If assigned at $14.00): -$658.95
= ($14.00-$14.65)*1,000 - $8.95 commissions

Total Net Profit(If EWT price unchanged at $13.89): -$201.85
= (+$567.10 +$0.00 -$768.95)
Total Net Profit(If EWT price assigned at $14.00): -$91.85
= (+$567.10 +$0.00 -$658.95)

Absolute Return if Unchanged at $13.89: -1.4%
= -$201.85/$14,650.95
Annualized Return If Unchanged (ARIU) -8.2%
= ($201.85/$14,650.95)*(365/61 days)

Absolute Return if Assigned at $14.00: -0.6%
= -$91.85/$14,650.95
Annualized Return If Assigned (ARIA) -3.8%
= (-$91.85/$14,650.95)*(365/61 days)

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