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Monday, October 24, 2011

Continuation Transactions -- Apple Inc., International Paper, Mylan Inc., and Peabody Energy

Upon Oct2011 options expiration last Friday, seven of the thirteen total covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions for four of these seven equities (Apple Inc., International Paper, Mylan Inc., and Peabody Energy) with Nov2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. Apple Inc.(AAPL) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 100 shares AAPL at $396.544
09/19/2011 Sold 1 AAPL Oct2011 $410 Call Option @ $10.15
10/22/2011 Oct2011 option expired.
Note: the AAPL price was $392.87 at option expiration.
10/24/2011 Sold 1 AAPL Nov2011 $410 Call Option @ $7.20
Note: the price of AAPL was $399.10 when the option was sold.

Some possible performance results(including commissions) for these AAPL transactions are as follows:
Stock Purchase Cost: $39,663.35
= ($396.544*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,715.60
= (100*($10.15+$7.20) - 2*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $399.10): +$246.65
= ($399.10-$396.544)*100 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $410.00 at expiration): +$1,336.65
= ($410.00-$396.544)*100 - $8.95 commissions

Total Net Profit (If stock price unchanged at $399.10): +$1,962.25
= (+$1,715.60 +$0.00 +$246.65)
Total Net Profit (If stock assigned at $410.00): +$3,052.25
= (+$1,715.60 +$0.00 +$1,336.65)

1. Absolute Return (If stock price unchanged at $399.10): +4.9%
= +$1,962.25/$39,663.35
Annualized Return If Unchanged (ARIU) +29.6%
= (+$1,962.25/$39,663.35)*(365/61 days)

2. Absolute Return (If stock assigned at $410.00 strike price): +7.7%
= +$3,052.25/$39,663.35
Annualized Return If Assigned (ARIA): +46.0%
= (+$3,052.25/$39,663.35)*(365/61 days)


2. International Paper Co.(IP) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 400 shares IP at $26.978
09/19/2011 Sold 4 IP Oct2011 $28 Calls @ $1.18
10/22/2011 Oct2011 options expired.
Note: the IP price was $25.93 at option expiration.
10/24/2011 Sold 4 IP Nov2011 $27.00 Call Options @ $.73
Note: the price of IP was $26.25 when the options were sold.
11/14/2011 Ex-Div $105.00 = $.2625 * 400 shares

Two possible overall performance results(including commissions) for this International Paper Co.(IP) transaction would be as follows:
Stock Purchase Cost: $10,800.15
= ($26.978*400+$8.95 commission)

Net Profit:
(a) Options Income: +$740.10
= (400*($1.18+$.73) - 2*$11.95 commissions)
(b) Dividend Income: +$105.00 = $.2625 * 400 shares
(c) Capital Appreciation (If stock unchanged at $26.25 at expiration): -$300.15
= ($26.25-$26.978)*400 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $27.00): -$.15
= ($27.00-$26.978)*400 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$544.95
= (+$740.10 +$105.00 -$300.15)
Total Net Profit (If stock assigned at $28.00): +$844.95
= (+$740.10 +$105.00 -$.15)

1. Absolute Return (If stock unchanged at $26.25 at expiration): +5.0%
= +$544.95/$10,800.15
Annualized Return (If stock unchanged at expiration): +30.2%
= (+$544.95/$10,800.15)*(365/61 days)

2. Absolute Return (If stock assigned at $27.00 at expiration): +7.8%
= +$844.95/$10,800.15
Annualized Return (If stock assigned at $27.00): +46.8%
= (+$844.95/$10,800.15)*(365/61 days)


3. Mylan Inc. -- Continuation
The transactions history is as follows:
07/18/2011 Sold 5 Mylan Inc. (MYL) Aug2011 $23.00 Put Options @ $1.06
Note: the price of MYL stock was $22.98 today when these puts were sold.
08/20/2011 Aug2011 MYL options exercised and stock purchased at $23.00 per share.
08/22/2011 Sold 5 MYL Sep2011 $22.00 Calls @ $.46
09/17/2011 Sep2011 MYL options expired.
09/20/2011 Sold 5 MYL Oct2011 $22.00 Calls @ $.63
Note: The price of MYL was $20.48 when these call options were sold.
10/22/2011 Oct2011 options expired.
Note: the MYL price was $18.04 at option expiration.
10/24/2011 Sold 4 IP Nov2011 $19.00 Call Options @ $.56
Note: the price of MYL was $18.08 when the options were sold.

Two possible overall performance results(including commissions) for the Mylan Inc. transactions would be as follows:
Stock Purchase Cost: $11,508.95
= ($23.00*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,304.20
= 500*($1.06+$.46+$.63+$.56) - 4*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MYL unchanged at $18.08):
-$2,468.95 = ($18.08-$23.00)*500 - $8.95 commissions
(c) Capital Appreciation (If MYL exercised at $19.00): -$2,008.95
= ($19.00-$23.00)*500 - $8.95 commissions

Total Net Profit(If MYL unchanged at $18.08): -$1,164.75
= (+$1,304.20 +$0.00 -$2,468.95)
Total Net Profit(If MYL exercised at $19.00): -$704.75
= (+$1,304.20 +$0.00 -$2,008.95)

1. Absolute Return if Unchanged at $18.08: -10.1%
= -$1,164.75/$11,508.95
Annualized Return If Unchanged (ARIU): -29.8%
= (-$1,164.75/$11,508.95)*(365/124 days)

2. Absolute Return if Assigned at $19.00: -6.1%
= -$704.75/$11,508.95
Annualized Return If Assigned (ARIA): -18.0%
= (-$704.75/$11,508.95)*(365/124 days)


4. Peabody Energy Corp.(BTU) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 300 shares BTU at $44.208
09/19/2011 Sold 3 BTU Oct2011 $47 Calls @ $1.67
10/22/2011 Oct2011 options expired.
Note: the BTU price was $38.89 at option expiration.
10/24/2011 Sold 3 BTU Nov2011 $41.00 Call Options @ $1.85
Note: the price of BTU was $40.40 when the options were sold.

Two possible overall performance results(including commissions) for this Peabody Energy Corp.(BTU) transaction would be as follows:
Stock Purchase Cost: $13,271.35
= ($44.208*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,033.60
= (300*($1.67+$1.85) - 2*$11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $40.40 at expiration): -$1,151.35
= ($40.40-$44.208)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $41.00): -$971.35
= ($41.00-$44.208)*300 - $8.95 commissions

Total Net Profit (If stock price unchanged at $40.40 at expiration): -$117.75
= (+$1,033.60 +$0.00 -$1,151.35)
Total Net Profit (If stock assigned at $41.00): +$62.25
= (+$1,033.60 +$0.00 -$971.35)

1. Absolute Return (If stock unchanged at $40.40 at expiration): -0.9%
= -$117.75/$13,271.35
Annualized Return (If stock unchanged at expiration): -5.3%
= (-$117.75/$13,271.35)*(365/61 days)

2. Absolute Return (If stock assigned at $41.00 at expiration): +0.5%
= +$62.25/$13,271.35
Annualized Return (If stock assigned at $41.00): +2.8%
= (+$62.25/$13,271.35)*(365/61 days)

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