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Wednesday, October 26, 2011

Sold 100% Cash-Secured Puts -- Citigroup

Today, the Covered Calls Advisor established new 100% Cash-Secured Puts positions in Bunge Ltd, Citigroup, Halliburton, and Morgan Stanley; each with Nov2011 expirations. The Covered Calls Advisor does not use margin, so the detailed information on these positions and some potential results shown below reflect the fact that these positions were established using 100% cash securitization for all four of these short put option positions.

1. Bunge Ltd.(BG) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Bunge Ltd.(BG) Nov2011 $60.00 Put Options @ $3.10
Note: the price of BG stock was $58.62 today when these puts were sold.

Two possible overall performance results(including commissions) for this Bunge Ltd.(BG)transaction would be as follows:
100% Cash-Secured Cost Basis: $18,000.00
= $60.00*300

Net Profit:
(a) Options Income: +$918.80
= ($3.10*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $58.62 and thus stock assigned at $60.00 at expiration): -$422.95
= ($58.62-$60.00)*300 - $8.95 commissions
(c) Capital Appreciation (If BG stock above $60.00 at Nov2011 expiration): +$0.00
= ($60.00-$60.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $58.62): +$495.85
= (+$918.80 +$0.00 -$422.95)
Total Net Profit(If stock price above $60.00 at Nov2011 options expiration): +$918.80
= (+$918.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $58.62: +2.8%
= +$495.85/$18,000.00
Annualized Return If Unchanged (ARIU): +41.9%
= (+$495.85/$18,000.00)*(365/24 days)

2. Absolute Return (If stock price above $60.00 at Nov2011 options expiration and put options thus expire worthless): +5.1%
= +$918.80/$18,000.00
Annualized Return (If stock price above $60.00 at expiration): +77.6%
= (+$918.80/$18,000.00)*(365/24 days)


2. Citigroup, Inc.(C) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Citigroup, Inc.(C) Nov2011 $31.00 Put Options @ $1.96
Note: the price of Citi stock was $30.42 today when these puts were sold.

Two possible overall performance results(including commissions) for this Citigroup, Inc.(C) transaction would be as follows:
100% Cash-Secured Cost Basis: $9,300.00
= $31.00*300

Net Profit:
(a) Options Income: +$576.80
= ($1.96*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $30.42 and thus stock assigned at $31.00 at expiration): -$182.95
= ($30.42-$31.00)*300 - $8.95 commissions
(c) Capital Appreciation (If Citigroup stock above $31.00 at Nov2011 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $30.42): +$393.85
= (+$576.80 +$0.00 -$182.95)
Total Net Profit(If stock price above $31.00 at Nov2011 options expiration): +$576.80
= (+$576.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $30.42: +4.2%
= +$393.85/$9,300.00
Annualized Return If Unchanged (ARIU): +64.4%
= (+$393.85/$9,300.00)*(365/24 days)

2. Absolute Return (If stock price above $31.00 at Nov2011 options expiration and put options thus expire worthless): +6.2%
= +$576.80/$9,300.00
Annualized Return (If stock price above $31.00 at expiration): +94.3%
= (+$576.80/$9,300.00)*(365/24 days)


3. Halliburton Co.(HAL) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Halliburton Co.(HAL) Nov2011 $36.00 Put Options @ $2.06
Note: the price of HAL stock was $35.56 today when these puts were sold.

Two possible overall performance results(including commissions) for this Halliburton Co.(HAL) transaction would be as follows:
100% Cash-Secured Cost Basis: $10,800.00
= $36.00*300

Net Profit:
(a) Options Income: +$606.80
= ($2.06*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $35.56 and thus stock assigned at $36.00 at expiration): -$140.95
= ($35.56-$36.00)*300 - $8.95 commissions
(c) Capital Appreciation (If HAL stock above $36.00 at Nov2011 expiration): +$0.00
= ($36.00-$36.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $35.56): +$465.85
= (+$606.80 +$0.00 -$140.95)
Total Net Profit(If stock price above $36.00 at Nov2011 options expiration): +$606.80
= (+$606.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $35.56: +4.3%
= +$465.85/$10,800.00
Annualized Return If Unchanged (ARIU): +65.6%
= (+$465.85/$10,800.00)*(365/24 days)

2. Absolute Return (If stock price above $36.00 at Nov2011 options expiration and put options thus expire worthless): +5.6%
= +$606.80/$10,800.00
Annualized Return (If stock price above $36.00 at expiration): +85.4%
= (+$606.80/$10,800.00)*(365/24 days)


4. Morgan Stanley (MS) -- New Position
The transaction was as follows:
10/26/2011 Sold 6 Morgan Stanley (MS) Nov2011 $17.00 Put Options @ $1.16
Note: the price of MS stock was $16.82 today when these puts were sold.

Two possible overall performance results(including commissions) for this Morgan Stanley (MS) transaction would be as follows:
100% Cash-Secured Cost Basis: $10,200.00
= $17.00*600

Net Profit:
(a) Options Income: +$682.55
= ($1.16*600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $16.82 and thus stock assigned at $17.00 at expiration): -$116.95
= ($16.82-$17.00)*600 - $8.95 commissions
(c) Capital Appreciation (If MS stock above $17.00 at Nov2011 expiration): +$0.00
= ($17.00-$17.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $16.82): +$565.60
= (+$682.55 +$0.00 -$116.95)
Total Net Profit(If stock price above $17.00 at Nov2011 options expiration): +$682.55
= (+$682.55 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $16.82: +5.5%
= +$565.60/$10,200.00
Annualized Return If Unchanged (ARIU): +84.3%
= (+$565.60/$10,200.00)*(365/24 days)

2. Absolute Return (If stock price above $17.00 at Nov2011 options expiration and put options thus expire worthless): +6.7%
= +$682.55/$10,200.00
Annualized Return (If stock price above $17.00 at expiration): +101.8%
= (+$682.55/$10,200.00)*(365/24 days)

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