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Friday, December 2, 2011

Continuation Transaction -- Apple Inc.

Today, a decision was made to retain the 100 shares held in Apple Inc.(AAPL) and to establish a Dec2011 covered call position. The detailed transactions as well as some possible results for this investment are as follows:

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.
11/19/2011 Nov2011 AAPL options expired.
11/30/2011 Sold 1 AAPL Dec2011 $400.00 Call @ $4.40
Note: the price of AAPL was $392.94 today when this call option was sold.

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

Net Profit:
(a) Options Income: +$2,145.90
= (100*($10.15+$7.20+$4.40) - 3*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $392.94): -$369.35
= ($392.94-$396.544)*100 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $400.00 at expiration): +$336.65
= ($400.00-$396.544)*100 - $8.95 commissions

Total Net Profit (If stock price unchanged at $392.94): +$1,776.55
= (+$2,145.90 +$0.00 -$369.35)
Total Net Profit (If stock assigned at $400.00): +$2,482.55
= (+$2,145.90 +$0.00 +$336.65)

1. Absolute Return (If stock price unchanged at $392.94): +4.5%
= +$1,776.55/$39,663.35
Annualized Return If Unchanged (ARIU) +18.4%
= (+$1,776.55/$39,663.35)*(365/89 days)

2. Absolute Return (If stock assigned at $400.00 strike price): +6.3%
= +$2,482.55/$39,663.35
Annualized Return If Assigned (ARIA): +25.7%
= (+$2,482.55/$39,663.35)*(365/89 days)

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