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Thursday, December 22, 2011

Continuation Transactions -- Citigroup Inc. and Morgan Stanley

Upon Dec2011 options expiration, all nine of the covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions in Citigroup Inc.(Symbol C) and Morgan Stanley (MS). The detailed transactions history for these positions as well as possible results are as follows:

1. Citigroup Inc.(C) -- Continuation
The transaction history is 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.
11/19/2011 Nov2011 Options Expired.
Note: the price of Citi stock was $26.28 upon options expiration.
11/30/2011 Sold 3 Dec2011 $27.00 call options @ $1.09
Note: the price of Citigroup stock was $26.61 when these options were sold.
12/17/2011 Dec2011 Options Expired.
Note: the price of Citigroup was $26.03 upon options expiration.
01/21/2011 Sold 3 Jan2012 $28.00 calls @$.99
Note: the price of Citi was $27.02 when these options were sold.

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

Net Profit:
(a) Options Income: +$1,178.40
= ($1.96 + $1.09 + $.99) *300 shares - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $27.02): -$1,202.95
= ($27.02-$31.00)*300 - $8.95 commissions
(c) Capital Appreciation (If Citigroup stock above $28.00 at Jan2012 expiration):
-$908.95
= ($28.00-$31.00) -$8.95 commissions

Total Net Profit(If stock price unchanged at $27.02): -$24.55
= (+$1,178.40 +$0.00 -$1,202.95)
Total Net Profit(If stock price above $28.00 at Jan2012 options expiration): +$269.45
= (+$1,178.40 +$0.00 -$908.95)

1. Absolute Return if Unchanged at $27.02: -0.3%
= -$24.55/$9,300.00
Annualized Return If Unchanged (ARIU): -1.1%
= (-$24.55/$9,300.00)*(365/87 days)

2. Absolute Return (If stock price above $28.00 at Jan2012 options expiration: +2.9%
= +$269.45/$9,300.00
Annualized Return (If stock price above $27.00 at expiration): +12.2%
= (+$269.45/$9,300.00)*(365/87 days)


2. Morgan Stanley (MS) -- Continuation
The transactions history is 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.
11/19/2011 Nov2011 MS put options exercised -- 600 shares MS purchased @ $17.00.
11/30/2011 Sold 6 MS Dec2011 $15.00 Calls @ $.44
Note: the price of MS was $14.18 today when these call options were sold.
12/17/2011 Dec2011 Options Expired.
Note: the price of Morgan Stanley was $14.98 upon options expiration.
01/21/2011 Sold 6 Jan2012 $16.00 calls @$.69
Note: the price of MS was $15.39 when these options 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: +$1,333.65
= ($1.16+$.44+$.69)*600 shares - 3*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $15.39): -$974.95
= ($15.39-$17.00)*600 - $8.95 commissions
(c) Capital Appreciation (If MS stock assigned at $16.00 at Jan2012 expiration):
-$608.95 = ($16.00-$17.00)*600 - $8.95 commissions

Total Net Profit(If stock price unchanged at $15.39): +$358.70
= (+$1,333.65 +$0.00 -$974.95)
Total Net Profit(If stock price above $16.00 at Jan2012 options expiration): +$724.70
= (+$1,333.65 +$0.00 -$608.95)

1. Absolute Return if Unchanged at $15.39: +3.5%
= +$358.70/$10,200.00
Annualized Return If Unchanged (ARIU): +14.8%
= (+$358.70/$10,200.00)*(365/87 days)

2. Absolute Return (If stock price above $16.00 at Jan2012 options expiration): +7.1%
= +$724.70/$10,200.00
Annualized Return (If stock price above $15.00 at expiration): +29.8%
= (+$724.70/$10,200.00)*(365/87 days)

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