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Sunday, December 23, 2012

December 2012 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained eight covered calls positions with December 2012 expirations. A summary of the results is as follows:

- Two positions (Apple Inc. and SPDR Gold Shares) had their options expire Friday since the stock prices closed below the Dec options' strike prices.  So now, the Covered Calls Advisor Portfolio (CCAP) is long shares in these two equities.  A decision will be made during this week to either sell these shares or to re-establish covered calls positions by selling Jan2013 call options.  When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day with the details.

- The other six covered calls positions (Canadian Natural Resources Inc., Citigroup Inc., iShares MSCI China ETF, iShares MSCI Emerging Markets ETF, iShares MSCI South Korea ETF, and Potash Corp.) were closed out upon Dec2012 options expiration since the stocks closed above the strike prices.  Hence, the options expired and the accompanying equities were assigned at their respective strike prices.  
The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls positions with Jan2012 options expirations are established.  These transactions will be posted on this blog the same day they occur.

Saturday, December 1, 2012

Returns -- Through November 2012

1. 2012 Year-to-Date Results:

As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 9.92% so far in 2012. This is 3.27 percentage points (+9.92% minus 13.19%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.



















The financial results were as follows:
CCAP Absolute Return (Jan 1st through November 30, 2012) = +9.92%
= ($322,758.43-$293,634.14)/$293,634.14
Benchmark Russell 3000 (IWV) Absolute Return (Jan 1st through November 30, 2012)
= +13.19%
= ($84.03-$74.18)/$74.18

As a reminder, the Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined: If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.


2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:





This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.

Also as a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in this advisor's personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "NEUTRAL". The corresponding investing strategy is to, on-average, sell 1% out-of-the-money covered calls for the nearest expiration month.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff

Thursday, November 22, 2012

Purchased ProShares Short S&P 500 ETF

Yesterday, a long position in ProShares Short S&P 500 (ticker symbol SH) was established with the purchase of 1,000 shares. The transaction was:
11/21/2012 Bought 1,000 SH shares @ $35.10
Stock Purchase Cost: $35,108.95
= $35.10 x 1,000 shares + $8.95 commissions

This long position in an inverse ETF provides an added hedge against the Covered Calls Advisor Portfolio's long positions. This position will benefit the overall portfolio performance (relative to the Russell 3000 benchmark) if the market declines since SH will increase in direct proportion to any decline in the S&P 500 while this position is held.

With this position, this advisor's overall portfolio exposure is now approximately 65% long, 15% short, and 20% cash.

Wednesday, November 21, 2012

Closed -- Foot Locker Inc. and Fusion-io Inc. Covered Calls

1. Foot Locker Inc. -- Closed
Today, a decision was made to close the Foot Locker (ticker symbol FL) position.
The transaction history was:
10/22/2012 Bought 300 FL shares @ $35.48
10/22/2012 Sold 3 FL Nov2012 $35.00 Call Options @ $1.45
Note: the price of FL shares was $35.55 today when these options were sold.
11/16/2012 FL Nov2012 options expired
11/19/2012 Sold 3 FL Dec2012 $33.00 Call Options @ $1.45
11/21/2012 Bought-to-Close 3 FL Dec2012 $33.00 Call Options @ $1.55
11/21/2012 Sold 300 FL shares @ $33.96

The overall performance result (including commissions) for this Foot Locker Inc. (FL) covered calls position was as follows:
Stock Purchase Cost: $10,635.05
= ($35.48*300+$8.95 commission)

Net Profit:
(a) Options Income: +$382.60
= ($1.45+$1.45-$1.55) X 300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$464.95
=+($33.96-$35.48)*300 - $8.95 commissions

Total Net Profit: -$82.35
= (+$382.60 +$0.00 -$464.95)

Absolute Return: -0.8%
= -$82.35/$10,635.05
Annualized Return (If stock assigned):  -9.4%
= (-$82.35/$10,635.05)*(365/30 days)


2.  Fusion-io Inc. -- Closed 
The Nov2012 covered calls position in Fusion-io Inc. (ticker symbol FIO) expired last Friday.  Today, a decision was made to close the position by selling the 300 shares in FIO.  The transaction history was as follows:
10/19/2012 Bought 300 FIO shares @ $27.55
10/19/2012 Sold 3 FIO Nov2012 $29.00 Call Options @ $2.55
Note: the price of FIO was $27.63 today when these options were sold.
11/16/2012 FIO Nov2012 options expired
11/21/2012 Sold 300 FIO shares @ $23.10

The overall performance result (including commissions) is as follows:
Stock Purchase Cost: $8,273.95
= ($27.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$753.80 = ($2.55*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FIO sold at $23.10): -$1,343.95
=+($23.10-$27.55)*300 - $8.95 commissions

Total Net Profit: -$590.15
= (+$753.80 +$0.00 -$1,343.95

Absolute Return: -7.1%
= -$590.15/$8,273.95
Annualized Return: -78.9%
= (-$590.15/$8,273.95)*(365/33 days)

Monday, November 19, 2012

Continuation Transactions -- Eight Covered Calls Positions

Friday was options expiration for November 2012. Today, December 2012 covered calls positions were established by selling calls against long positions in eight existing equities in the Covered Calls Advisor Portfolio (CCAP). The detailed transactions history for these positions are shown below. The overall return-on-investment results for each position will be calculated and presented in the future when the positions are closed.

1. Canadian National Resources LTD -- Continuation
The transactions are as follows:
10/25/2012 Bought 600 CNQ shares @ $30.28
10/25/2012 Sold 6 CNQ Nov2012 $31.00 Call Options @ $.75
Note: the price of CNQ shares was $30.37 today when these options were sold.
11/16/2012 CNQ Nov2012 options expired
11/19/2012 Sold 6 CNQ Dec2012 $27.00 Call Options @ $1.45

2. Citigroup Inc. -- Continuation
The transactions to date are as follows:
10/23/2012 Sold 4 Citigroup, Inc. (symbol C) Nov2012 $36.00 Put Options @ $.82
Note: the price of Citi stock was $36.97 today when these Puts were sold.
11/16/2012 C Nov2012 options expired
11/19/2012 Sold 4 C Dec2012 $35.00 Call Options @ $2.07

3. Foot Locker Inc. -- Continuation
The transactions are as follows:
10/22/2012 Bought 300 FL shares @ $35.48
10/22/2012 Sold 3 FL Nov2012 $35.00 Call Options @ $1.45
Note: the price of FL shares was $35.55 today when these options were sold.
11/16/2012 FL Nov2012 options expired
11/19/2012 Sold 3 FL Dec2012 $33.00 Call Options @ $1.45

4. SPDR Gold Shares -- Continuation
The transactions are as follows:
10/19/2012 Sold 1 SPDR Gold Shares (GLD) Nov2012 $170.00 Put Options @ $4.40
Note: the price of GLD was $167.00 today when these Puts were sold.
11/16/2012 GLD Nov2012 options expired
11/19/2012 Sold 1 GLD Dec2012 $169.00 Call Options @ $1.86

5. iShares MSCI China ETF -- Continuation
The transactions are as follows:
10/19/2012 Bought 800 FXI shares @ $37.11 10/19/2012 Sold 8 FXI Nov2012 $36.00 Call Options @ $1.52
Note: the price of FXI was $37.14 today when the options were sold.
11/16/2012 FXI Nov2012 options expired
11/19/2012 Sold 8 FXI Dec2012 $36.00 Call Options @ $1.05

6. iShares MSCI Emerging Markets ETF -- Continuation
The transactions are as follows:
10/23/2012 Bought 700 EEM shares @ $41.10
10/23/2012 Sold 7 EEM Nov2012 $41.00 Call Options @ $.98
Note: the price of EEM shares was $41.14 today when these options were sold.
11/16/2012 EEM Nov2012 options expired
11/19/2012 Sold 7 EEM Dec2012 $40.00 Call Options @ $1.40

7. iShares MSCI South Korea ETF -- Continuation
The transactions are as follows:
07/30/2012 Bought 500 EWY shares @ $54.51
08/01/2012 Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.
10/20/2012 EWY Oct2012 call options expired
Note: price of EWY was $57.43 at the close on Oct2012 options expiration Friday.
10/22/2012 Sell-to-Open 5 EWY Nov2012 $58.00 Call Options at $1.56
Note: the price of EWY was $58.34 when this transaction was made.
11/16/2012 EWY Nov2012 options expired
11/19/2012 Sold 5 EWY Dec2012 $57.00 Call Options @ $1.76

8. Potash Corp. of Saskatchewan Inc. -- Continuation
10/19/2012 Sold 3 Potash Corp.(POT) Nov2012 $40.00 Put Options @ $.88
Note: the price of Potash stock was $40.69 today when these Puts were sold.
11/16/2012 POT Nov2012 options expired
11/19/2012 Sold 3 POT Dec2012 $37.50 Call Options @ $1.18

November 2012 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained twelve covered calls positions with November 2012 expirations. A summary of the results is as follows:

- Ten positions (Canadian Natural Resources LTD, Citigroup Inc., Foot Locker Inc., Fusion-io Inc., SPDR Gold Shares, iShares MSCI China ETF, iShares MSCI Emerging Markets ETF, iShares MSCI South Korea ETF, MetLife Inc., and Potash Corp.) had their options expire yesterday since the stock prices closed below the Nov options' strike prices.  So now, the Covered Calls Advisor Portfolio (CCAP) is long shares in these ten equities.  A decision will be made during this week to either sell these shares or to re-establish covered calls positions by selling Dec2012 call options.  When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day with the details.

- The other two positions (Mylan Inc. and United Continental Holdings Inc.) were closed out upon Nov2012 options expiration since the stock closed above the strike prices.  Hence, the options expired and the accompanying equities were assigned at their respective strike prices.  
The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls positions with Dec2012 options expirations are established (possibly later this week).  These transactions will be posted on this blog the same day they occur.

The annualized return-on-investment financial results for these two closed positions are:
Mylan Inc. = +45.5%
United Continental Holdings Inc. = +37.1%

The detailed transactions history and results for these two closed positions are as follows:

1. Mylan Inc. (Ticker Symbol MYL) -- Closed
The transactions history was as follows:
10/24/2012 Bought 1,000 MYL shares @ $23.88
10/25/2012 Sold 10 MYL Nov2012 $24.00 Call Options @ $.65
Note: the price of MYL shares was $24.36 today when these options were sold.
11/16/2012 MYL Nov2012 options expired
Note: the price of MYL stock was $25.45 upon Nov2012 options expiration.

The overall performance result (including commissions) for this Mylan Inc. (MYL) covered calls position was as follows:
Stock Purchase Cost: $23,888.95 = ($23.88*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$633.55 = ($.65 X 1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MYL assigned at $24.00 upon Nov2012 expiration): +$111.05
=+($24.00-$23.88)*1,000 - $8.95 commissions

Total Net Profit (MYL assigned at $24.00 at Nov2012 expiration): +$744.60
= (+$633.55 +$0.00 +$111.05)

Absolute Return (MYL assigned at $24.00 at Nov2012 expiration): +3.1%
= +$744.60/$23,888.95
Annualized Return (MYL stock assigned): +45.5%
= (+$744.60/$23,888.95)*(365/25 days)


2. United Continental Holdings Inc. (Ticker Symbol UAL) -- Closed
The transactions history was as follows:
10/25/2012 Sold 10 United Continental Holdings Inc.(UAL) Nov2012 $19.00 Put Options @ $.48
Note: the price of UAL was $19.85 today when these Puts were sold.
11/16/2012 UAL Nov2012 options expired
Note: the price of UAL stock was $19.50 upon Nov2012 options expiration.

The Covered Calls Advisor does not use margin, so the detailed information on this position and the results shown below reflect the fact that this position was established using 100% cash securitization for the ten Put options sold.  

The overall performance result(including commissions) for this UAL transaction was as follows:
100% Cash-Secured Cost Basis: $19,000.00 = $19.00*1,000

Net Profit:
(a) Options Income: +$463.55 = ($.48*1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (UAL above $19.00 strike price at Nov2012 expiration): +$0.00 = ($19.00-$19.00)*1,000  

Total Net Profit (UAL stock price was above $19.00 strike price at Nov2012 options expiration): +$463.55
= (+$463.55 +$0.00 +$0.00)  

Absolute Return (UAL stock above $19.00 at Nov2012 options expiration and Put options thus expire worthless): +2.4%
= +$463.55/$19,000.00
Annualized Return (UAL stock price above $19.00 at expiration): +37.1%
= (+$463.55/$19,000.00)*(365/24 days)

Monday, November 12, 2012

Country Value Rankings

About once a quarter, the Covered Calls Advisor calculates the nine factors used to determine the current "Country Value Rankings" for 22 countries. Today's results (shown in the table below), provides a value-oriented and objective framework that assists this advisor to make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's Portfolio.

A comprehensive approach to asset allocation extends beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.). It should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leading advocate for developing a globally oriented value investing perspective to achieve investing outperformance.






Note: For expanded view, left click on this spreadsheet








The Country Value Rankings table above is based on a weighted-average ranking system. You will notice that there are nine categories (and one factor for each category) used in the analysis of each country as follows:











The next-to-last column on the Country Value Rankings spreadsheet shows the Weighted Average Summation Total for each country.  The average for the 22 countries is shown as 13.02 which is a Slightly Bearish overall World rating.

The overall market ratings for individual countries are:
Very Bullish -- China
Bullish -- South Korea and Singapore
Slightly Bullish -- Malaysia, Russia, Hong Kong, Australia, and Taiwan
Neutral -- Emerging Markets (EEM) and Germany
Slightly Bearish -- Mexico and Canada
Bearish -- Europe/Asia (EFA), U.S., France, and Japan
Very Bearish -- South Africa, United Kingdom, India, Brazil, Spain, and Italy 

Future investments in the Covered Calls Advisor Portfolio will be overweighted in these higher rated countries. It should also be noted that the U.S. is ranked 14th of the 22 countries rated, so U.S.-based companies selected for investment will be those with significant exposure to sales in countries/regions with relatively high expected GDP Growth.

This Country Value Rankings spreadsheet is detailed in terms of both the methodolgy used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please share your comments and questions in writing. They are always welcomed. Click the 'comments' link below to post your feedback. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,
Jeff

Sunday, November 11, 2012

Overall Market Meter Rating Remains at "Neutral"

Each month during options expiration week, the Covered Calls Advisor recalculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. This month, the Overall Market Meter rating remains unchanged at Neutral.

The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next three indicators), and
- growth (the last indicator).






















The current Market Meter Average of 3.25 (see blue line at the bottom of the chart above) is slightly lower than the 3.38 average of last month. The 3.25 is a Neutral rating (range from 2.51 to 3.50).  Five factors of the eight factors remained unchanged from last month.  The three factors that changed are as follows:
- Price Trend declined from Slightly Bullish to Neutral
- Interest Rates indicator declined from Neutral to Slightly Bearish
- Price/Earnings Ratio improved from Slightly Bearish to Neutral

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." So with this week's November 2012 options expiration, newly established positions for December 2012 expiration will be established in accordance with this guideline.

Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Wednesday, October 31, 2012

Returns -- Through October 2012

1. 2012 Year-to-Date Results:

As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 11.57% so far in 2012. This is 0.90 percentage points (+11.57% minus 12.47%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.

















The financial results were as follows:
CCAP Absolute Return (Jan 1st through October 31, 2012) = +11.57%
= ($327,613.42-$293,634.14)/$293,634.14
Benchmark Russell 3000 (IWV) Absolute Return (Jan 1st through October 31, 2012)
= +12.47%
= ($83.43-$74.18)/$74.18

As a reminder, the Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined: If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.


2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:





This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.

Also as a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in this advisor's personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "NEUTRAL". The corresponding investing strategy is to, on-average, sell 1% out-of-the-money covered calls for the nearest expiration month.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff

Thursday, October 25, 2012

Established Mylan Inc. Covered Calls

Today, a new covered calls position was established in Mylan Inc. (ticker symbol MYL) with a Nov2012 expiration and at the $24.00 strike price. The transactions are as follows:
10/24/2012 Bought 1,000 MYL shares @ $23.88
10/25/2012 Sold 10 MYL Nov2012 $24.00 Call Options @ $.65
Note: the price of MYL shares was $24.36 today when these options were sold.

A possible overall performance result (including commissions) for this Mylan Inc. (MYL) covered calls position is as follows:
Stock Purchase Cost: $23,888.95
= ($23.88*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$633.55
= ($.65 X 1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MYL price unchanged at $23.88 upon expiration): -$8.95
=+($23.88-$23.88)*1,000 - $8.95 commissions; OR
(c) Capital Appreciation (If MYL assigned at $24.00 upon expiration): +$111.05
=+($24.00-$23.88)*1,000 - $8.95 commissions

Total Net Profit (If MYL price unchanged at $23.88 at Nov2012 expiration): +$624.60
= (+$633.55 +$0.00 -$8.95); OR
Total Net Profit (If MYL assigned at $24.00 at Nov2012 expiration): +$744.60
= (+$633.55 +$0.00 +$111.05)

1. Absolute Return (If MYL unchanged at $23.88 at Nov2012 expiration): +2.6%
= +$624.60/$23,888.95
Annualized Return (If stock assigned): +38.2%
= (+$624.60/$23,888.95)*(365/25 days); OR

2. Absolute Return (If MYL assigned at $24.00 at Nov2012 expiration): +3.1% = +$744.60/$23,888.95
Annualized Return (If stock assigned): +45.5%
= (+$744.60/$23,888.95)*(365/25 days)

Established Canadian Natural Resources LTD Covered Calls

Today, a new covered calls position was established in Canadian Natural Resources LTD (ticker symbol CNQ) with a Nov2012 expiration and at the $31.00 strike price. The transactions are as follows:
10/25/2012 Bought 600 CNQ shares @ $30.28
10/25/2012 Sold 6 CNQ Nov2012 $31.00 Call Options @ $.75
Note: the price of CNQ shares was $30.37 today when these options were sold.

A possible overall performance result (including commissions) for this Canadian Natural Resources LTD (CNQ) covered calls position is as follows:
Stock Purchase Cost: $18,176.95
= ($30.28*600+$8.95 commission)

Net Profit:
(a) Options Income: +$436.55
= ($.75 X 600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CNQ price unchanged at $30.28 upon expiration): -$8.95
=+($30.28-$30.28)*600 - $8.95 commissions; OR
(c) Capital Appreciation (If CNQ assigned at $31.00 upon expiration): +$423.05 =+($31.00-$30.28)*600 - $8.95 commissions

Total Net Profit (If CNQ price unchanged at $30.28 at Nov2012 expiration): +$427.60
= (+$436.55 +$0.00 -$8.95); OR
Total Net Profit (If CNQ assigned at $31.00 at Nov2012 expiration): +$859.60
= (+$436.55 +$0.00 +$423.05)

1. Absolute Return (If CNQ unchanged at $30.28 at Nov2012 expiration): +2.4%
= +$427.60/$18,176.95
Annualized Return (If stock assigned): +35.8%
= (+$427.60/$18,176.95)*(365/24 days); OR

2. Absolute Return (If CNQ assigned at $31.00 at Nov2012 expiration): +4.7% = +$859.60/$18,176.95
Annualized Return (If stock assigned): +71.9%
= (+$859.60/$18,176.95)*(365/24 days)

Established 100% Cash-Secured Puts -- United Continental Holdings Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in United Continental Holdings Inc.(Symbol UAL) with a Nov2012 expiration.

The transaction was as follows:
10/25/2012 Sold 10 United Continental Holdings Inc.(UAL) Nov2012 $19.00 Put Options @ $.48
Note: the price of UAL was $19.85 today when these Puts were sold.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the seven Put options sold.

A possible overall performance results(including commissions) for this UAL transaction would be as follows:
100% Cash-Secured Cost Basis: $19,000.00 = $19.00*1,000

Net Profit:
(a) Options Income: +$463.55
= ($.48*1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL above $19.00 at Nov2012 expiration): +$0.00
= ($19.00-$19.00)*1,000

Total Net Profit (If UAL remains above $19.00 at Nov2012 options expiration): +$463.55  = (+$463.55 +$0.00 +$0.00)

Absolute Return (If UAL above $19.00 at Nov2012 options expiration and Put options thus expire worthless): +2.4%
= +$463.55/$19,000.00
Annualized Return (If stock price above $19.00 at expiration): +37.1%
= (+$463.55/$19,000.00)*(365/24 days)

The downside 'breakeven price' at expiration is at $18.52 ($19.00 - $.48). Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Nov2012 options expiration) for this United Continental (UAL) cash-secured Puts position is 75.8%. This compares with a probability of profit of 51.2% for a buy-and-hold of UAL over the same time period.

The 'crossover price' at expiration is $20.33 ($19.85 + $.48). This is the price above which it would have been more profitable to simply buy-and-hold UAL until Nov 21st (the Nov2012 options expiration date) rather than holding the short Put options. The probability of exceeding this crossover price at expiration is 43.3%.

Tuesday, October 23, 2012

Established iShares MSCI Emerging Markets ETF Covered Calls

Today, a new covered calls position was established in iShares MSCI Emerging Markets ETF (ticker symbol EEM) with a Nov2012 expiration and at the $41.00 strike price. The transactions are as follows:
10/23/2012 Bought 700 EEM shares @ $41.10
10/23/2012 Sold 7 EEM Nov2012 $41.00 Call Options @ $.98
Note: the price of EEM shares was $41.14 today when these options were sold.

A possible overall performance result (including commissions) for this iShares MSCI Emerging Markets ETF (EEM) covered calls position is as follows:
Stock Purchase Cost: $28,778.95
= ($41.10*700+$8.95 commission)

Net Profit:
(a) Options Income: +$671.80
= ($.98 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM assigned at $41.00 upon expiration): -$78.95
=+($41.00-$41.10)*700 - $8.95 commissions

Total Net Profit (If EEM assigned at $41.00 at Nov2012 expiration): +$592.85
= (+$671.80 +$0.00 -$78.95)

Absolute Return (If EEM assigned at $41.00 at Nov2012 expiration): +2.1%
= +$592.85/$28,778.95
Annualized Return (If stock assigned): +28.9%
= (+$592.85/$28,778.95)*(365/26 days)

The downside 'breakeven price' at expiration is at $40.12 ($41.10 - $.98).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 26 days until Nov2012 options expiration) for this iShares MSCI Emerging Markets ETF covered calls position is 66.5%. This compares with a probability of profit of 50.2% for a buy-and-hold of EEM over the same time period.

The 'crossover price' at expiration is $41.98 ($41.00 + $.98).  This is the price above which it would have been more profitable to simply buy-and-hold EEM stock until November 16, 2012 (the Nov2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 35.8%.

Established 100% Cash-Secured Puts -- Citigroup Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Citigroup Inc. at the $36.00 strike price and with a Nov2012 expiration. The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential financial result shown below reflect the fact that this position was established using 100% cash securitization.

Citigroup, Inc . (ticker symbol C) -- New Position
The transaction was as follows:
10/23/2012 Sold 4 Citigroup, Inc. (symbol C) Nov2012 $36.00 Put Options @ $.82
Note: the price of Citi stock was $36.97 today when these Puts were sold.

A possible overall performance result (including commissions) for this Citigroup, Inc.(C) transaction would be as follows:
100% Cash-Secured Cost Basis: $14,400.00
= $36.00*400

Net Profit:
(a) Options Income: +$316.05
= ($.82*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Citigroup stock above $36.00 at Nov2012 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit (If stock price above $36.00 at Nov2012 options expiration): +$316.05
= (+$316.05 options income +$0.00 dividends +$0.00 capital appreciation)

Absolute Return (If stock price above $36.00 at Nov2012 options expiration and Put options thus expire worthless): +2.2%
= +$316.05/$14,400.00
Annualized Return (If stock price above $36.00 at expiration): +32.0%
= (+$316.05/$14,400.00)*(365/25 days)

Monday, October 22, 2012

Established 100% Cash-Secured Puts -- MetLife Inc.

Today, the Covered Calls Advisor established new 100% Cash-Secured Puts position in MetLife Inc. at the $36.00 strike price and with an Nov2012 expiration. The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential financial result shown below reflect the fact that this position was established using 100% cash securitization.

MetLife Inc. (ticker symbol MET) -- New Position
The transaction was as follows:
10/22/2012 Sold 7 MetLife Inc. (MET) Nov2012 $36.00 Put Options @ $1.51
Note: the price of MetLife stock was $35.94 today when these Puts were sold.

A possible overall performance result (including commissions) for this MetLife Inc.(MET) transaction would be as follows:
100% Cash-Secured Cost Basis: $25,200.00
= $36.00*700

Net Profit:
(a) Options Income: +$1,042.80
= ($1.51*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MetLife stock above $36.00 at Nov2012 expiration): +$0.00
= ($36.00-$36.00) -$0.00 commissions

Total Net Profit (If stock price above $36.00 at Nov2012 options expiration): +$1,042.80
= (+$1,042.80 +$0.00 +$0.00)

Absolute Return (If stock price above $36.00 at Nov2012 options expiration and Put options thus expire worthless): +4.1%
= +$1,042.80/$25,200.00
Annualized Return (If stock price above $36.00 at expiration): +55.9%
= (+$1,042.80/$25,200.00)*(365/27 days)

Established Foot Locker Inc. Covered Calls

Today, a new covered calls position was established in Foot Locker Inc. (ticker symbol FL) with a Nov2012 expiration and at the $35.00 strike price. The transactions are as follows:
10/22/2012 Bought 300 FL shares @ $35.48
10/22/2012 Sold 3 FL Nov2012 $35.00 Call Options @ $1.45
Note: the price of FL shares was $35.55 today when these options were sold.

A possible overall performance result (including commissions) for this Foot Locker Inc. (FL) covered calls position is as follows:
Stock Purchase Cost: $10,635.05
= ($35.48*300+$8.95 commission)

Net Profit:
(a) Options Income: +$423.80
= ($1.45 X 300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FL assigned at $35.00 upon expiration): -$152.95
=+($35.00-$35.48)*300 - $8.95 commissions

Total Net Profit (If FL assigned at $35.00 at Nov2012 expiration): +$270.85
= (+$423.80 +$0.00 -$152.95)

Absolute Return (If FL assigned at $35.00 at Nov2012 expiration): +2.5%
= +$270.85/$10,635.05
Annualized Return (If stock assigned): +34.4%
= (+$270.85/$10,635.05)*(365/27 days)

The downside 'breakeven price' at expiration is at $34.03 ($35.48 - $1.45).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 27 days until Nov2012 options expiration) for this Foot Locker Inc. covered calls position is 69.5%. This compares with a probability of profit of 51.0% for a buy-and-hold of FL over the same time period.

The 'crossover price' at expiration is $36.45 ($35.00 + $1.45).  This is the price above which it would have been more profitable to simply buy-and-hold FL stock until November 16, 2012 (the Nov2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 38.6%.

Continuation -- iShares MSCI South Korea ETF

After Oct2012 options expiration last Friday, two long uncovered stock positions (Apple Inc. and iShares MSCI South Korea ETF) remained in the Covered Calls Advisor Portfolio (CCAP) for which decisions remained to either sell the stocks or to re-establish covered calls positions. This morning, a decision was made to retain the iShares MSCI South Korea ETF (symbol EWY) and to re-establish a covered calls position with a Nov2012 expiration and at the $58.00 strike price. The detailed transactions history for this EWY position as well as a possible overall performance result is as follows:

iShares MSCI South Korea ETF (EWY) -- Continuation
This past Friday, the Oct2012 covered calls position in iShares MSCI South Korea ETF was closed out. Today, with iShares MSCI South Korea ETF (EWY) trading at $58.34, a covered calls position was established by selling the Nov2012 $58.00 calls.

The transactions history for this ongoing EWY covered calls position is as follows:
07/30/2012 Bought 500 EWY shares @ $54.51 08/01/2012
Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.
10/20/2012 EWY Oct2012 call options expired
Note: price of EWY was $57.43 at the close on Oct2012 options expiration Friday.
10/22/2012 Sell-to-Open 5 EWY Nov2012 $58.00 Call Options at $1.56
Note: the price of EWY was $58.34 when this transaction was made.


A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,089.20
= ($1.40-$1.68+$2.03-$2.90+$1.87+$1.56)*500 shares - 4*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $58.00): +$1,736.05
= ($58.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY assigned at $58.00): +$2,825.25
= (+$1,089.20 +$0.00 +$1,736.05)

Absolute Return if Assigned at $58.00: +10.4%
= +$2,825.25/$27,263.95
Annualized Return If Assigned (ARIA): +34.4%
= (+$2,825.25/$27,263.95)*(365/110 days)

Saturday, October 20, 2012

October 2012 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained six covered calls positions with October 2012 expirations. A summary of the results is as follows:

- Two positions (Apple Inc. and iShares MSCI South Korea ETF) had their options expire yesterday since the stock prices closed below the Oct2012 options' strike prices.  So now, the Covered Calls Advisor Portfolio (CCAP) is long 100 shares of Apple Inc. (AAPL) and 500 shares of iShares MSCI South Korea ETF (EWY).  A decision will be made by Monday to either sell these shares or to re-establish covered calls positions by selling Nov2012 call options.  When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day with the details.

- The other four positions (Citigroup Inc. Halliburton Co., iShares MSCI China ETF, and MetLife Inc.) were closed out upon Oct2012 options expiration. The options expired and the accompanying equities were assigned (i.e. equities called away) at their respective strike prices.  
With the cash available from the closing of these positions, the Covered Calls Advisor will establish new positions this week with Nov2012 options expirations and will post them on this blog the same day they occur.

The annualized return-on-investment financial results for these four closed positions are:
Citigroup Inc. = +33.6%
Halliburton Co. = +34.4%
iShares MSCI China ETF = +20.0%
MetLife Inc. = +22.3%


The detailed transactions history and results for these four closed positions are as follows:

1. Citigroup Inc. (C) -- Closed
The transactions history was as follows:
9/26/2012 Sold 10 Citigroup, Inc. (C) Oct2012 $31.00 Put Options @ $.73
Note: the price of Citi stock was $32.12 today when these Puts were sold.
10/19/2012 Citigroup Oct2012 Options expired
Note: the price of Citi was $37.16 upon options expiration.

The overall performance result (including commissions) for this Citigroup, Inc.(C) transaction was as follows:
100% Cash-Secured Cost Basis: $31,000.00
= $31.00*1,000

Net Profit:
(a) Options Income: +$713.75
= ($.73*1,000 shares) - $16.25 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Citigroup stock closed at $37.16, well above the $31.00 strike price at Oct2012 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit: +$713.75
= (+$713.75 options income +$0.00 dividends +$0.00 capital appreciation)

Absolute Return: +2.3%
= +$713.75/$31,000.00
Annualized Return: +33.6%
= (+$713.75/$31,000.00)*(365/25 days)


2. Halliburton Co.(HAL) -- Closed 
The transactions history was as follows:
09/26/2012 Bought 700 HAL shares @ $33.819
09/26/2012 Sold 7 HAL Oct2012 $33.00 Call Options @ $1.65
Note: the price of HAL shares was $33.85 today when these options were sold.
10/19/2012 HAL Oct2012 Options expired
Note: the price of Halliburton stock was $34.98 upon options expiration.

The overall performance result (including commissions) for this Halliburton Co. (HAL) covered calls position was as follows: Stock Purchase Cost: $23,682.25
= ($33.819*700+$8.95 commission)

Net Profit:
(a) Options Income: +$1,140.80
= ($1.65 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HAL assigned at $33.00 upon expiration): -$582.25
=+($33.00-$33.819)*700 - $8.95 commissions

Total Net Profit: +$558.55
= (+$1,140.80 +$0.00 -$582.25)

Absolute Return (HAL assigned at $33.00 at Oct2012 expiration): +2.4%
= +$558.55/$23,682.25
Annualized Return: +34.4%
= (+$558.55/$23,682.25)*(365/25 days)


3. iShares MSCI China ETF (FXI) -- Closed
The transaction history for this iShares MSCI China ETF (FXI) position was as follows:
07/30/2012 Bought 1,000 FXI shares @ $34.09
07/30/2012 Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.
08/24/2012 10 FXI Aug 24th $34.50 call options expired.
Note: the price of FXI was $34.01 today when these options expired.
08/28/2012 Sold-to-Open 10 FXI Sep2012 $34.00 Calls @ $.56
Note: the price of FXI was $33.62 today when this transaction was made.
09/21/2012 Bought-to-Close 10 FXI Sep2012 $34.00 Call Options at $.90
09/21/2012 Sell-to-Open 10 FXI Oct2012 $34.00 Call Options at $1.35
Note: the price of FXI was $34.88 when this transaction was made.
10/19/2012 FXI Oct2012 Options expired
Note: the price of FXI was $37.13 upon options expiration.

The overall performance result (including commissions) for this iShares MSCI China ETF (FXI) covered calls position was as follows:
Stock Purchase Cost: $34,098.95
= ($34.09*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$1,535.25
=($.80-$.42+$.31+$.56-$.90+$1.35)*1,000 shares - 4*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI assigned at $34.00 upon expiration): -$98.95
=($34.00-$34.09)*1,000 - $8.95 commissions

Absolute Return (FXI assigned at $34.00 at Oct2012 options expiration): +4.5%
= +$1,535.25/$34,098.95
Annualized Return: +20.0%
= (+$1,535.25/$34,098.95)*(365/82 days) The transactions are as follows:


4. MetLife Inc. (MET) -- Closed
The transaction history for this MetLife Inc. position was as follows:
09/26/2012 Bought 600 MET shares @ $33.80 09/26/2012 Sold 6 MET Oct2012 $33.00 Call Options @ $1.47
Note: the price of MET shares was $33.81 today when these options were sold.
10/19/2012 MET Oct2012 Options expired
Note: the price of MET was $35.93 upon options expiration.

The overall performance result (including commissions) for this MetLife Inc. (MET) covered calls position was as follows:
Stock Purchase Cost: $20,288.95
= ($33.80*600+$8.95 commission)

Net Profit:
(a) Options Income: +$868.55
= ($1.47 X 600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MET assigned at $33.00 upon expiration): -$488.95
=+($33.00-$33.80)*600 - $8.95 commissions

Total Net Profit (MET assigned at $33.00 at Oct2012 expiration): +$310.00
= (+$868.55 +$0.00 -$558.55)

Absolute Return (MET assigned at $33.00 at Oct2012 expiration): +1.5%
= +$310.00/$20,288.95
Annualized Return: +22.3%
= (+$310.00/$20,288.95)*(365/25 days)

Friday, October 19, 2012

Established New Positions in Fusion-io Inc., iShares MSCI China ETF, SPDR Gold Shares, and Potash Corp.

Today, new positions were established in four equities [Fusion-io Inc.(FIO), iShares MSCI China ETF (FXI), SPDR Gold Shares (GLD), and Potash Corp.(POT)] with Nov2012 expirations. The positions and some possible results are as follows:


1. Fusion-io Inc. (Ticker Symbol FIO) -- New Position
The transactions were as follows:
10/19/2012 Bought 300 FIO shares @ $27.55
10/19/2012 Sold 3 FIO Nov2012 $29.00 Call Options @ $2.55
Note: the price of FIO was $27.63 today when these options were sold.

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $8,273.95
= ($27.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$753.80 = ($2.55*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FIO price unchanged at $27.55 upon expiration): -$8.95
=+($27.55-$27.55)*300 - $8.95 commissions; OR
(c) Capital Appreciation (If FIO assigned at $29.00 upon expiration): +$426.05 =+($29.00-$27.55)*300 - $8.95 commissions

Total Net Profit (If FIO price unchanged at $27.55 upon expiration): +$744.85

= (+$753.80 +$0.00 -$8.95); OR
Total Net Profit (If FIO assigned at $29.00 at Nov2012 expiration): +$1,179.85 = (+$753.80 +$0.00 +$426.05)

Absolute Return (If FIO price unchanged at $27.55 upon Nov2012 expiration): +9.0%
= +$744.85/$8,273.95
Annualized Return (If stock assigned): +109.5%
= (+$744.85/$8,273.95)*(365/30 days); OR

Absolute Return (If FIO assigned at $29.00 at Nov2012 expiration): +14.3% = +$1,179.85/$8,273.95
Annualized Return (If stock assigned): +173.5%
= (+$1,179.85/$8,273.95)*(365/30 days)




2. iShares MSCI China ETF (Ticker Symbol FXI) -- New Position
The transactions were as follows:
10/19/2012 Bought 800 FXI shares @ $37.11
10/19/2012 Sold 8 FXI Nov2012 $36.00 Call Options @ $1.52
Note: the price of FXI was $37.14 today when the options were sold.

A possible overall performance result (including commissions) for this iShares MSCI China ETF covered calls position is as follows:
Stock Purchase Cost: $29,696.95
= ($37.11*800+$8.95 commission)

Net Profit:
(a) Options Income: +$1,201.05
= 800*$1.52 - $14.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI price unchanged at $37.11): -$8.95
= ($37.11-$37.11)*800 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $36.00): -$896.95
= ($36.00-$37.11)*800 - $8.95 commissions

Total Net Profit (If FXI assigned at $36.00): +$304.10
= (+$1,201.05 +$0.00 -$896.95)

Absolute Return if Assigned at $36.00: +1.0%
= +$304.10/$29,696.95
Annualized Return If Assigned (ARIA): +12.5%
= (+$304.10/$29,696.95)*(365/30 days)




3. SPDR Gold Shares (Ticker Symbol GLD) -- New Position
The transaction was as follows:
10/19/2012 Sold 1 SPDR Gold Shares (GLD) Nov2012 $170.00 Put Options @ $4.40
Note: the price of GLD was $167.00 today when these Puts were sold.

Two possible overall performance result (including commissions) for this SPDR Gold Shares (GLD) transaction would be as follows:
100% Cash-Secured Cost Basis: $17,000.00 = $170.00*100

Net Profit:
(a) Options Income: +$430.30 = ($4.40*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GLD price unchanged at $167.00 at Nov2012 expiration):
-$300.00 = ($167.00-$170.00)*100 shares -$0.00 commissions; OR
(c) Capital Appreciation (If GLD price above $170.00 at Nov2012 expiration): +$0.00 = ($170.00-$170.00) -$0.00 commissions

Total Net Profit (If GLD price unchanged at $167.00 at Nov2012 options expiration): +$130.30 = (+$430.30 +$0.00 -$300.00); OR
Total Net Profit (If GLD price above $170.00 at Nov2012 options expiration): +$430.30 = (+$430.30 +$0.00 +$0.00)

Absolute Return (If GLD price unchanged at $167.00 at Nov2012 options expiration): +0.8% = +$130.30/$17,000.00
Annualized Return (If GLD price unchanged at $167.00 at Nov2012 expiration): +9.3%
= (+$130.30/$17,000.00)*(365/30 days)
Absolute Return (If GLD price above $170.00 at Nov2012 options expiration): +2.5% = +$430.30/$17,000.00
Annualized Return (If GLD above $170.00 at expiration): +30.8%
= (+$430.30/$17,000.00)*(365/30 days)



4.  Potash Corp. of Saskatchewan Inc. (Ticker Symbol POT) -- New Position
The transaction was as follows:
10/19/2012 Sold 3 Potash Corp.(POT) Nov2012 $40.00 Put Options @ $.88
Note: the price of Potash stock was $40.69 today when these Puts were sold.

A possible overall performance result (including commissions) for this Potash Corp.(POT) transaction would be as follows:
100% Cash-Secured Cost Basis:
$12,000.00 = $40.00*300

Net Profit:
(a) Options Income: +$252.80
= ($.88*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Potash stock above $40.00 at Nov2012 expiration): +$0.00 = ($40.00-$40.00) -$0.00 commissions

Total Net Profit (If stock price above $40.00 at Nov2012 options expiration): +$252.80 = (+$252.80 +$0.00 +$0.00)

Absolute Return (If stock price above $40.00 at Nov2012 options expiration and Put options thus expire worthless): +2.1%
= +$252.80/$12,000.00
Annualized Return (If stock price above $31.00 at expiration): +25.6%
= (+$252.80/$12,000.00)*(365/30 days)

Overall Market Meter Rating Remains at "Neutral"

Each month during options expiration week, the Covered Calls Advisor recalculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. This month, the Overall Market Meter rating remains unchanged at Neutral.

The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next three indicators), and
- growth (the last indicator).


The current Market Meter Average of 3.38 (see blue line at the bottom of the chart above) is slightly lower than the 3.50 average of last month. The 3.38 is a Neutral rating (range from 2.51 to 3.50).  Five factors of the eight factors remained unchanged from last month.  The three factors that changed are as follows:
- Price Trend declined from Bullish to Slightly Bullish
- Interest Rates indicator improved from Slightly Bearish to Neutral
- Future Earnings Growth declined from Slightly Bullish to Neutral

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." So with today's October 2012 options expiration, newly established positions for November 2012 expiration will be established in accordance with this guideline.

Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Saturday, September 29, 2012

Returns -- Through September 2012

1. 2012 Year-to-Date Results:

As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 12.35% so far in 2012. This is 2.03 percentage points (+12.35% minus 14.38%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.
















The financial results were as follows:
CCAP Absolute Return (Jan 1st through September 30th, 2012) = +12.35%
= ($329,903.82-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return (Jan 1st through September 30th, 2012) = +14.38%
= ($84.85-$74.18)/$74.18

As a reminder, the Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined: If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.


2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:





This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.

Also as a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in this advisor's personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "NEUTRAL". The corresponding investing strategy is to, on-average, sell 1% out-of-the-money covered calls for the nearest expiration month.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff

Wednesday, September 26, 2012

Established MetLife Inc. Covered Calls

Today, a new covered calls position was established in MetLife Inc. (ticker symbol MET) with an Oct2012 expiration and at the $33.00 strike price. The transactions are as follows:
09/26/2012 Bought 600 MET shares @ $33.80
09/26/2012 Sold 6 MET Oct2012 $33.00 Call Options @ $1.47
Note: the price of MET shares was $33.81 today when these options were sold.

A possible overall performance result (including commissions) for this MetLife Inc. (MET) covered calls position is as follows:
Stock Purchase Cost: $20,288.95
= ($33.80*600+$8.95 commission)

Net Profit:
(a) Options Income: +$868.55
= ($1.47 X 600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MET assigned at $33.00 upon expiration): -$488.95
=+($33.00-$33.80)*600 - $8.95 commissions

Total Net Profit (If MET assigned at $33.00 at Oct2012 expiration): +$310.00
= (+$868.55 +$0.00 -$558.55)

Absolute Return (If MET assigned at $33.00 at Oct2012 expiration): +1.5%
= +$310.00/$20,288.95
Annualized Return (If stock assigned): +22.3%
= (+$310.00/$20,288.95)*(365/25 days)

The downside 'breakeven price' at expiration is at $32.33 ($33.80 - $1.47).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 25 days until Oct2012 options expiration) for this MetLife Inc. covered calls position is 70.3%. This compares with a probability of profit of 50.8% for a buy-and-hold of MET over the same time period.

The 'crossover price' at expiration is $34.47 ($33.00 + $1.47).  This is the price above which it would have been more profitable to simply buy-and-hold MET stock until October 20, 2012 (the Oct2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 42.1%.

Established Halliburton Co. Covered Calls

Today, a new covered calls position was established in Halliburton Co. (ticker symbol HAL) with an Oct2012 expiration and at the $33.00 strike price. The transactions are as follows:
09/26/2012 Bought 700 HAL shares @ $33.819
09/26/2012 Sold 7 HAL Oct2012 $33.00 Call Options @ $1.65
Note: the price of HAL shares was $33.85 today when these options were sold.

A possible overall performance result (including commissions) for this Halliburton Co. (HAL) covered calls position is as follows:
Stock Purchase Cost: $23,682.25
= ($33.819*700+$8.95 commission)

Net Profit:
(a) Options Income: +$1,140.80
= ($1.65 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HAL assigned at $33.00 upon expiration): -$582.25
=+($33.00-$33.819)*700 - $8.95 commissions

Total Net Profit (If HAL assigned at $33.00 at Oct2012 expiration): +$558.55
= (+$1,140.80 +$0.00 -$582.25)

Absolute Return (If HAL assigned at $33.00 at Oct2012 expiration): +2.4%
= +$558.55/$23,682.25
Annualized Return (If stock assigned): +34.4%
= (+$558.55/$23,682.25)*(365/25 days)

The downside 'breakeven price' at expiration is at $32.17 ($33.82 - $1.65).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 25 days until Oct2012 options expiration) for this Halliburton Co. covered calls position is 73.4%. This compares with a probability of profit of 51.4% for a buy-and-hold of HAL over the same time period.

The 'crossover price' at expiration is $34.65 ($33.00 + $1.65).  This is the price above which it would have been more profitable to simply buy-and-hold HAL stock until October 20, 2012 (the Oct2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 40.0%.

Establish Apple Inc. Covered Call

Today, a new covered call position was established in Apple Inc. with an Oct2012 expiration and at the $675 strike price. The transactions and some possible outcomes are as follows:

09/26/2012 Bought 100 AAPL shares @ $667.85
09/26/2012 Sold 1 AAPL Oct2012 $675.00 Call Option @ $16.50
Note: the price of AAPL was $669.50 when this call option was sold.

Two possible overall performance results(including commissions) for the Apple Inc.(AAPL) transactions would be as follows:
Stock Purchase Cost: $66,793.95
= ($667.85*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,640.30
= ($16.50*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $667.85): -$8.95
+($667.85-$667.85)*100 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $675.00): +$706.05
+($675.00-$667.85)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at Oct2012 expiration): +$1,631.35
= (+$1,640.30 +$0.00 -$8.95)
Total Net Profit (If stock assigned at $675.00 at Oct2012 expiration): +$2,346.35
= (+$1,640.30 +$0.00 +$706.05)

1. Absolute Return (If stock price unchanged at Oct2012 expiration): +2.4%
= +$1,631.35/$66,793.95
Annualized Return (If stock price unchanged at Oct2012 expiration): +35.7%
= (+$1,631.35/$66,793.95)*(365/25 days);

OR

2. Absolute Return (If stock assigned at $675.00 at Oct2012 expiration): +3.5%
= +$2,346.35/$66,793.95
Annualized Return (If stock assigned): +51.3%
= (+$2,346.35/$66,793.95)*(365/25 days)

Sunday, September 23, 2012

September 2012 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained eleven covered calls positions with September 2012 expirations. A summary of the results were as follows:

- Two positions (iShares MSCI China ETF and iShares MSCI South Korea ETF) were in-the-money just prior to options expiration this past Friday and the Covered Calls Advisor decided to roll-out to Oct2012 covered calls positions.  The details of these roll-out transactions and their financial results were posted on this blog on Friday.

- The remaining nine positions (Bank of America Corp., General Motors, Market Vectors Russia ETF, McDermott International, Morgan Stanley, Mylan Inc., Occidental Petroleum, United Continental Holdings, and VALE SA ADR) were closed out upon Sep2012 options expiration. The options expired and the accompanying equities were assigned (i.e. equities called away) at their respective strike prices.  
With the cash available from the closing of these positions, the Covered Calls Advisor will establish new positions this week and will post them on this blog the same day that they occur.

The annualized return-on-investment financial results for these nine closed positions are:
Bank of America Corp. = +39.7%
General Motors Co. = +42.3%
Market Vectors Russia ETF = +38.1%
McDermott International Inc. = +62.8%
Morgan Stanley = +52.5%
Mylan Inc. = +11.8%
Occidental Petroleum Corp. = +21.4%
United Continental Holdings Inc. = +40.5%
VALE SA ADR = +24.8%

The detailed transactions history and results for these nine positions are as follows:

1. Bank of America Corp. (BAC) -- Closed
The transactions history is as follows:
07/30/2012 Bought 1,000 BAC shares @ $7.29
08/01/2012 Sold 10 BAC Aug2012 $7.00 Call Options @ $.44
Note: the price of BAC was $7.34 today when these options were sold.
08/17/2012 Bought-to-Close 10 BAC Aug2012 $7.00 call options @ $1.01
Note: BAC was trading at $8.01 when this transaction occurred.
08/20/2012 Sold 10 BAC Sep2012 $8.00 Call Options @ $.30
Note: BAC was trading at $8.05 when this transaction occurred.
09/21/2012 Sep012 $8.00 options expired and 1,000 BAC shares assigned (called away)at $8.00
Note: the price of BAC stock was $9.11 upon options expiration.

The overall performance result (including commissions) for this Bank of America (BAC) position was as follows:
Stock Purchase Cost: $7,281.05
= ($7.29*1,000+$8.95 commission)

Net Profit:
(a) Options Income: -$272.90
= ($.44-$1.01+$.30)*1,000 shares - 2*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (BAC assigned at $8.00 upon expiration): +$701.05
=+($8.00-$7.29)*1,000 - $8.95 commissions

Total Net Profit (BAC assigned at $8.00 at Sep2012 expiration): +$428.15
= (-$272.90 +$0.00 +$701.05)

Absolute Return (BAC assigned at $8.00 at Sep2012 expiration): +5.9%
= +$428.15/$7,281.05
Annualized Return : +39.7%
= (+$428.15/$7,281.05)*(365/54 days)


2. General Motors Co. (GM) -- Closed
The transactions are as follows: 09/04/2012 Bought 500 GM shares @ $21.20
09/04/2012 Sold 5 GM Sep2012 $21.00 Call Options @ $.71
Note: the price of GM shares was $21.24 today when these options were sold.
09/21/2012 Sep012 $21.00 options expired and 500 GM shares assigned (called away)at $21.00
Note: the price of GM stock was $24.80 upon options expiration.

The overall performance result (including commissions) for this General Motors Co. (GM) covered calls position was as follows:
Stock Purchase Cost: $10,608.95
= ($21.20*500+$8.95 commission)

Net Profit:
(a) Options Income: +$342.30
= ($.71 X 500 shares) - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (GM assigned at $21.00 upon expiration): -$108.95
=+($21.00-$21.20)*500 - $8.95 commissions

Total Net Profit (GM assigned at $21.00 at Sep2012 expiration): +$233.35
= (+$342.30 +$0.00 -$108.95)

Absolute Return (If GM assigned at $21.00 at Sep2012 expiration): +2.2%
= +$233.35/$10,608.95
Annualized Return: +42.3%
= (+$233.35/$10,608.95)*(365/19 days)


3. Market Vectors Russia ETF -- Closed
The transactions history for this Market Vectors Russia ETF (RSX) covered calls position is as follows: 07/30/2012 Bought 600 RSX shares @ $26.59
08/01/2012 Sold 6 RSX Aug2012 $27.00 Call Options @ $.55
Note: the price of RSX was $26.70 today when these options were sold.
08/17/2012 Bought-to-Close 6 RSX Aug2012 $27.00 Calls at $.85
Note: this was done with the price of RSX at $27.84
08/17/2012 Sold-to-Open 6 RSX Sep2012 $27.00 call options at $1.45
Note: the price of RSX was $27.88 when these Sep2012 call options were sold.
09/21/2012 Sep012 $27.00 options expired and 600 RSX shares assigned (called away)at $27.00
Note: the price of RSX stock was $29.73 upon options expiration.

The overall performance result (including commissions) for this Market Vectors Russia ETF (RSX) covered calls position is as follows:
Stock Purchase Cost: $15,962.95
= ($26.59*600+$8.95 commission)

Net Profit:
(a) Options Income: +$663.10
= ($.55-$.85+$1.45)*600 shares - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (RSX assigned at $27.00): +$237.05
= ($27.00-$26.59)*600 - $8.95 commissions

Total Net Profit(RSX assigned at $27.00): +$900.15
= (+$663.10 +$0.00 +$237.05)

Absolute Return (RSX assigned at $27.00): +5.6%
= +$900.15/$15,962.95
Annualized Return: +38.1%
= (+$900.15/$15,962.95)*(365/54 days)


4. McDermott International Inc. -- Closed
The transactions history for this MDR position is as follows:
08/01/2012 Bought 600 MDR @ $11.56
08/01/2012 Sold 6 MDR Aug2012 $12.00 Calls @ $.55
08/17/2012 MDR Aug2012 $12.00 Call Options expired.
Note: the price of MDR stock was $11.75 upon options expiration.
08/20/2012 Sold 6 MDR Sep2012 $12.00 Calls @ $.45
Note: the price of MDR was $11.76 when these options were sold.
09/21/2012 Sep012 $12.00 options expired and 600 MDR shares assigned (called away)at $12.00
Note: the price of MDR stock was $12.70 upon options expiration.

The overall performance result (including commissions) for this McDermott position was as follows: Stock Purchase Cost: $9,256.95
= ($11.56*600+$8.95 commission)
Net Profit:
(a) Options Income: +$573.10
= 600 shares*($.55+$.45) - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MDR assigned at $12.00): +$255.05
= ($12.00-$11.56)*600 - $8.95 commissions

Total Net Profit (MDR assigned at $12.00 upon Sep2012 expiration): +$828.15
= (+$573.10 +$0.00 +$255.05)

Absolute Return (MDR assigned at $12.00): +8.9%
= +$828.15/$9,256.95
Annualized Return: +62.8%
= (+$828.15/$9,256.95)*(365/52 days)


5. Morgan Stanley -- Closed
The transactions history for this Morgan Stanley (MS) covered calls position is as follows:
07/31/2012 Bought 600 MS @ $13.63 07/31/2012
Sold 6 MS Aug2012 $14.00 Calls @ $.35
08/17/2012 Bought-to-Close 6 MS Aug2012 $14.00 Calls at $.58
Note: this was done with the price of MS at $14.57
08/17/2012 Sold-to-Open 6 MS Sep2012 $14.00 call options at $.96
09/21/2012 Sep012 $14.00 options expired and 600 MS shares assigned (called away)at $14.00
Note: the price of MS stock was $17.08 upon options expiration.

The overall performance result (including commissions) for this Morgan Stanley covered calls position was as follows: Stock Purchase Cost: $8,186.95
= ($13.63*600+$8.95 commission)

Net Profit:
(a) Options Income: +$411.10
= ($.35-$.58+$.96)*600 shares - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MS assigned at $14.00): +$213.05
= ($14.00-$13.63)*600 - $8.95 commissions

Total Net Profit (MS assigned at $14.00 at Sep2012 options expiration): +$624.15
= (+$411.10 +$0.00 +$213.05)

Absolute Return (MS assigned at $14.00): +7.6%
= +$624.15/$8,186.95
Annualized Return: +52.5%
= (+$624.15/$8,186.95)*(365/53 days)


6. Mylan Inc. -- Closed
The transactions history for this Mylan Inc.(MYL) covered calls position is as follows: 03/08/2012 Bought 500 Mylan Inc. Shares @ $22.51
03/08/2012 Sold 5 MYL Mar2012 $23.00 Calls @ $.26
Note: the price of Mylan was $22.75 today when the calls were sold.
03/18/2012 Mar2012 options expired.
03/19/2012 Sold 5 MYL Apr2012 $23.00 Calls @ $.47
Note: the price of MYL was $22.73 when these options were sold.
04/22/2012 MYL May2012 Call options expired.
04/25/2012 Sold 5 MYL May2012 $23.00 Calls at $.30
Note: the price of MYL was $22.20 when these call options were sold.
05/19/2012 MYL Jun2012 Call options expired.
06/04/2012 Sold 5 MYL Jun2012 $21.00 Calls at $.28
06/15/2012 Bought-to-Close 5 Jun2012 $21.00 call options at $.20
06/15/2012 Sold 5 MYL Jul2012 $22.00 call options at $.31
07/18/2012 Bought-to-Close 5 MYL Jul2012 $22.00 call options at $.60
07/18/2012 Sell-to-Open 5 MYL Aug2012 $22.00 call options at $.96
Note: the price of MYL was $22.57 when this credit spread roll-out transaction was made.
08/17/2012 Bought-to-Close 5 MYL Aug2012 $22.00 Calls at $1.53
Note: this was done with the price of MYL at $23.52
08/17/2012 Sold-to-Open 5 MYL Sep2012 $23.00 call options at $.88
09/21/2012 Sep012 $23.00 options expired and 500 MYL shares assigned (called away)at $23.00
Note: the price of MYL stock was $24.55 upon options expiration.

The result from this position is as follows:
Stock Purchase Cost: $11,263.95
= ($22.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$486.60
= ($.26+$.47+$.30+$.28-$.20+$.31-$.60+$.96-$1.53+$.88)*500 shares) - 7*$11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (MYL price above $23.00 at Sep2012 options expiration): +$236.05
= ($23.00-$22.51)*500 - $8.95 commissions

Total Net Profit(MYL stock assigned at $23.00 at Sep2012 options expiration): +$722.65 = (+$486.60 +$0.00 +$236.05)

Absolute Return (Mylan stock assigned at $23.00 at Sep2012 options expiration): +6.4%
= +$722.65/$11,263.95
Annualized Return: +11.8%
= (+$722.65/$11,263.95)*(365/198 days)


7. Occidental Petroleum Corp. -- Closed
The transactions are as follows:
08/23/2012 Bought 200 OXY shares @ $87.80
08/23/2012 Sold 2 OXY Sep2012 $85.00 Call Options @ $3.95
09/06/2012 Ex-dividend of $.54 per share
09/21/2012 Sep012 $85.00 options expired and 200 OXY shares assigned (called away)at $85.00
Note: the price of OXY stock was $87.39 upon options expiration.

The overall performance result (including commissions) for this Occidental Petroleum Corp. (OXY) covered calls position was as follows: Stock Purchase Cost: $17,568.95
= ($87.80*200+$8.95 commission)

Net Profit:
(a) Options Income: +$779.55
= ($3.95*200 shares) - $10.45 commissions
(b) Dividend Income (OXY stock assigned at Sep2012 expiration): +$108.00
= ($.54 dividend per share x 200 shares); or
(c) Capital Appreciation (If stock assigned at $85.00): -$568.95
+($85.00-$87.80)*200 - $8.95 commissions

Total Net Profit (OXY stock assigned at $85.00 at Sep2012 expiration): +$318.60
= (+$779.55 +$108.00 -$568.95); or

Absolute Return (OXY stock assigned at $85.00 at Sep2012 expiration): +1.8% = +$318.60/$17,568.95
Annualized Return: +21.4%
= (+$318.60/$17,568.95)*(365/31 days);


8. United Continental Holdings Inc. (UAL) -- Closed
The transaction was as follows:
08/28/2012 Sold 7 United Continental Holdings Inc.(UAL) Sep2012 $18.00 Put Options @ $.52
Note: the price of UAL was $18.75 today when these Puts were sold.
09/21/2012 Sep012 $18.00 options expired
Note: the price of UAL stock was $20.02 upon options expiration.

The overall performance result (including commissions) for this UAL transaction was as follows: 100% Cash-Secured Cost Basis: $12,600.00 = $18.00*700

Net Profit:
(a) Options Income: +$349.80
= ($.52*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (UAL above $18.00 at Sep2012 expiration): +$0.00
= ($18.00-$18.00)*700

Total Net Profit (UAL above $18.00 at Sep2012 options expiration): +$349.80 = (+$349.80 +$0.00 +$0.00)

Absolute Return (UAL above $18.00 at Sep2012 options expiration and Put options thus expire worthless): +2.8%
= +$349.80/$12,600.00
Annualized Return: +40.5%
= (+$349.80/$12,600.00)*(365/25 days)


9. VALE SA ADR -- Closed
The transactions are as follows:
08/20/2012 Bought 700 VALE shares @ $17.66
08/20/2012 Sold 7 VALE Sep2012 $17.00 Call Options @ $1.09
Note: the price of Vale shares was $17.71 today when these options were sold.
09/21/2012 Sep012 $17.00 options expired and 700 VALE shares assigned (called away)at $17.00
Note: the price of VALE stock was $17.00 upon options expiration.

The overall performance result (including commissions) for this Vale SA ADR (VALE) covered calls position was as follows: Stock Purchase Cost: $12,370.95
= ($17.66*700+$8.95 commission)

Net Profit:
(a) Options Income: +$748.80 = ($1.09 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (VALE assigned at $17.00 upon expiration): -$470.95
=+($17.00-$17.66)*700 - $8.95 commissions

Total Net Profit (VALE assigned at $17.00 at Sep2012 expiration): +$277.85
= (+$748.80 +$0.00 -$470.95)

Absolute Return (VALE assigned at $17.00 at Sep2012 expiration): +2.2%
= +$277.85/$12,370.95
Annualized Return: +24.8%
= (+$277.85/$12,370.95)*(365/33 days)

Saturday, September 22, 2012

Roll-Outs -- iShares MSCI China ETF and iShares MSCI South Korea ETF

The Covered Calls Advisor decided to retain the existing covered calls positions in iShares MSCI China ETF (ticker symbol FXI) and iShares MSCI South Korea ETF (ticker symbol EWY) by rolling out to the Oct2012 expiration.  The advantage of waiting until today (expiration Friday) to roll these positions was to extract almost all of the extrinsic value from the short options before establishing the position for the next expiration month.

1. iShares MSCI China ETF (FXI) -- Roll Out
The Sep2012 options at the $34.00 strike price were rolled out to the same $34.00 strike price for Oct2012 with the following credit spread transaction:
09/21/2012 Bought-to-Close 10 FXI Sep2012 $34.00 Call Options at $.90
09/21/2012 Sell-to-Open 10 FXI Oct2012 $34.00 Call Options at $1.35
Note: the price of FXI was $34.88 when this transaction was made.

The transaction history so far in this iShares MSCI China ETF (FXI) position is as follows:
07/30/2012 Bought 1,000 FXI shares @ $34.09
07/30/2012 Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.
08/24/2012 10 FXI Aug 24th $34.50 call options expired.
Note: the price of FXI was $34.01 today when these options expired.
08/28/2012 Sold-to-Open 10 FXI Sep2012 $34.00 Calls @ $.56
Note: the price of FXI was $33.62 today when this transaction was made.
09/21/2012 Bought-to-Close 10 FXI Sep2012 $34.00 Call Options at $.90
09/21/2012 Sell-to-Open 10 FXI Oct2012 $34.00 Call Options at $1.35
Note: the price of FXI was $34.88 when this transaction was made.

A possible overall performance result (including commissions) for this iShares MSCI China ETF (FXI) covered calls position is as follows:
Stock Purchase Cost: $34,098.95 = ($34.09*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$1,535.25 =($.80-$.42+$.31+$.56-$.90+$1.35)*1,000 shares - 4*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $34.00 upon expiration): -$98.95
=($34.00-$34.09)*1,000 - $8.95 commissions

Total Net Profit (If FXI assigned at $34.00 at Oct2012 expiration): +$1,535.25
= (+$1,634.20 +$0.00 -$98.95)

Absolute Return (If FXI assigned at $34.00 at Oct2012 options expiration): +4.5%
= +$1,535.25/$34,098.95
Annualized Return (If stock assigned): +20.0%
= (+$1,535.25/$34,098.95)*(365/82 days)

2. iShares MSCI South Korea ETF (EWY) -- Roll Up and Out
The Sep2012 options at the $57.00 strike price were rolled-up-and-out to the $59.00 strike price for Oct2012 with the following credit spread transaction:
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.

The transaction history so far in this iShares MSCI South Korea ETF (EWY) position is as follows:
07/30/2012 Bought 500 EWY shares @ $54.51 08/01/2012
Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$321.90
= ($1.40-$1.68+$2.03-$2.90+$1.87)*500 shares - 3*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $59.00): +$2,236.05
= ($59.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY assigned at $59.00): +$2,557.95
= (+$321.90 +$0.00 +$2,236.05)

Absolute Return if Assigned at $59.00: +9.4%
= +$2,557.95/$27,263.95
Annualized Return If Assigned (ARIA): +41.8%
= (+$2,557.95/$27,263.95)*(365/82 days)

Monday, September 17, 2012

Overall Market Meter Changes to "Neutral" from "Slightly Bullish"

Each month during options expiration week, the Covered Calls Advisor recalculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. This month, the Overall Market Meter rating changes from Slightly Bullish to Neutral.

The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below);
- momentum (next two indicators in the chart);
- value (next three indicators); and
- growth (the last indicator).






















The current Market Meter Average of 3.50 (see blue line in chart above) is below the 3.75 average of last month. The 3.50 is a Neutral rating (range from 2.51 to 3.50).  Six of the eight factors used to determine the Overall Market Meter rating were unchanged from the prior analysis last month. The two factors that changed were: (1) Interest Rates changed from Neutral to Slightly Bearish; and (2) P/E Ratios changed from Neutral to Slightly Bearish.

This is the first change in the Overall Market Meter rating since January 18th, 2012.  During these past 8 months that the rating was Slightly Bullish, the benchmark Russell 3000 index increased by 13.4%.

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Neutral sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." So with the September 2012 options expiration, newly established positions for October 2012 expiration will be established in accordance with this guideline.

Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.

Regards to All and Godspeed,
Jeff

Tuesday, September 4, 2012

Established General Motors Co. Covered Calls

Today, a new covered calls position was established in General Motors Co. (Ticker Symbol GM) with a Sep2012 expiration and at the $21.00 strike price. The transactions are as follows:
09/04/2012 Bought 500 GM shares @ $21.20
09/04/2012 Sold 5 GM Sep2012 $21.00 Call Options @ $.71
Note: the price of GM shares was $21.24 today when these options were sold.

A possible overall performance result (including commissions) for this General Motors Co. (GM) covered calls position is as follows:
Stock Purchase Cost: $10,608.95
= ($21.20*500+$8.95 commission)

Net Profit:
(a) Options Income: +$342.30
= ($.71 X 500 shares) - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GM assigned at $21.00 upon expiration): -$108.95
=+($21.00-$21.20)*500 - $8.95 commissions

Total Net Profit (If GM assigned at $21.00 at Sep2012 expiration): +$233.35
= (+$342.30 +$0.00 -$108.95)

Absolute Return (If GM assigned at $21.00 at Sep2012 expiration): +2.2%
= +$233.35/$10,608.95
Annualized Return (If stock assigned): +42.3%
= (+$233.35/$10,608.95)*(365/19 days)

The downside 'breakeven price' at expiration is at $20.49 ($21.20 - $.71).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 18 days until Sep2012 options expiration) for this General Motors covered calls position is 70.1%. This compares with a probability of profit of 51.4% for a buy-and-hold of GM over the same time period.

The 'crossover price' at expiration is $21.79 ($21.00 + $.71).  This is the price above which it would have been more profitable to simply buy-and-hold GM stock until September 22, 2012 (the Sep2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 35.9%.

Saturday, September 1, 2012

Returns -- Through August 2012

1. 2012 Year-to-Date Results:

As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 9.38% so far in 2012. This is 2.62 percentage points (+9.38% minus 12.00%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.















The financial results were as follows:
CCAP Absolute Return (Jan 1st through August 31st, 2012) = +9.38%
= ($316,072.68-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return (Jan 1st through August 31st, 2012) = +12.00%
= ($83.08-$74.18)/$74.18

As a reminder, the Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined: If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.


2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:





This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.

Also as a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in this advisor's personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "SLIGHTLY BULLISH". The corresponding investing strategy is to, on-average, sell 2% out-of-the-money covered calls for the nearest expiration month.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff