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Friday, January 20, 2012

Roll Up and Out -- iShares MSCI China ETF, iShares MSCI Emerging Markets ETF, and iShares MSCI South Korea ETF

Today was Jan2012 options expiration. With less than 30 minutes before the market close, three existing covered calls were rolled up and out to Feb2012 covered calls.
The advantage of waiting until this afternoon 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.

The detailed transactions history for these three covered calls positions as well as possible performance results are as follows:

1. iShares MSCI China ETF (FXI) -- Continuation Transactions
The transaction history is as follows:
04/18/2011 Bought 1,000 FXI @ $44.80
04/20/2011 Sold 10 FXI May2011 $47.00 Calls @ $.49
Note: the price of FXI was $45.88 when the calls were sold.
05/31/2011 Sold 10 FXI Jul2011 $47.00 Calls @ $.37
Note: The price of FXI was $45.18 when these call options were sold.
06/21/2011 FXI ETF distribution of $.68555 per share
07/16/2011 Jul2011 FXI options expired.
07/18/2011 Sold 10 FXI Aug2011 $42.00 Calls @$.71
08/20/2011 Aug2011 FXI options expired.
08/22/2011 Sold 10 FXI Sep2011 $42.00 Calls @ $.65
09/17/2011 Sep2011 FXI options expired.
09/20/2011 Sold 10 FXI Oct2011 $38.00 Calls @ $.47
10/22/2011 Oct2011 options expired.
10/26/2011 Sold 10 FXI Nov2011 $37.00 Calls @ $.86
11/19/2011 Nov2011 FXI options expired.
11/30/2011 Sold 10 FXI Jan2012 $38.00 Calls @ $1.10
Note: the price of FXI was $36.42 today when these call options were sold.
12/20/2011 Ex-Distribution $79.40 = $.0794 * 1,000 shares
01/20/2012 Bought-to-Close 10 FXI Jan2012 $38.00 Calls @ $.68
Note: the price of FXI was $38.67 when these call options were bought.
01/20/2012 Sold 10 FXI Feb2012 $40.00 Calls @ $.49
Note: the price of FXI was $38.72 today when these call options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $44,808.95
= ($44.80*1,000+$16.45 commission)

Net Profit:
(a) Options Income: +$4,358.40
= (1,000*($.49+$.37+$.71+$.65+$.47+$.86+$1.10-$.68+$.49) - 8*$12.70 commissions)
(b) Distribution Income: $767.95 = ($.68555+$.0794) * 1,000 shares
(c) Capital Appreciation (If FXI price unchanged at $38.72 at expiration): -$6,088.95
= ($38.72-$44.80)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $40.00 at expiration): -$4,808.95
= ($40.00-$44.80)*1,000 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $38.72 at expiration): -$962.90
= (+$4,358.40 +$767.95 -$6,088.95)
Total Net Profit (If FXI assigned at $40.00): +$317.40
= (+$4,358.40 +$767.95 -$4,808.95)

1. Absolute Return (If FXI unchanged at $38.72 at expiration): -2.1%
= -$962.90/$44,808.95
Annualized Return (If FXI unchanged at expiration): -2.6%
= (-$962.90/$44,808.95)*(365/306 days)

2. Absolute Return (If FXI assigned at $40.00 at expiration): +0.7%
= +$317.40/$44,808.95
Annualized Return If Assigned (ARIA): +0.8%
= (+$317.40/$44,808.95)*(365/306 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 500 EEM @ $47.81
04/19/2011 Sold 5 EEM May2011 $49.00 Calls @ $.83
Note: the price of EEM was $48.32 when the calls were sold.
05/27/2011 Sold 5 EEM Jun2011 $49.00 Calls @ $.44
Note: the price of EEM was $47.83 when the calls were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of EEM was $45.34 upon options expiration.
6/22/2011 Distribution Income $.46092 per share.
06/28/2011 Sold 5 EEM Jul2011 $47.00 Calls @ $.62
Note: price of EEM was $46.42 when these options were sold.
07/16/2011 Jul2011 EEM options expired.
07/18/2011 Sold 5 EEM Aug2011 $47.00 Calls @$.99
Note: The price of EEM was $46.55 when these call options were sold.
08/20/2011 Aug2011 EEM options expired.
08/22/2011 Sold 5 EEM Sep2011 $42.00 Calls @ $.71
09/17/2011 Sep2011 EEM options expired.
09/20/2011 Sold 5 EEM Oct2011 $42.00 Calls @ $.63
Note: The price of EEM was $39.68 when these call options were sold.
10/22/2011 Oct2011 options expired.
10/26/2011 Sold 5 EEM Nov2011 $41.00 Calls @ $.78
11/19/2011 Nov2011 EEM options expired.
11/30/2011 Sold 5 EEM Dec2011 $41.00 Calls @ $.59
Note: the price of EEM was $39.71 today when these call options were sold.
12/20/2011 Ex-Distribution $173.48 = $.34696 * 500 shares
01/20/2012 Bought-to-Close 5 EEM Jan2012 $39.00 Calls @ $2.43
Note: the price of EEM was $41.41 when these call options were bought.
01/20/2012 Sold 5 EEM Feb2012 $42.00 Calls @ $.80
Note: the price of EEM was $41.50 today when these call options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI Emerging Markets ETF (EEM) transactions would be as follows:
Stock Purchase Cost: $23,913.95
= ($47.81*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,820.70
= [500*($.83 +$.35+$.62+$.99+$.71+$.63+$.78+$.59-$2.43+$.80) - 9*$12.70 commissions]
(b) Distribution Income: $403.94 = ($.46092+$.34696) * 500 shares
(c) Capital Appreciation (If EEM unchanged at $41.50 at expiration): -$3,163.95
= ($41.50-$47.81)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $42.00): -$2,913.95
= ($42.00-$47.81)*500 - $8.95 commissions

Total Net Profit (If EEM price unchanged at $41.50 at expiration): -$939.31
= (+$1,820.70 +$403.94 -$3,163.95)
Total Net Profit (If EEM assigned at $42.00): -$689.31
= (+$1,820.70 +$403.94 -$2,913.95)

1. Absolute Return (If EEM price unchanged at $41.50 at expiration): -3.9%
= -$939.31/$23,913.95
Annualized Return if Unchanged at expiration (ARIU): -4.7%
= (-$939.31/$23,913.95)*(365/306 days)

2. Absolute Return (If EEM assigned at $42.00 at expiration): -2.9%
= -$689.31/$23,913.95
Annualized Return If Assigned (ARIA): -3.4%
= (-$689.31/$23,913.95)*(365/306 days)


3. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
10/25/2011 Bought 800 EWY @ $54.62
10/25/2011 Sold 8 EWY Nov2011 $54.00 Calls @ $2.59
Note: these call options were sold with the price of EWY at $54.62
11/19/2011 Nov2011 EWY options expired.
11/30/2011 Sold 8 EWY Dec2011 $56.00 Calls @ $1.48
Note: the price of EWY was $55.38 today when these call options were sold.
12/20/2011 Ex-Distribution $298.41 = $.37301 * 800 shares
01/20/2012 Bought-to-Close 8 EWY Jan2012 $55.00 Calls @ $1.75
Note: the price of EWY was $56.73 when these call options were bought.
01/20/2012 Sold 8 EWY Feb2012 $57.00 Calls @ $1.50
Note: the price of EWY was $56.73 when these call options were sold.

Two possible overall performance results(including commissions) for the EWY position would be as follows:
Stock Purchase Cost: $43,704.95
= ($54.62*800+$8.95 commission)

Net Profit:
(a) Options Income: +$2,871.20
= (800*($2.59+$1.48-$.1.75+$1.50) - 3*$14.95 commissions)
(b) Dividend Income: +$298.41 = $.37301* 800 shares
(c) Capital Appreciation (If EWY price unchanged at $56.73): +$1,679.05
= ($56.73-$54.62)*800 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $57.00): +$1,895.05
= ($57.00-$54.62)*800 - $8.95 commissions

Total Net Profit (If EWY price unchanged at $56.73): +$4,848.66
= (+$2,871.20 +$298.41 +$1,679.05)
Total Net Profit(If EWY assigned at $57.00): +$5,064.66
= (+$2,871.20 +$298.41 +$1,895.05)

1. Absolute Return if Unchanged at $56.73: +11.1%
= +$4,848.66/$43,704.95
Annualized Return If Unchanged (ARIU): +34.9%
= (+$4,848.66/$43,704.95)*(365/116 days)

2. Absolute Return if Assigned at $57.00: +11.6%
= +$5,064.66/$43,704.95
Annualized Return If Assigned (ARIA): +36.5%
= (+$5,064.66/$43,704.95)*(365/116 days)

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