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Wednesday, February 29, 2012

Returns -- Through February 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 outperformed the benchmark Russell 3000 index by 2.59 percentage points (+12.04% minus +9.45%) over the first two months of calendar year 2012.

The financial results were as follows:

CCAP Absolute Return (Jan 1st through Feb 29th, 2012) = +12.04%

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Feb 29th, 2012) = +9.45%

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,


  1. Jeff,

    I want to say upfront that the overall return for the CCAP is outstanding. However,I have to ask what happened in 2010? Covered calls is a bullish strategy and 2010 was a bullish year. I can understand a 100-200 basis point lag, but the CCAP lag was much bigger. Was it one bad trade, or were there fundamental issues in your strategy? If it was the latter, what changes have been made to address those issues?

    I don't mean to embarrass you. I just want to learn from your mistakes rather than repeat them.

  2. Greg,

    The two primary reasons for this underperformance were (1) the extraordinarily variable monthly returns (both positive and negative) of the overall market -- monthly returns exceeded +3.0% or were less than -3.0% in ten of the twelve months in 2010; and (2) sub-par stock selections.


  3. Jeff - good stuff as always. Some day I need to understand these approaches of lowering risk profile better.