Wednesday, April 25, 2012

Closed -- Rio Tinto PLC

The Apr2012 covered calls position in Rio Tinto expired last Friday. Today, a decision was made to close out the RIO position by selling the 300 shares. The Covered Calls Advisor Portfolio is overweighted in the materials sector, so this sale will provide some cash to establish a new covered calls position that this Advisor believes will provide a better profit opportunity going forward. The detailed transactions history for this position as well as the performance result is shown below:

02/21/2012 Bought 300 RIO @ $58.24 02/21/2012
Sold 3 RIO Mar2012 $57.50 Calls @ $1.80
02/29/2012 Ex-Dividend $273.00 = $.91 * 300 shares 03/18/2012 Mar2012 options expired.
03/19/2012 Sold 3 RIO Apr2012 $57.50 Calls @ $1.75
Note: the price of RIO was $57.30 when these options were sold.
04/22/2012 RIO Apr2012 Call options expired.
04/25/2012 Sold 300 RIO at $56.19

The overall performance result(including commissions) for this Rio Tinto PLC (RIO) transactions was as follows:
Stock Purchase Cost: $17,480.95 = ($58.24*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,053.80
= ($1.80+$1.75)*300 shares - $11.20 commissions
(b) Dividend Income: +$273.00
= $.91 per share x 300 shares
(c) Capital Appreciation (Stock sold at $56.19): -$623.95
= +($56.19-$58.24)*300 - $8.95 commissions

Total Net Profit: +$702.85
= (+$1,053.80 +$273.00 -$623.95)

Absolute Return: +4.0%
= +$702.85/$17,480.95
Annualized Return: +22.9%
= (+$702.85/$17,480.95)*(365/64 days)

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