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Tuesday, May 1, 2012

Continuation Transactions -- Hess Corp. and Morgan Stanley

Upon Apr2012 options expiration, eleven covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired.  As of today, there were only two remaining positions (Hess Corp. and Morgan Stanley) in which decisions remained to either sell the stocks or to re-establish covered calls positions.  This morning, a decision was made to re-establish covered calls positions in both Hess (symbol HES) and Morgan Stanley (symbol MS) with May2012 expirations.  The detailed transactions history for these positions as well as some possible overall performance results are as follows:

1. Hess Corp.(HES) -- Continuation
The transactions history is as follows:
03/19/2012 Bought 200 HES shares @ $62.572
03/19/2012 Sold 2 HES Apr2012 $65.00 Call Options @ $1.24
Note: the price of HES was $63.24 when these calls were sold.
04/22/2012 Apr2012 HES options expired.
05/01/2012 Sold 2 HES May2012 $55.00 Call Options @ $.74
Note: the price of HES was $53.35 when these options were sold.

Two possible overall performance results(including commissions) for the Hess Corp.(HES) transactions would be as follows:
Stock Purchase Cost: $12,523.35 = ($62.572*200+$8.95 commission)

Net Profit:
(a) Options Income: +$375.10 = ($1.24+$.74)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $53.35): -$1,853.35
+($53.35-$62.572)*200 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $55.00): -$1,523.35
+($55.00-$62.572)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $53.35 upon May2012 expiration): -$1,478.25
= (+$375.10 +$0.00 -$1,853.35)
Total Net Profit(If stock assigned at $55.00 at May2012 expiration): -$1,148.25
=(+$375.10 +$0.00 -$1,523.35)

1. Absolute Return (If stock price unchanged upon May2012 expiration): -11.8%
= -$1,478.25/$12,523.35
Annualized Return (If stock price unchanged at May2012 expiration): -69.5%
= (-$1,478.25/$12,523.35)*(365/62 days)

2. Absolute Return (If stock assigned at $55.00 upon May2012 expiration): -9.2%
= -$1,148.25/$12,523.35
Annualized Return (If stock assigned): -54.0%
= (-$1,148.25/$12,523.35)*(365/62 days)


2. Morgan Stanley(MS) -- Continuation
The transactions history is as follows:
04/04/2012 Bought 300 MS @ $18.82
04/04/2012 Sold 3 MS Apr2012 $19.00 Calls @ $.66
Note: the price of MS was $18.87 today when the call options were sold.
04/22/2012 Apr2012 MS options expired.
04/26/2012 Ex-dividend of $15.00 ($.05 per share * 300 shares)
05/01/2012 Sold 3 MS May2012 $18.00 Call Options @ $.32
Note: the price of MS was $17.42 when these options were sold.

Two possible overall performance results(including commissions) for the Morgan Stanley (MS) transactions would be as follows:
Stock Purchase Cost: $5,654.95
= ($18.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$271.60
= ($.66+$.32)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$15.00 ($.05 per share * 300 shares)
(c) Capital Appreciation (If stock price unchanged at $17.42): -$428.95
+($17.42 - $18.82)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $18.00): -$254.95
+($18.00-$18.82)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $17.42 upon May2012 expiration): -$142.35
= (+$271.60 +$15.00 -$428.95)
Total Net Profit(If stock assigned at $18.00 at May2012 expiration): +$31.65
= (+$271.60 +$15.00 -$254.95)

1. Absolute Return (If stock price unchanged at May2012 expiration): -2.5%
= -$142.35/$5,654.95
Annualized Return (If stock price unchanged at May2012 expiration): -20.0%
= (-$142.35/$5,654.95)*(365/46 days)

2. Absolute Return (If stock assigned at $18.00 at May2012 expiration): +0.6%
= +$31.65/$5,654.95
Annualized Return (If stock assigned): +4.4%
= (+$31.65/$5,654.95)*(365/46 days)

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