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Thursday, June 21, 2012

Establish Valero Energy Corp. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Valero Energy Corp.(VLO) covered calls as follows:

Established Valero Energy Corp.(VLO) Covered Calls for Jul2012:
06/21/2012 Bought 300 VLO @ $22.82
06/21/2012 Sold 3 VLO Jul2012 $24.00 Calls @ $.46

With total capacity of approximately 3.0 million barrels per day, Valero Energy Corp. is the largest petroleum refiner and marketer in the U.S. The company has the industry's most complex and sophisticated refining system. Most of its 16 refineries throughout the U.S., Canada and Aruba are able to process heavy, low-quality crude oil. The company has a growing network of retail outlets in the Great Plains, Southwest and Northeast.


Two possible overall performance results(including commissions) for the Valero Energy Corp.(VLO) transactions would be as follows:

Stock Purchase Cost: $6,854.95
= ($22.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$126.80
= ($.46*300 shares) - $11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price unchanged at $22.82): -$8.95
= ($22.82-$22.82)*300 - $8.95 commissions
(c) Capital Appreciation (If VLO above $24.00 at Jul2012 expiration): +$345.05
+($24.00-$22.82)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $22.82): +$117.85
= (+$126.80 +$0.00 -$8.95)
Total Net Profit(If stock price above $24.00 at Jul2012 options expiration): +$471.85
= (+$126.80 +$0.00 +$345.05)

Absolute Return if Unchanged at $22.82: +1.7%
= +$117.85/$6,854.95
Annualized Return If Unchanged (ARIU): +20.2%
= (+$117.85/$6,854.95)*(365/31 days)

Absolute Return (If stock price above $24.00 at Jul2012 options expiration): +6.9%
= +$471.85/$6,854.95
Annualized Return (If stock price above $26.00 at expiration): +81.0%
= (+$471.85/$6,854.95)*(365/31 days)

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