Friday, July 20, 2012

Roll Out -- Hess Corp.

Today was Jul2012 options expiration. With less than an hour before the market close, the existing covered calls position was rolled out to an Aug2012 covered calls position for the same $45.00 strike price.

The advantage of waiting until this afternoon to roll this position was to extract almost all of the extrinsic value from the short options before establishing the position for the next expiration month. With Hess Corp.(Symbol HES) stock at $45.41, the Jul2012 $45.00 options were in-the-money and the remaining time value in the Jul2012 options was only $.01 [$.42 - ($45.41 - $45.00)]. A credit spread transaction was executed to roll out from the July2012 to the Aug2012 $45.00 strike price as follows:

07/20/2012 Bought-to-Close 2 HES Jul2012 $45.00 Call Options at $.42
07/20/2012 Sell-to-Open 2 HES Aug2012 $45.00 Call Options at $1.95

The transaction history so far in this Hess Corp.(HES) position 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.
05/19/2012 HES Jun2012 Call options expired.
06/04/2012 Sold 2 HES Jun2012 $45.50 Calls at $1.18
06/15/2012 Jun2012 options expired.
06/18/2012 Sold 2 HES Jul2012 $45.00 Calls at $1.20
Note: the price of HES was $43.56 when these options were sold.
07/20/2012 Bought-to-Close 2 HES Jul2012 $45.00 Call Options at $.42
07/20/2012 Sell-to-Open 2 HES Aug2012 $45.00 Call Options at $1.95
Note: the price of HES was $45.41 when this credit spread transaction was executed.

The overall return-on-investment result for this Hess covered calls position will be calculated and presented when the position is closed.

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