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Wednesday, July 18, 2012

Roll Out -- Mylan Inc.

Today, with Mylan Inc.(Symbol MYL) stock at $22.57, the Jul2012 $22.00 options in-the-money, and only 3 days remaining until options expiration, the Covered Calls Advisor rolled out to the Aug2012 $22.00 options.  The remaining time value in the Jul2012 options was only $.03 [$.60 - ($22.57 - $22.00)] today when the following credit spread transaction was executed:
07/18/2012 Bought-to-Close 5 MYL Jul2012 $22.00 Call Options at $.60
07/18/2012 Sell-to-Open 5 MYL Aug2012 $22.00 Call Options at $.96

The transaction history so far in this Mylan (MYL) position is as follows:
03/08/2012 Bought 500 Mylan Inc. Shares @ $22.51
03/08/2012 Sold 5 MYL Mar2012 $23.00 Calls @ $.26
Note: the price of Mylan was $22.75 today when the calls were sold.
03/18/2012 Mar2012 options expired.
03/19/2012 Sold 5 MYL Apr2012 $23.00 Calls @ $.47
Note: the price of MYL was $22.73 when these options were sold.
04/22/2012 MYL May2012 Call options expired.
04/25/2012 Sold 5 MYL May2012 $23.00 Calls at $.30
Note: the price of MYL was $22.20 when these call options were sold.
05/19/2012 MYL Jun2012 Call options expired.
06/04/2012 Sold 5 MYL Jun2012 $21.00 Calls at $.28
06/15/2012 Bought-to-Close 5 Jun2012 $21.00 call options at $.20
06/15/2012 Sold 5 MYL Jul2012 $22.00 call options at $.31
07/18/2012 Bought-to-Close 5 MYL Jul2012 $22.00 call options at $.60
07/18/2012 Sell-to-Open 5 MYL Aug2012 $22.00 call options at $.96
Note: the price of MYL was $22.57 when this credit spread roll-out transaction was made.

A possible result from this position is as follows:
Stock Purchase Cost: $11,263.95
= ($22.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$822.80
= ($.26+$.47+$.30+$.28-$.20+$.31-$.60+$.96)*500 shares) - 6*$11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price above $22.00 at Aug2012 options expiration):
-$263.95 = ($22.00-$22.51)*500 - $8.95 commissions

Total Net Profit(If stock price above $22.00 at Aug2012 options expiration): +$558.85
= (+$822.80 +$0.00 -$263.95)

Absolute Return (If Mylan stock price above $22.00 at Aug2012 options expiration): +5.0% = +$558.85/$11,263.95
Annualized Return (If stock price above $22.00 at expiration): +11.1%
= (+$558.85/$11,263.95)*(365/163 days)

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