Tuesday, July 17, 2012

Roll Out -- Valero Energy Corp

Today, with the Valero Jul2012 $24.00 options well in-the-money and a remaining time value of only $.04 [$1.50 - ($25.46-$24.00)], it was decided to roll out the covered calls position to the Aug2012 $24.00 strike price.

The transaction history so far in this Valero (VLO) position is as follows:
06/21/2012 Bought 300 VLO @ $22.82
06/21/2012 Sold 3 VLO Jul2012 $24.00 Calls @ $.46
07/17/2012 Bought-to-Close 3 VLO Jul2012 $24.00 Calls @ $1.50
07/17/2012 Sold-to-Open 3 VLO Aug2012 $24.00 Calls @ $1.95

A possible result from this position is as follows:
Stock Purchase Cost: $6,854.95
= ($22.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$242.40
= ($.46-$1.50+$1.95)*300 shares) - 3*$11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price above $24.00 at Aug2012 options expiration):
+$345.05 = ($24.00-$22.82)*300 - $8.95 commissions

Total Net Profit(If stock price above $24.00 at Aug2012 options expiration): +$587.45
= (+$242.40 +$0.00 +$345.05)

Absolute Return (If Valero stock price above $24.00 at Aug2012 options expiration): +8.6% = +$587.45/$6,854.95

Annualized Return (If stock price above $24.00 at expiration): +53.9%
= (+$587.45/$6,854.95)*(365/58 days)

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