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Tuesday, August 28, 2012

Continuation -- iShares MSCI China ETF Covered Calls

After the August 24th, 2012 weekly options expiration last Friday, a long uncovered equity position of 1,000 shares of iShares MSCI China ETF (FXI) remained in the Covered Calls Advisor Portfolio (CCAP).  This morning, a decision was made to retain these shares and to re-establish a covered call positions with Sep2012 expirations. The detailed transactions history for this position as well as a possible overall performance result is:

07/30/2012 Bought 1,000 FXI shares @ $34.09
07/30/2012 Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.
08/24/2012 10 FXI Aug 24th $34.50 call options expired.
Note: the price of FXI was $34.01 today when these options expired.
08/28/2012 Sold-to-Open 10 FXI Sep2012 $34.00 Calls @ $.56
Note: the price of FXI wa $33.62 today when this transaction was made.

Two possible overall performance results (including commissions) for this iShares MSCI China ETF (FXI) covered calls position are as follows:
Stock Purchase Cost: $34,098.95
= ($34.09*1,000+$8.95 commission)
Net Profit:
(a) Options Income: +$1,300.65
=($.80-$.42+$.31+$.56)*1,000 shares - 3*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI price unchanged at $33.62 upon Sep2012 expiration):
-$478.95
=($33.62-$34.09)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $34.00 upon expiration): -$98.95
=($34.00-$34.09)*1,000 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $33.62 at Sep2012 expiration): +$821.70
= (+$1,300.65 +$0.00 -$478.95)
Total Net Profit (If FXI assigned at $34.00 at Sep2012 expiration): +$1,201.70
= (+$1,300.65 +$0.00 -$98.95)

Absolute Return (If FXI price unchanged at $33.62 at Sep2012 expiration): +2.4%
= +$821.70/$34,098.95
Annualized Return (If price unchanged at $34.41 at 8/24/2012 expiration): +16.3%
= (+$821.70/$34,098.95)*(365/54 days)

Absolute Return (If FXI assigned at $34.00 at Sep2012 options expiration): +3.5%
= +$1,201.70/$34,098.95
Annualized Return (If stock assigned): +23.8%
= (+$1,201.70/$34,098.95)*(365/54 days)

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