Wednesday, August 1, 2012

Established Covered Calls Positions in Bank of America Corp., iShares MSCI South Korea ETF, and Market Vectors Russia ETF

Today, new covered calls positions were established in three equities [Bank of America Corp. (BAC), iShares MSCI South Korea ETF (FXI), and Market Vectors Russia ETF (RSX)] with Aug2012 expirations. The positions and some possible results are as follows:


1. Bank of America Corp.  
07/30/2012 Bought 1,000 BAC shares @ $7.29
08/01/2012 Sold 10 BAC Aug2012 $7.00 Call Options @ $.44
Note: the price of BAC was $7.34 today when these options were sold.

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $7,281.05
= ($7.29*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$423.55 = ($.44*1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BAC assigned at $7.00 upon expiration): -$298.95
=+($7.00-$7.29)*1,000 - $8.95 commissions

Total Net Profit(If BAC assigned at $7.00 at Aug2012 expiration): +$124.60
= (+$423.55 +$0.00 -$298.95)

Absolute Return (If BAC assigned at $7.00 at Aug2012 expiration): +1.7%
= +$124.60/$7,281.05
Annualized Return (If stock assigned): +32.9%
= (+$124.60/$7,281.05)*(365/19 days)


2. iShares MSCI South Korea ETF
07/30/2012 Bought 500 EWY shares @ $54.51
08/01/2012 Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.

Two possible overall performance results (including commissions) for this iShares MSCI South Korea ETF covered calls position is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$687.30
= 500*$1.40 - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY price unchanged at $54.51): -$8.95
= ($54.51-$54.51)*500 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $56.00): +$736.05
= ($56.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $54.51): +$678.35
= (+$687.30 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $56.00): +$1,423.35
= (+$687.30 +$0.00 +$736.05)

Absolute Return if Unchanged at $54.51: +2.5%
= +$678.35/$27,263.95
Annualized Return If Unchanged (ARIU): +47.8%
= (+$678.35/$27,263.95)*(365/19 days)

Absolute Return if Assigned at $56.00: +5.2%
= +$1,423.35/$27,263.95
Annualized Return If Assigned (ARIA): +100.3%
= (+$1,423.35/$27,263.95)*(365/19 days)


3. Market Vectors Russia ETF
07/30/2012 Bought 600 RSX shares @ $26.59
08/01/2012 Sold 6 RSX Aug2012 $27.00 Call Options @ $.55
Note: the price of RSX was $26.70 today when these options were sold.

Two possible overall performance results (including commissions) for this Market Vectors Russia ETF covered calls position is as follows:
Stock Purchase Cost: $15,962.95
= ($26.59*600+$8.95 commission)

Net Profit:
(a) Options Income: +$316.55
= 600*$.55 - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If RSX price unchanged at $26.59): -$8.95
= ($26.59-$26.59)*600 - $8.95 commissions
(c) Capital Appreciation (If RSX assigned at $27.00): +$237.05
= ($27.00-$26.59)*600 - $8.95 commissions

Total Net Profit(If RSX price unchanged at $26.59): +$307.60
= (+$316.55 +$0.00 -$8.95)
Total Net Profit(If RSX assigned at $27.00): +$553.60
= (+$316.55 +$0.00 +$237.05)

Absolute Return if Unchanged at $26.59: +1.9%
= +$307.60/$15,962.95
Annualized Return If Unchanged (ARIU): +37.0%
= (+$307.60/$15,962.95)*(365/19 days)

Absolute Return if Assigned at $27.00: +3.5%
= +$553.60/$15,962.95
Annualized Return If Assigned (ARIA): +66.6%
= (+$553.60/$15,962.95)*(365/19 days)

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