Monday, October 22, 2012

Continuation -- iShares MSCI South Korea ETF

After Oct2012 options expiration last Friday, two long uncovered stock positions (Apple Inc. and iShares MSCI South Korea ETF) remained in the Covered Calls Advisor Portfolio (CCAP) for which decisions remained to either sell the stocks or to re-establish covered calls positions. This morning, a decision was made to retain the iShares MSCI South Korea ETF (symbol EWY) and to re-establish a covered calls position with a Nov2012 expiration and at the $58.00 strike price. The detailed transactions history for this EWY position as well as a possible overall performance result is as follows:

iShares MSCI South Korea ETF (EWY) -- Continuation
This past Friday, the Oct2012 covered calls position in iShares MSCI South Korea ETF was closed out. Today, with iShares MSCI South Korea ETF (EWY) trading at $58.34, a covered calls position was established by selling the Nov2012 $58.00 calls.

The transactions history for this ongoing EWY covered calls position is as follows:
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.
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.
10/20/2012 EWY Oct2012 call options expired
Note: price of EWY was $57.43 at the close on Oct2012 options expiration Friday.
10/22/2012 Sell-to-Open 5 EWY Nov2012 $58.00 Call Options at $1.56
Note: the price of EWY was $58.34 when this transaction was made.


A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,089.20
= ($1.40-$1.68+$2.03-$2.90+$1.87+$1.56)*500 shares - 4*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $58.00): +$1,736.05
= ($58.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY assigned at $58.00): +$2,825.25
= (+$1,089.20 +$0.00 +$1,736.05)

Absolute Return if Assigned at $58.00: +10.4%
= +$2,825.25/$27,263.95
Annualized Return If Assigned (ARIA): +34.4%
= (+$2,825.25/$27,263.95)*(365/110 days)

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