Thursday, October 25, 2012

Established Mylan Inc. Covered Calls

Today, a new covered calls position was established in Mylan Inc. (ticker symbol MYL) with a Nov2012 expiration and at the $24.00 strike price. The transactions are as follows:
10/24/2012 Bought 1,000 MYL shares @ $23.88
10/25/2012 Sold 10 MYL Nov2012 $24.00 Call Options @ $.65
Note: the price of MYL shares was $24.36 today when these options were sold.

A possible overall performance result (including commissions) for this Mylan Inc. (MYL) covered calls position is as follows:
Stock Purchase Cost: $23,888.95
= ($23.88*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$633.55
= ($.65 X 1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MYL price unchanged at $23.88 upon expiration): -$8.95
=+($23.88-$23.88)*1,000 - $8.95 commissions; OR
(c) Capital Appreciation (If MYL assigned at $24.00 upon expiration): +$111.05
=+($24.00-$23.88)*1,000 - $8.95 commissions

Total Net Profit (If MYL price unchanged at $23.88 at Nov2012 expiration): +$624.60
= (+$633.55 +$0.00 -$8.95); OR
Total Net Profit (If MYL assigned at $24.00 at Nov2012 expiration): +$744.60
= (+$633.55 +$0.00 +$111.05)

1. Absolute Return (If MYL unchanged at $23.88 at Nov2012 expiration): +2.6%
= +$624.60/$23,888.95
Annualized Return (If stock assigned): +38.2%
= (+$624.60/$23,888.95)*(365/25 days); OR

2. Absolute Return (If MYL assigned at $24.00 at Nov2012 expiration): +3.1% = +$744.60/$23,888.95
Annualized Return (If stock assigned): +45.5%
= (+$744.60/$23,888.95)*(365/25 days)

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