Tuesday, January 8, 2013

Establish Covered Calls Position in iShares MSCI China ETF

Today, a new covered calls position was established in iShares MSCI China ETF (FXI) with a Jan2012 options expiration. The positions and some possible results are as follows:

iShares MSCI China ETF (Ticker Symbol FXI) -- New Covered Calls Position
The transactions were as follows:
1/08/2013 Bought 1,000 FXI shares @ $40.619
1/08/2013 Sold 10 FXI Jan2013 $40.00 Call Options @ $.92

A possible overall performance result (including commissions) for this iShares MSCI China ETF covered calls position is as follows:
Stock Purchase Cost: $40,627.95
= ($40.619*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$903.55
= 1,000*$.92 - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $40.00): -$627.95
= ($40.00-$40.619)*1,000 - $8.95 commissions

Total Net Profit (If FXI assigned at $40.00): +$275.60
= (+$903.55 +$0.00 -$627.95)

Absolute Return if Assigned at $40.00: +0.7%
= +$275.60/$40,627.95
Annualized Return If Assigned (ARIA): +20.6%
= (+$275.60/$40,627.95)*(365/12 days)

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