Thursday, June 6, 2013

Established 100% Cash-Secured Puts -- iShares MSCI Emerging Markets ETF

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in iShares MSCI Emerging Markets ETF (Ticker Symbol EEM) with a Jul2013 expiration and at the $39.00 strike price.    As detailed below, this investment will provide a +2.0% absolute return in 41 days (which is equivalent to a +17.9% annualized return) if EEM closes at or above the $39.00 strike price at options expiration on July 19th.

The transaction was as follows:
06/10/2013 Sold 3 iShares MSCI Emerging Markets ETF  (EEM) Jul2013 $39.00 Put Options @ $.82
Note: the price of EEM was $40.20 today when these Puts were sold.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.

A possible overall performance results(including commissions) for this EEM transaction would be as follows:
100% Cash-Secured Cost Basis: $11,700.00 = $39.00*300

Net Profit:
(a) Options Income: +$234.80
= ($.82*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM remains above $39.00 at Jul2013 expiration): +$0.00
= ($39.00-$39.00)*300 shares

Total Net Profit (If EEM is above $39.00 strike price at Jul2013 options expiration): +$234.80  = (+$234.80 +$0.00 +$0.00)

Absolute Return (If EEM above $39.00 at Jul2013 options expiration and Put options thus expire worthless): +2.0%
= +$234.80/$11,700.00
Annualized Return (If stock price above $39.00 at expiration): +17.9%
= (+$234.80/$11,700.00)*(365/41 days)