The Covered Calls Advisor Portfolio (CCAP) contained eleven positions with June 2013 expirations. A summary of the results is as follows:
- Nine positions (Apple Inc., Barrick Gold Corp., Fluor Corporation, Fusion-io Inc., Hertz Global Holdings Inc., iShares MSCI China ETF, Potash Corp of Saskatchewan Inc., Tesoro Corporation, and Transocean Inc.) had their options expire yesterday since the stock prices closed below the Jun2013 options' strike prices. So now, the Covered Calls Advisor Portfolio (CCAP) is long shares in these nine equities. A decision will be made during this week to either sell these shares or to continue with these equities by establishing covered calls positions by selling Jul2013 call options. When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day with the transaction details.
- The other two covered calls positions (Prudential Financial Inc. and Symantec Corp.) were closed out upon Jun2013 options expiration since the stocks closed above the strike prices. Hence, the options expired and the accompanying equities were assigned at their respective strike prices.
The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls positions are established. These transactions will be posted on this blog the same day they occur.
The annualized return-on-investment financial results for these two closed positions are:
Prudential Financial Inc. = +26.6%
Symantec Corp. = +47.3%
With only two of eleven positions being closed out, this was a difficult month. This result occurred primarily as a result of the precipitous market decline on Wednesday and Thursday this week when Bernanke announced the likely future tapering (and ultimate elimination) of Fed's Treasury bond buying stimulus program.
The detailed transactions history and results for the two closed positions are provided below.
1. Prudential Financial Inc. (PRU) -- Closed
The transactions history was as follows:
05/31/2013 Sold 3 Prudential Financial Inc. (PRU) Jun2013 $67.50 Put Options @ $1.12
Note: the price of PRU was $69.02 today when these Puts were sold.
06/22/2013 PRU Jun2013 options expired
Note: the price of PRU stock was $71.55 upon Jun2012 options expiration.
The Covered Calls Advisor does not use margin, so the detailed information on this position and the results shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.
The overall performance result(including commissions) for this PRU transaction was as follows: 100% Cash-Secured Cost Basis: $20,250.00 = $67.50*300
(a) Options Income: +$324.80
= ($1.12*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (PRU remained above $67.50 strike price at Jun2013 expiration): +$0.00
= ($67.50-$67.50)*300 shares
Total Net Profit (PRU remained above $67.50 strike price at Jun2013 options expiration): +$324.80
= (+$324.80 +$0.00 +$0.00)
Absolute Return (PRU above $67.50 at Jun2013 options expiration and Put options thus expire worthless): +1.6%
Annualized Return (PRU stock price above $67.50 at expiration): +26.6%
= (+$324.80/$20,250.00)*(365/22 days)
2. Symantec Corp. (SYMC) -- Closed
This position was an example of the "Early Assignment or Dividend Capture Strategy". The details of this strategy as applied to this covered calls position is described here (see "link ") on the day the position was established. As shown below, the Dividend Capture occurred in this instance. Although there was only $.07 time value remaining at market close the day prior to the ex-dividend date, and thus the time value was less than the $.15 dividend, the calls options were not exercised to capture the dividend. So, the Covered Calls Advisor retained the shares and captured the dividend.
The transactions were as follows:
06/12/2013 Bought 500 SYMC shares @ $22.19
06/12/2013 Sold 5 SYMC Jun2013 $22.00 Call Options @ $.40
06/17/2013 Ex-dividend of $.15 per share
06/22/2013 5 SYMC call options assigned and stock sold at $22.00 strike price
Note: the price of SYMC was $22.23 at the market close yesterday (options expiration Friday)
The overall performance result (including commissions) for this Symantec Corp (SYMC) covered calls position was as follows:
Stock Purchase Cost: $11,103.95
= ($22.19*500+$8.95 commission)
(a) Options Income: +$187.30 = ($.40*500 shares) - $12.70 commissions
(b) Dividend Income: +$75.00
= ($.15 dividend per share x 500 shares)
(c) Capital Appreciation (Stock assigned at $22.00 at Jun2013 expiration): -$103.95
= +($22.00-$22.19)*500 - $8.95 commissions
Total Net Profit (Stock assigned at $22.00 at Jun2013 expiration): +$158.35
= (+$187.30 +$75.00 -$103.95)
Absolute Return (SYMC stock assigned at $22.00 at Jun2013 expiration): +1.4%
Annualized Return: +47.3%
= (+$158.35/$11,103.95)*(365/11 days);