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Wednesday, December 31, 2014

Established New Short 100% Cash-Secured Puts Position in Williams Companies Inc.

Today, the Covered Calls Advisor established a new position in Williams Companies Inc. (Symbol WMB) by selling 3 Jan2015 $44.00 Put options. The transaction and a potential return-on-investment result is:

1.  Williams Companies Inc. (WMB) -- New Position
The transaction was as follows:
12/31/2014 Sold 3 Williams Companies Inc. Jan2015 $44.00 Puts @ $.90
Note: The price of WMB was $44.96 when this transaction was executed.

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 result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $13,200.00
= $44.00*300
Note:  the price of WMB was $44.96 when these Put options were sold.

Net Profit:
(a) Options Income: +$258.80
= ($.90*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If WMB is above $44.00 strike price at Jan2015 expiration): +$0.00
= ($44.00-$44.00)*300 shares

Total Net Profit (If WMB is above $44.00 strike price at Jan2015 options expiration): +$258.80 
= (+$258.80 +$0.00 +$0.00)

Absolute Return (If WMB is above $44.00 strike price at Jan2015 options expiration): +2.0%
= +$258.80/$13,200.00
Annualized Return (If WMB above $44.00 at expiration): +39.8%
= (+$258.80/$13,200.00)*(365/18 days)

The downside 'breakeven price' at expiration is at $43.10 ($44.00 - $.90), which is 4.1% below the current market price of $44.96.
The 'crossover price' at expiration is $45.86 ($44.96 + $.90).  This is the price above which it would have been more profitable to simply buy-and-hold WMB until Jan 16th (the Jan2015 options expiration date) rather than investing in these short Put options.

Monday, December 29, 2014

Established New Short 100% Cash-Secured Puts Position in iShares China Large-Cap ETF

The Covered Calls Advisor is late in posting this position, which was established a week ago on the Monday after Dec2014 options expiration.  A new position was established in iShares China Large-Cap ETF (Symbol FXI) by selling 4 Jan2015 $40.00 Put options.
The details of the associated transaction and a potential return-on-investment result is:

1. iShares China Large-Cap ETF (FXI) -- New Position
The transaction was as follows:
12/22/2014 Sold 4 iShares China Large-Cap ETF Jan2015 $40.00 Puts @ $.75
Note: The price of FXI was approximately $41.06 when this transaction was executed.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $16,000.00
= $40.00*400
Note:  the price of FXI was $41.06 when these Put options were sold.

Net Profit:
(a) Options Income: +$288.05
= ($.75*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI is above $40.00 strike price at Jan2015 expiration): +$0.00
= ($40.00-$40.00)*400 shares

Total Net Profit (If FXI is above $40.00 strike price at Jan2015 options expiration):+$288.05  = (+$288.05 +$0.00 +$0.00)

Absolute Return (If FXI is above $40.00 strike price at Jan2015 options expiration): +1.8% = +$288.05/$16,000.00
Annualized Return (If FXI above $40.00 at expiration): +25.3%
= (+$288.05/$16,000.00)*(365/26 days)

The downside 'breakeven price' at expiration is at $39.25 ($40.00 - $.75), which is 4.4% below the current market price of $41.06.
The 'crossover price' at expiration is $41.81 ($41.06 + $.75).  This is the price above which it would have been more profitable to simply buy-and-hold FXI until Jan 16th (the Jan2015 options expiration date) rather than investing in these short Put options.

Established Continuing Covered Calls Position in iShares MSCI Germany ETF

On Friday, three Jan2015 $28.00 call options were sold against the 300 long iShares MSCI Germany ETF shares (ticker symbol EWG).

The transactions to date for this position and a potential return-on-investment result are detailed below:

iShares MSCI Germany ETF (EWG) -- Continuation
The transactions are as follows:
12/02/2014 Sold 3 iShares MSCI Germany ETF Dec2014 $29.00 Puts @ $.70
Note: The price of EWG was $28.57 when this transaction was executed.
12/26/2014 Sold 3 EWG Jan2015 Call options @ $.60

Note: the price of EWG was $28.24 when these options were sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,700.00
= $29.00*300
Note:  the price of EWG was $28.57 when these Put options were sold.

Net Profit:
(a) Options Income: +$367.60
= ($.70+$.60)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWG is above $28.00 strike price at Jan2015 expiration): -$308.95
= ($28.00-$29.00)*300 shares - $8.95 commissions

Total Net Profit (If EWG is above $28.00 strike price at Jan2015 options expiration):+$58.65 
= (+$367.60 +$0.00 -$308.95)

Absolute Return (If EWG is above $28.00 strike price at Jan2015 options expiration): +0.7%
= +$58.65/$8,700.00
Annualized Return (If EWG above $28.00 at expiration): +5.5%
= (+$58.65/$8,700.00)*(365/45 days)

Saturday, December 20, 2014

December 2014 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained seven positions with December 2014 expirations.  The results are as follows:

- Four of the seven positions (Baidu Inc., two iShares MSCI China ETF positions, and Micron Technology Inc.) were closed out at expiration. This was the optimal result for these positions in that the maximum potential return-on-investment (ROI) results was achieved from when each of these positions was established.  The annualized ROI for these closed positions are:

Baidu Inc. = +1.4% absolute return (equivalent to +25.8% annualized return for the 20 days holding period)
iShares MSCI China ETF (FXI position #1)  = +3.2% absolute return (equivalent to +19.5% annualized return for the 60 days holding period)
iShares MSCI China ETF (FXI position #2) = +3.6% absolute return (equivalent to +64.8% annualized return for the 20 days holding period)
Micron Technology Inc. = +4.1% absolute return (equivalent to +28.8% annualized return for the 52 days holding period)

The detailed transactions history and results for each of these positions is detailed below. The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established.

- Three of the seven positions (Agnico Eagle Mines, Goldcorp, and iShares MSCI Gemany ETF) ended at expiration with the price of the stocks below the strike prices.  So the respective options expired and the long shares were retained in the Covered Calls Advisor Portfolio.  A decision will be made soon to either sell these shares or to establish a covered calls position by selling Jan2015 call options against the current long stock holdings. When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day along with the detailed transactions to-date for each stock position.

Details of the four closed positions summarized above and the associated return-on-investment results are as follows:

1. Baidu Inc. (BIDU) -- Closed
The transactions were as follows:
12/02/2014 Sold 1 out-of-the-money Dec2014 $230.00 Put @ $3.35
Note: The price of Baidu was $237.38 when this transaction was executed.
12/19/2014 BIDU Dec2014 $230.00 Put option expired.
Note: the price of BIDU was $234.23 upon Dec2014 options expiration.

The overall performance result (including commissions) for this Baidu transaction was as follows:
100% Cash-Secured Cost Basis: $23,000.00 = $230.00*100
Note:  the price of BIDU was $237.38 when the Put option was sold.

Net Profit:
(a) Options Income: +$325.30
= ($3.35*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (BIDU closed above $230.00 at the Dec2014 options expiration): +$0.00
= ($230.00-$230.00)*100 shares

Total Net Profit (BIDU was above $230.00 strike price at Dec2014 options expiration): +$325.30 
= (+$325.30 +$0.00 +$0.00)

Absolute Return (BIDU Put option expired worthless since the stock was above the strike price at options expiration): +1.4%
= +$325.30/$23,000.00
Annualized Return: +25.8%
= (+$325.30/$23,000.00)*(365/20 days)


2. iShares MSCI China Large-Cap ETF (FXI) -- 1st Position Closed
The transactions were as follows:
10/22/2014 Sold 4 iShares MSCI China ETF Dec2014 $38.00 Puts @ $1.25
Note: The price of FXI was $38.48 when this transaction was executed.
12/19/2014 FXI Dec2014 $38.00 Put options expired.
Note: the price of FXI was $40.26 upon Dec2014 options expiration.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis:
$15,200.00 = $38.00*400
Note: the price of FXI was $38.48 when these Put options were sold.

Net Profit:
(a) Options Income: +$488.05 = ($1.25*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI was above $38.00 at Dec2014 expiration): +$0.00
= ($38.00-$38.00)*400 shares

Total Net Profit (FXI closed above $38.00 strike price at Dec2014 options expiration): +$488.05
= (+$488.05 +$0.00 +$0.00)

Absolute Return-on-Investment: (FXI was above $38.00 at Dec2014 options expiration and Put options thus expired worthless): +3.2%
= +$488.05/$15,200.00
Annualized Return: +19.5%
= (+$488.05/$15,200.00)*(365/60 days)


3. iShares MSCI China Large-Cap ETF (FXI) -- 2nd Position Closed
The transaction was as follows:
12/01/2014 Sold 4 iShares China Large-Cap ETF Dec2014 $40.00 Puts @ $1.45
Note: The price of FXI was $39.44 when this transaction was executed.
12/19/2014 FXI Dec2014 $40.00 Put options expired.
Note: the price of FXI was $40.26 upon Dec2014 options expiration.

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 four Put options sold.

The overall performance result (including commissions) for this transaction was:
100% Cash-Secured Cost Basis:
$16,000.00 = $40.00*400
Note: the price of FXI was $39.44 when these Put options were sold.

Net Profit:
(a) Options Income: +$568.05
= ($1.45*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation (FXI was above $40.00 strike price at Dec2014 expiration): +$0.00
= ($40.00-$40.00)*400 shares

Total Net Profit (FXI was above $40.00 strike price at Dec2014 options expiration): +$568.05
= (+$568.05 +$0.00 +$0.00)

Absolute Return (FXI was above $40.00 strike price at Dec2014 options expiration, so the Put options expired worthless): +3.6%
= +$568.05/$16,000.00
Annualized Return: +64.8%
= (+$568.05/$16,000.00)*(365/20 days)


4.  Micron Technology Inc. (MU) -- Closed
The transaction is as follows:
10/30/2014 Sold 4 Micron Technology Inc. Dec2014 $30.00 Puts @ $1.26
Note: The price of Micron was $31.22 when this transaction was executed.
12/19/2014 MU Dec2014 $30.00 Put option expired.
Note: the price of MU was $34.49 upon Dec2014 options expiration.


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 four Put options sold.

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $12,000.00
= $30.00*400
Note:  the price of Micron was $31.22 when these Put options were sold.

Net Profit:
(a) Options Income: +$492.05
= ($1.26*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MU was above $30.00 at Dec2014 expiration): +$0.00
= ($30.00-$30.00)*400 shares

Total Net Profit (MU was above $30.00 strike price at Dec2014 options expiration): +$492.05 
= (+$492.05 +$0.00 +$0.00)

Absolute Return-on-Investment:: +4.1%
= +$492.05/$12,000.00
Annualized Return: +28.8%
= (+$492.05/$12,000.00 )*(365/52 days)

Friday, December 19, 2014

U.S. Stocks -- Overvaluation Alert

The Covered Calls Advisor uses five primary valuation metrics to get a general sense of whether, at any given time, the U.S. stock market is relatively undervalued, fairly valued, or overvalued. All five of these indicators are now signaling that the U.S. stock market is now overvalued.

1. P/E Ratio -- The current trailing twelve months Price-to-Earnings Ratio for the S&P 500 is 19.0, which is 31% higher than the historic average of 14.5.
2. P/S Ratio -- The current Price-to-Sales Ratio for the S&P 500 is 1.8, which is 29% above the historic average of 1.4.
3. NYSE Margin Debt -- Very close to highest ever historic value.
4. Corporate Profit Margins -- Current trailing twelve month operating profit margins are 10.1%, which is two standard deviations above the long term historic average of 6.5%.
 5. Total Stock Market-to-Gross National Product -- This is Warren Buffett's favorite valuation indicator of the overall stock market. The total stock market valuation is measured by the total market capitalization of the Wilshire 5000 stock index. This indicator is now at 119.1% which is 2 standard deviations above the historic mean of 71.3%. There has been only one other occasion (during the dotcom bubble in 2000) in the past 50 years when this indicator was so far above the historic average.

The current Overall Market Meter rating for the U.S. stock market is NEUTRAL.  But this rating includes macroeconomic, momentum, and growth factors in addition to valuation measures (like those shown above). Today is December 2014 options expiration.  Normally, with a Neutral rating, the Covered Calls Advisor would on-average sell 1% out-of-the-money covered calls for the next month (in this case for Jan2015).  However, the five metrics above clearly indicate that we are now at an extremely high valuation in the U.S. stock market; so much so that the Covered Calls Advisor's portfolio strategy will be adjusted to reflect this more cautious outlook.  So, positions established for the Jan2015 expiration will be hedged to a greater extent, so that a profit could still be generated even if a market pullback occurs during this next month.  The positions will be conservative ones with about 85% moderately deep-in-the-money Covered Calls (and/or short their synthetically equivalent 100% cash-secured Puts) and an approximately 15% short position in the S&P 500 index -- ProShares Short S&P 500 Index (ticker symbol SH).  The long position in SH was established today with the purchase of 1,000 shares at $21.68 per share.  

Please contact me at the email address shown in the right sidebar with any comments or questions.

Godspeed and Merry Christmas,
Jeff
     

Wednesday, December 17, 2014

Early Assignment of Covered Calls Position in iShares MSCI South Korea Capped ETF

Today prior to market open, my broker informed me that the 3 Dec2014 call options in iShares MSCI South Korea Capped ETF were assigned, so the 300 shares of EWY were sold at the $55.00 strike price.  The owner of these calls exercised their option yesterday to obtain the 300 shares on the day prior to today's ex-dividend date for EWY to capture the $.67 distribution.  As detailed below, this investment yielded a modest +0.3% absolute return in 54 days (which is equivalent to a +2.2% annualized return-on-investment).


1. iShares MSCI South Korea Capped ETF -- Closed
10/24/2014  Bought 300 shares EWY at $56.68
10/24/2014  Sold 3 EWY Dec2014 $55.00 Call options at $1.93
12/17/2014  Early Assignment -- Sold 300 shares EWY at $55.00 strike price

The performance result (including commissions) for this South Korea ETF position was as follows:
Stock Purchase Cost: $16,995.05
= ($56.68*300+$8.95 commission)

Net Profit:
(a) Options Income: +$567.80
= 300 * $1.93 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HAL sold at $49.90) = -$512.95
= ($55.00-$56.68)*300 - $8.95 commissions

Total Net Profit: +$54.85
= (+$567.80 +$0.00 -$512.95)

Absolute Return: +0.3%
= +$54.85/$16,995.05
Annualized Return: +2.2%
= (+$54.85/$16,995.05)*(365/54 days)

Tuesday, December 16, 2014

Established a 100% Cash-Secured Puts Position in Alibaba Group ADR

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Alibaba Group ADR (Ticker Symbol BABA) with a Jan2015 expiration and at the $100.00 strike price.  As detailed below, this investment will provide a +2.5% absolute return in 33 days (which is equivalent to a +28.2% annualized return) if Alibaba closes at or above $100.00 at options expiration on January 16th.

Details of this transaction along with a potential return-on-investment result are: 

Alibaba Group  (Ticker BABA)
The transaction is as follows:
12/16/2014 Sold 2 out-of-the-money Jan2015 $100.00 Put options @ $2.60
Note: The price of Alibaba stock was $105.51 when this transaction was executed.

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 two Put options sold.

A possible overall performance result (including commissions) for this Alibaba transaction would be as follows:
100% Cash-Secured Cost Basis: $20,000.00 = $100.00*200
Note:  the price of Alibaba was $105.51 when the Put options were sold.

Net Profit:
(a) Options Income: +$509.55
= ($2.60*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Alibaba closes above $100.00 at the Jan2015 options expiration): +$0.00
= ($100.00-$100.00)*200 shares

Total Net Profit (If Alibaba is above $100.00 strike price at Jan2015 options expiration): +$509.55 
= (+$509.55 +$0.00 +$0.00)

Absolute Return (If Alibaba is above $100.00 at Jan2015 options expiration and Put options thus expire worthless): +2.5%
= +$509.55/$20,000.00
Annualized Return (If Alibaba is above $100.00 at expiration): +28.2%
= (+$509.55/$20,000.00)*(365/33 days)

The downside 'breakeven price' at expiration is at $97.40 ($100.00 - $2.60), which is 7.7% below the current market price of $105.51.
The 'crossover price' at expiration is $108.11 ($105.51 + $2.60).  This is the price above which it would have been more profitable to simply buy-and-hold Alibaba stock until January 16th (the Jan2015 options expiration date) rather than holding this short Puts option position.

Friday, December 12, 2014

Established Covered Calls Position -- Halliburton Co.


Today, a new covered calls position was established in Halliburton Co.  (Ticker Symbol HAL).  This Halliburton position was established at the $40.00 strike price and with a Jan2015 options expiration.  As shown below, this investment will provide a +3.2% absolute return in 37 days (which is equivalent to a +31.6% annualized return) if Halliburton stock closes at its current price of $37.59 at options expiration on Jan 16th.
The details of the associated transactions and two potential return-on-investment results are as follows:

1. Halliburton Co. (HAL)
The transactions were as follows:
12/12/2014 Bought 300 HAL shares @ $37.59
12/12/2014 Sold 3 HAL Jan2015 $40.00 Call Options @ $1.30
Note: the price of HAL was $37.59 today when these options were sold.

A possible overall performance result (including commissions) for these Halliburton covered calls is as follows:
Stock Purchase Cost: $11,285.95
= ($37.59*300+$8.95 commission)

Net Profit:
(a) Options Income: +$378.80
= 300*$1.30 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HAL unchanged at $37.59 at Jan2015 options expiration) = -$8.95
= ($37.59-$37.59)*300 - $8.95 commissions; OR
(c) Capital Appreciation (If HAL assigned at $40.00) = +$714.05
= ($40.00-$37.59)*300 - $8.95 commissions

Total Net Profit (If HAL unchanged at $37.59 at Jan2015 options expiration): +$361.85
= (+$370.80 +$0.00 -$8.95); OR
Total Net Profit (If HAL assigned at $40.00): +$1,084.85
= (+$370.80 +$0.00 +$714.05)

1. Absolute Return (If HAL unchanged at $37.59 at Jan2015 options expiration): +3.2%
= +$361.85/$11,285.95
Annualized Return If Assigned (ARIA): +31.6%
= (+$361.85/$11,285.95)*(365/37 days); OR
2. Absolute Return if Assigned (at $40.00 strike price): +9.6%
= +$1,084.85/$11,285.95
Annualized Return If Assigned (ARIA): +94.8%
= (+$1,084.85/$11,285.95)*(365/37 days)

The downside 'breakeven price' at expiration is at $36.29 ($37.59 - $1.30), which is 3.5% below the current market price of $37.59.
The 'crossover price' at expiration is $38.89 ($37.59 + $1.30). This is the price above which it would have been more profitable to simply buy-and-hold HAL stock until January 16th (the Jan2015 options expiration date) rather than establish this covered calls position.

Tuesday, December 9, 2014

Established a 100% Cash-Secured Puts Position in AT&T Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in AT&T Inc.(Ticker Symbol T) with a Jan2015 expiration and at the $32.00 strike price.  As detailed below, this investment will provide a +2.0% absolute return in 40 days (which is equivalent to a +18.5% annualized return) if AT&T closes at or above $32.00 at options expiration on January 16th.

Details of this transaction along with a potential return-on-investment result are: 

AT&T Inc. (Symbol T)
The transaction is as follows:
12/09/2014 Sold 4 out-of-the-money Jan2015 $32.00 Put options @ $.68
Note: The price of AT&T was $32.77 when this transaction was executed.

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 two Put options sold.

A possible overall performance result (including commissions) for this AT&T transaction would be as follows:
100% Cash-Secured Cost Basis: $12,800.00 = $32.00*400
Note:  the price of AT&T was $32.77 when the Put options were sold.

Net Profit:
(a) Options Income: +$260.05
= ($.68*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AT&T closes above $32.00 at the Jan2015 options expiration): +$0.00
= ($32.00-$32.00)*400 shares

Total Net Profit (If AT&T is above $32.00 strike price at Jan2015 options expiration): +$260.05 
= (+$260.05 +$0.00 +$0.00)

Absolute Return (If AT&T is above $32.00 at Jan2015 options expiration and Put options thus expire worthless): +2.0%
= +$260.05/$12,800.00
Annualized Return (If AT&T is above $32.00 at expiration): +18.5%
= (+$260.05/$12,800.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $31.32 ($32.00 - $.68), which is 4.4% below the current market price of $32.77.
The 'crossover price' at expiration is $33.45 ($32.77 + $.68).  This is the price above which it would have been more profitable to simply buy-and-hold AT&T Inc. stock until January 16th (the Jan2015 options expiration date) rather than holding this short Puts option position.
Note: the stock price will decrease by the amount of the quarterly dividend upon the opening of the market on the ex-dividend date.  Although the quarterly dividend for Jan2015 has not yet been declared, it is likely that the ex-div date will be January 6th and the amount will be approximately $.46.

Established a 100% Cash-Secured Put Position in Google Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Google Inc. (Ticker Symbol GOOG) with a Jan2015 expiration and at the $530.00 strike price.  As detailed below, this investment will provide a +3.4% absolute return in 40 days (which is equivalent to a +31.2% annualized return) if Google closes at or above $530.00 at options expiration on Jan 16th.

Details of this transaction along with a potential return-on-investment result are: 

Google Inc. (GOOG)
The transaction is as follows:
12/09/2014 Sold 1 Jan2015 $530.00 Put @ $18.20
Note: The price of Google was $522.64 when this transaction was executed.

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 one Put option sold.

A possible overall performance result (including commissions) for this Google transaction would be as follows:
100% Cash-Secured Cost Basis: $53,000.00
= $530.00*100
Note:  the price of GOOG was $522.64 when the Put option was sold.

Net Profit:
(a) Options Income: +$1,810.30
= ($18.20*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GOOG closes above $530.00 at Jan2015 expiration): +$0.00
= ($530.00-$530.00)*100 shares

Total Net Profit (If GOOG is above $530.00 strike price at Jan2015 options expiration): +$1,810.30 
= (+$1,810.30 +$0.00 +$0.00)

Absolute Return (If GOOG is above $530.00 at Jan2015 options expiration and Put option thus expires worthless): +3.4%
= +$1,810.30/$53,000.00
Annualized Return (If GOOG is above $530.00 at expiration): +31.2%
= (+$1,810.30/$53,000.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $511.80 ($530.00 - $18.20), which is 2.1% below the current market price of $522.64.
The 'crossover price' at expiration is $540.84 ($522.64 + $18.20).  This is the price above which it would have been more profitable to simply buy-and-hold Google Inc. stock until January 16th (the Jan2015 options expiration date) rather than holding this short Put option.

Continuation of Covered Calls Position in Agnico Eagle Mines Ltd.

Today, the covered calls position in Agnico Eagle Mines Ltd. (ticker symbol AEM) was continued by selling three Dec2014 $27.50 strike price Call options.  The transactions to date for this AEM position and two possible resulting return-on-investment results are as follows:

1.  Agnico Eagle Mines Ltd. (AEM) -- Continuation
The transactions are as follows:
09/24/2014 Sold 3 Oct2014 $30.00 Puts @ $1.10
Note: The price of Agnico Eagle was $30.03 when this transaction was executed.
10/17/2014 3 Oct2014 $30.00 Puts expired
Note: the price of AEM was $28.72 when these Puts expired
10/20/2014 Sold 3 Nov2014 $30.00 Calls @ $1.75
Note: the price of AEM was $29.55 when these options were sold.
11/21/2014 3 Nov2014 Call options expired
Note: the price of AEM was $26.64 today upon Nov2014 options expiration
12/09/2014 Sold 3 AEM Dec2014 $27.50 Call options @ $.35
Note: the price of AEM was $25.52 when these 3 Call options were sold.

Two possible overall performance results (including commissions) for this Agnico Eagle Mines transaction would be as follows:
100% Cash-Secured Cost Basis: $9,000.00 = $30.00*300
Note: the price of AEM was $30.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$911.40
= ($1.10+$1.75+$.35)*300 shares - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AEM close at current market price of $25.52 at Dec2014 expiration): -$1,344.00
= ($25.52-$30.00)*300 shares; OR
(c) Capital Appreciation (If AEM close above $27.50 at Dec2014 expiration): -$750.00
= ($27.50-$30.00)*300 shares

1.  Total Net Profit (If AEM closes at current market price of $25.52 at Dec2014 options expiration): -$432.60 
= (+$911.40 +$0.00 -$1,344.00); OR
2. Total Net Profit (If AEM is above $27.50 strike price at Dec2014 options expiration): +$161.40 
= (+$911.40 +$0.00 -$750.00)

1. Absolute Return (If AEM is at $25.52 current market price at Dec2014 options expiration and Call options thus expire worthless):  -4.8%
= -$432.60/$9,000.00
Annualized Return (If AEM is unchanged at $25.52 at Dec2014 expiration): -20.2%
= (-$432.60/$9,000.00)*(365/87 days); OR
2. Absolute Return (If AEM is above $27.50 strike price at Dec2014 options expiration and Call options are assigned): +1.8%
= +$161.40/$9,000.00
Annualized Return (If AEM is above $27.50 at Dec2014 expiration): +7.5%
= (+$161.40/$9,000.00)*(365/87 days)

Tuesday, December 2, 2014

Established Cash-Secured Puts Position in iShares MSCI Germany ETF

Today, 3 short Put options were sold in the iShares MSCI Germany ETF (Symbol EWG) for Dec2014 at the $29.00 strike price. This short-term bullish position was established for two primary reasons:
(1) the European markets should react positively if the expected monetary easing by the ECB takes place later this week; and
(2) Germany is ranked relatively high (6th of 22 countries) in the Covered Calls Advisor's current "Country Value Rankings": See http://coveredcallsadvisor.blogspot.com/2014/11/country-value-rankings.html

The details of the associated transaction and two potential return-on-investment results are presented below:

1. iShares MSCI Germany ETF (EWG) -- New Short 100% Cash-Secured Put Options Position
The transaction was as follows:
12/02/2014 Sold 3 iShares MSCI Germany ETF Dec2014 $29.00 Puts @ $.70
Note: The price of EWG was $28.57 when this transaction was executed.

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 result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,700.00
= $29.00*300
Note:  the price of EWG was $28.57 when these Put options were sold.

Net Profit:
(a) Options Income: +$198.80
= ($.70*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWG remains at current $28.57 price at Dec2014 expiration): -$129.00
= ($28.57-$29.00)*300 shares; or
(c) Capital Appreciation (If EWG is above $29.00 strike price at Dec2014 expiration): +$0.00
= ($29.00-$29.00)*300 shares

1. Total Net Profit (If EWG remains at current $28.57 price at Dec2014 expiration):+$69.80 
= (+$198.80 +$0.00 -$129.00); or
2. Total Net Profit (If EWG is above $29.00 strike price at Dec2014 options expiration):+$198.80 
= (+$198.80 +$0.00 +$0.00)

1. Absolute Return (If EWG remains at current $28.57 price at Dec2014 expiration): +0.8%
= +$69.80/$8,700.00
Annualized Return: +15.4%
= (+$69.80/$8,700.00)*(365/19 days); or

2. Absolute Return (If EWG is above $29.00 strike price at Dec2014 options expiration): +2.3%
= +$198.80/$8,700.00
Annualized Return (If EWG above $29.00 at expiration): +43.9%
= (+$198.80/$8,700.00)*(365/19 days)

The downside 'breakeven price' at expiration is at $28.30 ($29.00 - $.70), which is 0.9% below the current market price of $28.57.
The 'crossover price' at expiration is $29.27 ($28.57 + $.70).  This is the price above which it would have been more profitable to simply buy-and-hold EWG until Dec 19th (the Dec2014 options expiration date) rather than selling these short Put options.

Established New Short 100% Cash-Secured Puts Position in iShares China Large-Cap ETF

Yesterday, a new position was established in iShares China Large-Cap ETF (Symbol FXI) by selling 4 Dec2014 $40.00 Put options. As shown in the "CCAP Portfolio Holdings" section in the right sidebar, this is the second FXI short Put options position established with a Dec2014 options expiration.
 
The details of the associated transaction and two potential return-on-investment results are:

1. iShares China Large-Cap ETF (FXI) -- New Position
The transaction was as follows:
12/01/2014 Sold 4 iShares China Large-Cap ETF Dec2014 $40.00 Puts @ $1.45
Note: The price of FXI was $39.44 when this transaction was executed.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $16,000.00
= $40.00*400
Note:  the price of FXI was $39.44 when these Put options were sold.

Net Profit:
(a) Options Income: +$568.05
= ($1.45*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains at current $39.44 price at Dec2014 expiration): -$224.00
= ($39.44-$40.00)*400 shares; or
(c) Capital Appreciation (If FXI is above $40.00 strike price at Dec2014 expiration): +$0.00
= ($40.00-$40.00)*400 shares

1. Total Net Profit (If FXI remains at current $39.44 price at Dec2014 expiration):+$344.05 
= (+$568.05 +$0.00 -$224.00); or
2. Total Net Profit (If FXI is above $40.00 strike price at Dec2014 options expiration):+$568.05 
= (+$568.05 +$0.00 +$0.00)

1. Absolute Return (If FXI remains at current $39.44 price at Dec2014 expiration): +2.2%
= +$344.05/$16,000.00
Annualized Return: +39.2%
= (+$344.05/$16,000.00)*(365/20 days); or

2. Absolute Return (If FXI is above $40.00 strike price at Dec2014 options expiration): +3.6%
= +$568.05/$16,000.00
Annualized Return (If FXI above $40.00 at expiration): +64.8%
= (+$568.05/$16,000.00)*(365/20 days)

The downside 'breakeven price' at expiration is at $38.55 ($40.00 - $1.45), which is 2.3% below the current market price of $39.44.
The 'crossover price' at expiration is $40.89 ($39.44 + $1.45).  This is the price above which it would have been more profitable to simply buy-and-hold FXI until Dec 19th (the Dec2014 options expiration date) rather than investing in these short Put options.

Established a 100% Cash-Secured Put Position in Baidu Inc.

Yesterday, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Baidu Inc. ADR (Ticker Symbol BIDU) with a Dec2014 expiration and at the $230.00 strike price.  As detailed below, this investment will provide a 1.4+% absolute return in 20 days (which is equivalent to a +25.8% annualized return) if Baidu closes at or above $230.00 at options expiration on Dec 19th.

Details of this transaction along with a potential return-on-investment result are: 

Baidu Inc. (BIDU)
The transaction is as follows:
09/29/2014 Sold 1 out-of-the-money Oct2014 $230.00 Put @ $3.35
Note: The price of Baidu was $237.38 when this transaction was executed.

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 one Put option sold.

A possible overall performance result (including commissions) for this Baidu transaction would be as follows:
100% Cash-Secured Cost Basis: $23,000.00 = $230.00*100
Note:  the price of BIDU was $237.38 when the Put option was sold.

Net Profit:
(a) Options Income: +$325.30
= ($3.35*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BIDU closes above $230.00 at the Dec2014 options expiration): +$0.00
= ($230.00-$230.00)*100 shares

Total Net Profit (If BIDU is above $230.00 strike price at Dec2014 options expiration): +$325.30 
= (+$325.30 +$0.00 +$0.00)

Absolute Return (If BIDU is above $230.00 at Dec2014 options expiration and Put option thus expire worthless): +1.4%
= +$325.30/$23,000.00
Annualized Return (If BIDU is above $230.00 at expiration): +25.8%
= (+$325.30/$23,000.00)*(365/20 days)

The downside 'breakeven price' at expiration is at $226.65 ($230.00 - $3.35), which is 4.5% below the current market price of $237.38.
The 'crossover price' at expiration is $240.73 ($237.38 + $3.35).  This is the price above which it would have been more profitable to simply buy-and-hold Baidu Inc. stock until December 19th (the Dec2014 options expiration date) rather than holding this short Put option.

Monday, December 1, 2014

Continuation -- Goldcorp Inc. Covered Calls Position

At the Nov2014 options expiration, the $23.00 call options expired.  Today, the covered calls position was re-established at the $22.00 strike price by selling 3 Dec2014 call options in Goldcorp Inc. (ticker symbol GG).  As detailed below, this investment will provide an overall +3.0% absolute return in 81 days (which is equivalent to a +13.7% annualized return) if the stock closes at or above the $22.00 strike price at options expiration on December 19th.
The details of the associated transactions and a potential return-on-investment results are as follows:

1. Goldcorp Inc.(GG) -- Covered Calls Continuation Position

The transactions were as follows:
09/30/2014 Bought 300 GG shares @ $22.959
09/30/2013 Sold 3 GG Nov2014 $23.00 Call Options @ $1.13
Note: the price of GG was $23.04 when these options were sold.
11/21/2014 3 Nov2014 Call Options expired.
12/01/2014 Sold 3 GG Dec2014 $22.00 Calls @ $.53
Note: the price of Goldcorp was $21.15 when these call options were sold.

Two possible overall performance results (including commissions) for this Goldcorp Inc. (GG) covered calls position are as follows:
Stock Purchase Cost: $6,896.65
= ($22.959*300+$8.95 commission)

Net Profit:
(a) Options Income: +$475.60
= 300*($1.13+$.53) - 2*$11.20 commissions
(b) Dividend Income: +$30.00
= $.05 * 300 (monthly dividend) * 2 months
(c) Capital Appreciation (If GG price unchanged at $21.15 at options expiration in Dec2014): -$551.65
= ($21.15-$22.959)*300 - $8.95 commissions; or
(c) Capital Appreciation (If GG assigned at $22.00 at Dec2014 options expiration): -$296.65
= ($22.00-$22.959)*300 - $8.95 commissions

1. Total Net Profit (If GG unchanged at $21.15 at options expiration in Dec2014): -$46.05
= (+$475.60 +$30.00 -$551.65); or
2. Total Net Profit (If GG assigned at $22.00): +$208.95
= (+$475.60 +$30.00 -$296.65)

Two possible overall return-on-investments are:
1. Absolute Return (if GG price unchanged at $21.15 at Dec2014 expiration:): -0.7%
= -$46.05/$6,896.65
Annualized Return If Unchanged (ARIU): -3.0%
= (-$46.05/$6,896.65)*(365/81 days); or

2. Absolute Return if Assigned (at $22.00): +3.0%
= +$208.95/$6,896.65
Annualized Return If Assigned (ARIA): +13.7%
= (+$208.95/$6,896.65)*(365/81 days)

Sunday, November 30, 2014

Country Value Rankings

A comprehensive approach to asset allocation extends beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.). It should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leading advocate for developing a globally oriented value investing perspective to achieve investing outperformance.

The Covered Calls Advisor has developed a method for determining the relative investing worthiness of twenty countries and two regions around the world.  The "Country Value Rankings" table below is based on a weighted-average ranking system.  The eight factors used to calculate these rankings are as follows:














Today's results, shown in the table below, provides a value-oriented and objective framework that assists this advisor to make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's Portfolio.


From the chart above, the resulting overall market ratings for individual countries and regions are:
Very Bullish (Above 25 total points) -- None
Bullish (20-25 points) -- China, South Korea, Singapore, and Switzerland
Slightly Bullish (15-20 points) -- Taiwan, Russia, Sweden, and Hong Kong
Neutral (10-15 points) -- Germany, Australia, Malaysia, United Kingdom, Italy, U.S.A.,EurAsia, Emerging Markets, and Spain
Slightly Bearish -- Canada, France, Mexico, and Japan
Bearish -- South Africa
Very Bearish -- Brazil and India


Future investments in the Covered Calls Advisor Portfolio will be overweighted in these higher rated countries. It should also be noted that the U.S. is currently ranked 14th of the 24 ratings and the overall rating for the U.S. is Neutral.

This Country Value Rankings spreadsheet is detailed in terms of both the methodology used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please email your comments and questions (to the address in the top right sidebar of this blog). They are always welcomed.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,
Jeff

Wednesday, November 26, 2014

Established iShares MSCI South Korea Capped ETF Covered Calls

On Monday, a new covered calls position was established in iShares MSCI South Korea Capped ETF (ticker symbol EWY) at the $55.00 strike price and for the Dec2014 expiration as follows:

10/24/2014  Bought 300 shares EWY at $56.68
10/24/2014  Sold 3 EWY Dec2014 $55.00 Call options at $1.93

The return-on-investment for this position will not be reported until this position is closed since there will likely be an ex-dividend on Wednesday, Dec 17th which is two days prior to the Dec 19th expiration; and the announcement on the amount of the dividend will not occur until the day prior to the ex-dividend. 

General Electric Co. Position Closed

The Jan2015 covered calls position in the General Electric Company expired last Friday with the stock below the $24.00 strike price.  Today, the position was closed out by selling the 300 shares in the Covered Calls Advisor portfolio.  As detailed below, this investment yielded a +0.5% absolute return in 14 days (which is equivalent to a +45.4% annualized return-on-investment). The associated transactions and financial results are:

General Electric Company (GE) -- Closed

The transactions were as follows:
01/06/2015 Sold 4 General Electric Co Jan2015 $24.00 Puts @ $.34
Note: The price of GE was $24.00 when this transaction was executed.
01/20/2015 Sold 400 GE shares @ $23.84

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 four Put options sold.

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $9,600.00
= $24.00*400
Note:  the price of GE was $24.00 when these Put options were sold.

Net Profit:
(a) Options Income: +$124.05
= ($.34*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$72.95
= ($23.84-$24.00)*400 shares - $8.95 commission

Total Net Profit: +$51.10
= (+$124.05 +$0.00 -$72.95)

Absolute Return: +0.5%
= +$51.10/$9,600.00
Annualized Return: +13.9%
= (+$51.10/$9,600.00 )*(365/14 days)

Tuesday, November 25, 2014

November 2014 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained eleven positions with November 2014 expirations.  The results are as follows:

- Eight of the eleven positions (American Airlines, Baidu Ind., Chevron, EMC Inc., iShares MSCI China ETF, Google Inc., and Micron Technology Inc.) were closed out at expiration. This was the optimal result for these positions in that the maximum potential return-on-investment (ROI) results was achieved from when each of these postions was established.  The annualized ROI for these closed positions are:
American Airlines Group = +10.1% absolute return (equivalent to +60.4% annualized return for the 61 day holding period)
Baidu Inc. = +8.7% absolute return (equivalent to +57.4% annualized return for the 55 days holding period)
Chevron Corporation = +1.7% absolute return (equivalent to +11.9% annualized return for the 51 day holding period)
EMC Corp (position #1) = +2.2% absolute return (equivalent to +15.9% annualized return for the 51 days holding period)
EMC Corp (position #2) = +5.1% absolute return (equivalent to +39.9% annualized return for the 47 days holding period)
iShares MSCI China ETF = =1.7% absolute return (equivalent to +19.8% annualized return for the 31 days holding period)
Google Inc = -3.2% absolute return (equivalent to -20.5% annualized return for the 57 days holding period)
Micron Technology Inc. = +4.5% absolute return (equivalent to +35.1% annualized return for the 47 days holding period)

The detailed transactions history and results for each of these positions is detailed below. The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established.

- Three of the eleven positions (Agnico Eagle Mines, Goldcorp, and Halliburton) ended at expiration with the price of the stocks below the strike prices.  So the respective options expired and the long shares were retained in the Covered Calls Advisor Portfolio.  A decision will be made soon to either sell these shares or to establish a covered calls position by selling Dec2014 call options against the current long stock holdings. When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day along with the detailed transactions to-date for each stock position.

Details of the eight closed positions summarized above and the associated return-on-investment results are as follows:

1.  American Airlines Group (AAL) -- Closed
The transactions were as follows:
09/23/2014 Sold 4 Oct2014 $35.00 Puts @ $1.44
Note: The price of American Airlines was $35.03 when this transaction was executed.
10/17/2014 3 Oct2014 $35.00 Puts expired
Note: the price of AAL was $33.38 when these Puts expired
10/20/2014 Sold 3 Nov2014 $35.00 Calls @ $2.15
Note: the price of AAL was $34.50 when these options were sold.
11/21/2014 Nov2014 options closed in-the-money and the stock was assigned at the $35.00 strike price

The overall performance result (including commissions) for these AAL transactions was:
100% Cash-Secured Cost Basis: $14,000.00
= $35.00*400
Note: the price of AAL was $35.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$1,412.10
= ($1.44+$2.15) *400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (AAL closed above $35.00 at Nov2014 expiration): +$0.00
= ($35.00-$35.00)*400 shares

Total Net Profit (AAL above $35.00 strike price at Nov2014 options expiration):+$1,412.10
= (+$1,412.10 +$0.00 +$0.00)

Absolute Return (AAL was above $35.00 strike price at Nov2014 options expiration and Put options thus expired worthless): +10.1%
= +$1,412.10/$14,000.00
Annualized Return: +60.4%
= (+$1,412.10/$14,000.00)*(365/61 days)


2. Baidu Inc. (BIDU) -- Closed
The transactions were as follows:
09/29/2014 Sold 1 Oct2014 $215.00 Put @ $4.90
Note: The price of Bidu was $218.99 when this transaction was executed.
10/17/2014 1 Oct2014 $215.00 Put expired
Note: the price of Bidu was $211.73 when this Put option expired
10/20/2014 Sold 1 Nov2014 $220.00 Call @ $8.90
Note: the price of BIDU was $216.50 when this Call option were sold.
11/21/2014 The Nov2014 call options were in-the-money and the stock was assigned at the the $220 strike price.

The overall performance result (including commissions) for these BIDU  transactions would be as follows:
100% Cash-Secured Cost Basis: $21,500.00 = $215.00*100
Note: the price of BIDU was $218.99 when the Put option was sold.

Net Profit:
(a) Options Income: +$1,360.60
= ($4.90+$8.90) *100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (BIDU closed above $220.00 at Nov2014 expiration): +$500.00
= ($220.00-$215.00)*100 shares

Total Net Profit (BIDU closed above $220.00 strike price at Nov2014 options expiration):+$1,860.60 
= (+$1,360.60 +$0.00 +$500.00)

Absolute Return (BIDU closed above the$220.00 strike price at Nov2014 options expiration): +8.7%
= +$1,860.60/$21,500.00
Annualized Return: +57.4%
= (+$1,860.60/$21,500.00)*(365/55 days)


3.  Chevron Corporation (CVX) -- Closed
The transactions were as follows:
10/01/2014 Bought 300 CVX shares @ $118.54
10/01/2014 Sold 3 CVX Oct2014 $118.00 Call Options @ $2.14
Note: the price of CVX was $118.54 today when these options were sold.
10/17/2014 3 CVX Call options expired
10/22/2014 Sold 3 Nov2014 $115.00 Calls @ $2.40
Note: the price of CVX was $115.46 when these options were sold
11/21/2014 Nov2014 call options assigned since stock about $115.00 strike price

The overall performance result for this CVX position was as follows:
Stock Purchase Cost: $35,570.95
= ($118.54*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,339.60
= 300*($2.14+$2.40) - 2*$11.20 commissions
(b) Dividend Income: +$321.00 = $1.07 * 300 shares
(c) Capital Appreciation (CVX assigned at $115.00) = -$1,070.95
= ($115.00-$118.54)*300 - $8.95 commissions

Total Net Profit (CVX assigned at $115.00): +$589.65
= (+$1,339.60 +$321.00 -$1,070.95)

Absolute Return Upon Assignment (at $115.00): +1.7%
= +$589.65/$35,570.95
Annualized Return: +11.9%
= (+$589.65/$35,570.95)*(365/51 days)


4.  EMC Corp (EMC) -- Closed
The transactions were as follows:
10/02/2014 Bought 400 EMC shares @ $28.27
10/02/2014 Sold 4 EMC Oct2014 $28.00 Call Options @ $.75
Note: the price of EMC was $28.27 today when these options were sold.
10/17/2014 4 Oct12014 Call options expired
10/22/2014 Sold 4 EMC Nov2014 $27.50 Call Options @ $.46
Note: the price of EMC was $26.87 when these options were sold
11/21/2014 Nov2014 call options assigned since stock above $27.50 strike price

The performance result (including commissions) for these EMC covered calls is as follows:
Stock Purchase Cost: $11,316.95
= ($28.27*400+$8.95 commission)

Net Profit:
(a) Options Income: +$460.10
= 400*($.75+$.46) - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (EMC assigned at $27.50) = -$208.95
= ($27.50-$28.27)*400 - $8.95 commissions

Total Net Profit (EMC assigned at $27.50): +$251.15
= (+$460.10 +$0.00 -$208.95)

Absolute Return: +2.2%
= +$251.15/$11,316.95
Annualized Return: +15.9%
= (+$251.15/$11,316.95)*(365/51 days)


5. EMC Corp (EMC) -- Closed
The transactions were as follows:
10/07/2014 Bought 400 EMC shares @ $28.33
10/07/2014 Sold 4 EMC Nov2014 $29.00 Call Options @ $.84
Note: the price of EMC was $28.48 today when these options were sold.
11/21/2014 Nov2014 call options closed above the $29.00 strike price, so the EMC stock shares were assigned.

The overall performance result (including commissions) for these EMC covered calls was follows:
Stock Purchase Cost: $11,340.95
= ($28.33*400+$8.95 commission)

Net Profit:
(a) Options Income: +$324.05
= 400*$.84 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (EMC closed above $29.00 strike price) = +$259.05
= ($29.00-$28.33)*400 - $8.95 commissions

Total Net Profit (EMC closed above $29.00 strike price at Nov2014 options expiration): +$583.10
= ($324.05+$0.00+$259.05)

Absolute Return: Stock Assigned (at $29.00 strike price): +5.1%
= +$583.10/$11,340.95
Annualized Return: +39.9%
= (+$583.10/$11,340.95/$11,316.95)*(365/47 days)


6. iShares MSCI China ETF (FXI) -- Closed
The transactions were as follows:
10/22/2014 Bought 400 FXI shares @ $38.48
10/22/2014 Sold 4 FXI Nov2014 $38.00 Call Options @ $1.18
Note: the price of FXI was $38.48 today when these options were sold.
11/21/2014 Call options closed above $38 strike price at Nov2014 expiration and 400 shares called away

The performance result (including commissions) for these FXI covered calls is as follows:
Stock Purchase Cost: $15,400.95
= ($38.48*400+$8.95 commission)

Net Profit:
(a) Options Income: +$460.05
= 400*$1.18 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI assigned at $38.00 strike price at Nov2014 expiration)
= -$200.95 
= ($38.00-$38.48)*400 - $8.95 commissions

Total Net Profit (FXI assigned at $38.00): +$259.10
= (+$460.05 +$0.00 -$200.95)

Absolute Return upon Assignment (at $38.00): +1.7%
= +$259.10/$15,400.95
Annualized Return: +19.8%
= (+$259.10/$15,400.95)*(365/31 days)


7.  Google Inc. (GOOG) -- Closed
The transactions were:
09/25/2014 Sold 1 Oct2014 $580.00 Put @ $13.60
Note: The price of Google was $582.05 when this transaction was executed.
10/17/2014 1 Oct2014 Put option expired
10/22/2014 Sold 1 Nov2014 $530.00 Call option @ $18.00
Note: the price of GOOG was $538.20 when this Call option was sold
11/21/2014 the Call option was in-the-money and the stock was assigned at the $530.00 strike price upon Nov2014 expiration

The performance result (including commissions) for this Google transaction was follows:
100% Cash-Secured Cost Basis: $58,000.00 = $580.00*100
Note: the price of GOOG was $582.05 when the Put option was sold.

Net Profit:
(a) Options Income: +$3,140.60
= ($13.60+$18.00)*100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (GOOG closed above $530.00 at Nov2014 expiration):
-$5,000.00
= ($530.00-$580.00)*100 shares

Total Net Profit (GOOG was above $530.00 strike price at Nov2014 options expiration):
-$1,859.40 
= (+$3,140.60 +$0.00 -$5,000.00)

Absolute Return (GOOG was above $530.00 at Nov2014 options expiration): -3.2%
= -$1,859.40/$58,000.00
Annualized Return (GOOG is above $530.00 at expiration): -20.5%
= (-$1,859.40/$58,000.00)*(365/57 days)


8.  Micron Technology Inc. (MU) -- Closed
The transactions were as follows:
10/07/2014 Sold 4 Micron Technology Inc. Oct2014 $31.00 Puts @ $.47
Note: The price of Micron was $31.93 when this transaction was executed.
10/17/2014 4 Oct2014 $31.00 Puts expired
Note: the price of MU was $28.77 when these Put options expired
10/20/2014 Sold 4 Nov2014 $31.00 Calls @ $.99
Note: the price of MU was $29.35 when these Call options were sold.
11/21/2014 the Call options were in-the-money and the stock was assigned at the $31.00 strike price upon Nov2014 expiration

The overall performance result (including commissions) for these transactions was as follows:
100% Cash-Secured Cost Basis: $12,400.00
= $31.00*400
Note: the price of Micron was $31.93 when these Put options were sold.

Net Profit:
(a) Options Income: +$560.10
= ($.47+$.99)*400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MU was above $31.00 at Nov2014 expiration): +$0.00
= ($31.00-$31.00)*400 shares

Total Net Profit (MU was above $31.00 strike price at Nov2014 options expiration):+$560.10 
= (+$560.10 +$0.00 +$0.00)

Absolute Return (MU was above $31.00 at Nov2014 options expiration): +4.5%
= +$560.10/$12,400.00
Annualized Return: +35.1%
= (+$560.10/$12,400.00)*(365/47 days)

Saturday, November 8, 2014

Overall Market Meter Remains at "Neutral"

The Covered Calls Advisor recalculated the current values for each of the eight factors used to determine the "Overall Market Meter" rating.  This month, the Overall Market Meter rating remains unchanged at Neutral.

The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next three indicators), and
- growth (the last indicator).


























The current Market Meter average of 3.00 (see blue line at the bottom of the chart above) is precisely in the middle of the Neutral range (Neutral range is from 2.51 to 3.50). 

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Neutral sentiment is to "on-average sell 1% out-of-the-money covered calls for the next options expiration month".

Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Wednesday, November 5, 2014

Early Exercise of Boeing Covered Call Position

Today, I received notification that the Covered Calls Advisor's covered call position in Boeing Company (Ticker Symbol BA) with a Nov2014 expiration and at the $120.00 strike price was exercised early. The shares of Boeing had risen to $125.11 as of yesterday's close, so the time value remaining in the call option had declined to the point where the owner of the option decided to exercise his/her option to buy the shares at $120.00 in order to capture today's quarterly ex-dividend payment of $.73 per share.

10/22/2014 Bought 100 BA shares @ $122.579
10/22/2014 Sold 1 BA Nov2014 $120.00 Call Option @ $4.60
Note: the price of BA was $122.90 today when this Call option was sold.
11/4/2014 Short call option assigned; so sold 100 BA shares @ $120.00

The actual return-on-investment result for this closed position was 1.5% absolute return (equivalent to +39.0% annualized return for the 14 day holding period).

As is often the case, early assignment provides a higher annualized return than if the position had been assigned at Nov2014 expiration, so this is the Covered Calls Advisor's preferred outcome.

The details of the overall performance result (including commissions) for this Boeing Co. (BA) covered calls position were as follows:
Stock Purchase Cost: $12,266.85
= ($122.579*100+$8.95 commission)

Net Profit:
(a) Options Income: +$450.30
= ($4.60*100 shares) - $9.70 commissions
(b) Dividend Income (Option exercised early on day prior to Nov 5th ex-div date): +$0.00
(c) Capital Appreciation (stock assigned early on Nov 4th): -$266.85
+($120.00-$122.579)*100 - $8.95 commissions

Total Net Profit (Early exercise on day prior to Nov 5th ex-div date): +$183.45
= (+$450.30 +$0.00 -$266.85)

Actual Return-on-Investment:
1. Absolute Return: +1.5%
= +$183.45/$12,266.85
2. Annualized Return: +39.0%
= (+$183.45/$12,266.85)*(365/14 days)

Thursday, October 30, 2014

Established a December 2014 100% Cash-Secured Puts Position in Micron Technology Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Micron Technology Inc. (Ticker Symbol MU) with a Dec2014 expiration and at the $30.00 strike price.  As detailed below, this investment will provide a +4.1% absolute return in 52 days (which is equivalent to a +28.8% annualized return) if Micron Technology stock remains at or above $30.00 at options expiration on December 20th.

Details of this transaction along with a potential return-on-investment result are: 

Micron Technology Inc. (MU)
The transaction is as follows:
10/30/2014 Sold 4 Micron Technology Inc. Dec2014 $30.00 Puts @ $1.26
Note: The price of Micron was $31.22 when this transaction was executed.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $12,000.00
= $30.00*400
Note:  the price of Micron was $31.22 when these Put options were sold.

Net Profit:
(a) Options Income: +$492.05
= ($1.26*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MU remains above $30.00 at Dec2014 expiration): +$0.00
= ($30.00-$30.00)*400 shares

Total Net Profit (If MU is above $30.00 strike price at Dec2014 options expiration):+$492.05 
= (+$492.05 +$0.00 +$0.00)

Absolute Return (If MU is above $30.00 at Dec2014 options expiration and Put options thus expire worthless): +4.1%
= +$492.05/$12,000.00
Annualized Return (If MU above $30.00 at expiration): +28.8%
= (+$492.05/$12,000.00 )*(365/52 days)

The downside 'breakeven price' at expiration is at $28.74 ($30.00 - $1.26), which is 7.9% below the current market price of $31.22.
The 'crossover price' at expiration is $32.48 ($31.22 + $1.26).  This is the price above which it would have been more profitable to simply buy-and-hold Micron stock until Dec 20th (the Dec2014 options expiration date) rather than holding these short Put options.

Wednesday, October 22, 2014

Established Boeing Co. Covered Calls -- Example of Early Assignment or Dividend Capture Strategy

Today, a new covered call position was established in Boeing Company (Ticker Symbol BA) with a Nov2014 expiration and at the $120.00 strike price. The transactions are as follows:

10/22/2014 Bought 100 BA shares @ $122.579
10/22/2014 Sold 1 BA Nov2014 $120.00 Call Option @ $4.60
Note: the price of BA was $122.90 today when this Call option was sold.
11/05/2014 Ex-dividend of $.73 per share

This covered calls investment is a strategic one that explicitly considers the upcoming quarterly dividend of $.73 with an ex-dividend date of November 5th.  Although unlikely, if the current time value (i.e. extrinsic value) of $2.021 [$4.60 option premium - ($122.579 stock price - $120.00 strike price)] remaining in the short call option decays to less than $.73 by November 4th (the day prior to the ex-div date), then there is a possibility that the call option owner will exercise early and will call the stock away to capture the dividend. As shown below, two potential returns for this position are:
If Early Assignment: +1.5% absolute return (equivalent to +39.0% annualized return for the next 14 days) if the stock is assigned early (day prior to Nov 5th ex-div date); OR
If Dividend Capture:  +2.1% absolute return (equivalent to +24.6% annualized return over the next 31 days) if the stock is assigned at Nov2014 expiration on November 21st.

As is often the case, early assignment provides a higher annualized return, so this is the Covered Calls Advisor's preferred outcome; but either outcome would provide a very good return.  These returns will be achieved as long as the stock is above the $120.00 strike price at assignment -- a 2.1% of downside protection.  Alternatively, if the stock declines below the strike price, the breakeven price of $117.249 ($122.579-$.73-$4.60) provides a nice 4.3% downside protection. 

In summary, this covered calls investment provides a very nice annualized ROI potential for such a conservative (hedged with good downside protection and with no upcoming earnings announcement prior to Nov2014 options expiration) investment. 

Two possible overall performance results (including commissions) for this Boeing Co. (BA) covered calls position are as follows:
Stock Purchase Cost: $12,266.85
= ($122.579*100+$8.95 commission)

Net Profit:
(a) Options Income: +$450.30
= ($4.60*100 shares) - $9.70 commissions
(b) Dividend Income (If option exercised early on day prior to Nov 5th ex-div date): +$0.00
(b) Dividend Income (If stock assigned at Nov2014 expiration): +$73.00
= ($.73 dividend per share x 100 shares); or
(c) Capital Appreciation (If stock assigned early on Nov 4th): -$266.85
+($120.00-$122.579)*100 - $8.95 commissions; or
(c) Capital Appreciation (If stock assigned at $120.00 at Nov2014 expiration): -$266.85
+($120.00-$122.579)*100 - $8.95 commissions

Total Net Profit (If option exercised on day prior to Nov 5th ex-div date): +$183.45
= (+$450.30 +$0.00 -$266.85); or
Total Net Profit (If stock assigned at $120.00 at Nov2014 expiration): +$256.45
= (+$450.30 +$73.00 -$266.85)

1. Absolute Return (If option exercised on day prior to Nov 5th ex-div date): +1.5%
= +$183.45/$12,266.85
Annualized Return (If option exercised early): +39.0%
= (+$183.45/$12,266.85)*(365/14 days); OR

2. Absolute Return (If stock assigned at $120.00 at Nov2014 expiration): +2.1%
= +$256.45/$12,266.85
Annualized Return (If stock assigned): +24.6%
= (+$256.45/$12,266.85)*(365/31 days);

Established Two New Positions in iShares MSCI China ETF (FXI)

Today, two new positions were added in iShares MSCI China ETF (Symbol FXI) -- one covered calls position with a November 2014 expiration and a short 100% cash-secured Puts position with a December 2014 expiration.
 
The details of the associated transactions and potential return-on-investment results are as follows:

1. iShares MSCI China ETF (FXI)
The transactions were as follows:
10/22/2014 Bought 400 FXI shares @ $38.48
10/22/2014 Sold 4 FXI Nov2014 $38.00 Call Options @ $1.18
Note: the price of FXI was $38.48 today when these options were sold.

Two possible overall performance result (including commissions) for these FXI covered calls is as follows:
Stock Purchase Cost: $15,400.95
= ($38.48*400+$8.95 commission)

Net Profit:
(a) Options Income: +$460.05
= 400*$1.18 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $38.00 strike price at Nov2014 expiration)
= -$200.95 
= ($38.00-$38.48)*400 - $8.95 commissions

Total Net Profit (If FXI assigned at $38.00): +$259.10
= (+$460.05 +$0.00 -$200.95)

Absolute Return if Assigned (at $38.00): +1.7%
= +$259.10/$15,400.95
Annualized Return If Assigned (ARIA): +19.8%
= (+$259.10/$15,400.95)*(365/31 days)
 

2. iShares MSCI China ETF (FXI)
The transaction is as follows:
10/22/2014 Sold 4 iShares MSCI China ETF Dec2014 $38.00 Puts @ $1.25
Note: The price of FXI was $38.48 when this transaction was executed.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $15,200.00
= $38.00*400
Note:  the price of FXI was $38.48 when these Put options were sold.

Net Profit:
(a) Options Income: +$488.05
= ($1.25*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains above $38.00 at Dec2014 expiration): +$0.00
= ($38.00-$38.00)*400 shares

Total Net Profit (If FXI is above $38.00 strike price at Dec2014 options expiration):+$488.05 
= (+$488.05 +$0.00 +$0.00)

Absolute Return (If FXI is above $38.00 at Dec2014 options expiration and Put options thus expire worthless): +3.2%
= +$488.05/$15,200.00
Annualized Return (If FXI above $38.00 at expiration): +19.5%
= (+$488.05/$15,200.00)*(365/60 days)

The downside 'breakeven price' at expiration is at $36.75 ($38.00 - $1.25), which is 4.5% below the current market price of $38.48.
The 'crossover price' at expiration is $39.73 ($38.48 + $1.25).  This is the price above which it would have been more profitable to simply buy-and-hold FXI until Dec 19th (the Dec2014 options expiration date) rather than holding these short Put options.

Established Continuing Covered Call Positions -- Chevron, EMC, Google, and Halliburton

Last Friday with Oct2014 Options expiration, options expired in Chevron Corporation (Symbol CVX), EMC Corporation (EMC), Google Inc. (GOOG), and Halliburton Co. (HAL).  Today, November 2014 call options were sold to continue positions in each of these four stocks by establishing covered calls.

The transactions to date for each of these positions and some possible resulting return-on-investment results are as follows:

1.  Chevron Corporation (CVX) -- Continuation
The transactions are as follows:
10/01/2014 Bought 300 CVX shares @ $118.54
10/01/2014 Sold 3 CVX Oct2014 $118.00 Call Options @ $2.14
Note: the price of CVX was $118.54 today when these options were sold.
10/17/2014 3 CVX Call options expired
10/22/2014 Sold 3 Nov2014 $115.00 Calls @ $2.40
Note: the price of CVX was $115.46 when these options were sold

A possible overall performance result for this CVX position is as follows:
Stock Purchase Cost: $35,570.95
= ($118.54*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,339.60
= 300*($2.14+$2.40) - 2*$11.20 commissions
(b) Dividend Income: +$321.00 = $1.07 * 300 shares
(c) Capital Appreciation (If CVX assigned at $115.00) = -$1,070.95
= ($115.00-$118.54)*300 - $8.95 commissions

Total Net Profit (If CVX assigned at $115.00): +$589.65
= (+$1,339.60 +$321.00 -$1,070.95)

Absolute Return if Assigned (at $118.00): +1.7%
= +$589.65/$35,570.95
Annualized Return If Assigned (ARIA): +11.9%
= (+$589.65/$35,570.95)*(365/51 days)

2.  EMC Corp (EMC) -- Continuation
The transactions were as follows:
10/02/2014 Bought 400 EMC shares @ $28.27
10/02/2014 Sold 4 EMC Oct2014 $28.00 Call Options @ $.75
Note: the price of EMC was $28.27 today when these options were sold.
10/17/2014 4 Oct12014 Call options expired
10/22/2014 Sold 4 EMC Nov2014 $27.50 Call Options @ $.46
Note: the price of EMC was $26.87 when these options were sold

A possible overall performance result (including commissions) for these EMC covered calls is as follows:
Stock Purchase Cost: $11,316.95
= ($28.27*400+$8.95 commission)

Net Profit:
(a) Options Income: +$460.10
= 400*($.75+$.46) - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EMC assigned at $27.50) = -$208.95
= ($27.50-$28.27)*400 - $8.95 commissions

Total Net Profit (If EMC assigned at $27.50): +$251.15
= (+$460.10 +$0.00 -$208.95)

Absolute Return if Assigned (at $28.00): +2.2%
= +$251.15/$11,316.95
Annualized Return If Assigned (ARIA): +15.9%
= (+$251.15/$11,316.95)*(365/51 days)

3.  Google Inc. (GOOG) -- ContinuationThe transaction is as follows:
09/25/2014 Sold 1 Oct2014 $580.00 Put @ $13.60
Note: The price of Google was $582.05 when this transaction was executed.
10/17/2014 1 Oct2014 Put option expired
10/22/2014 Sold 1 Nov2014 $530.00 Call option @ $18.00
Note: the price of GOOG was $538.20 when this Call option was sold
A possible overall performance result (including commissions) for this Google transaction would be as follows:
100% Cash-Secured Cost Basis: $58,000.00 = $580.00*100
Note: the price of GOOG was $582.05 when the Put option was sold.

Net Profit:
(a) Options Income: +$3,140.60
= ($13.60+$18.00)*100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GOOG closes above $530.00 at Nov2014 expiration):
-$5,000.00
= ($530.00-$580.00)*100 shares

Total Net Profit (If GOOG is above $530.00 strike price at Nov2014 options expiration):
-$1,859.40 
= (+$3,140.60 +$0.00 -$5,000.00)

Absolute Return (If GOOG is above $530.00 at Nov2014 options expiration and Put option thus expire worthless): -3.2%
= -$1,859.40/$58,000.00
Annualized Return (If GOOG is above $580.00 at expiration): -20.5%
= (-$1,859.40/$58,000.00)*(365/57 days)


4. Halliburton Co. (HAL) -- Continuation
The transactions were as follows:
09/25/2014 Bought 300 HAL shares @ $64.10
09/25/2014 Sold 3 HAL Oct2014 $63.50 Call Options @ $1.94
Note: the price of HAL was $64.10 today when these options were sold.
10/17/2014  3 Oct2014 Call options expired
10/22/2014 Sold 3 Nov2014 $55 Call options @ $2.58
Note: the price of HAL was $56.13 when these options were sold

A possible overall performance result (including commissions) for these Halliburton covered calls is as follows:
Stock Purchase Cost: $19,238.95
= ($64.10*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,333.60
= 300*($1.94+$2.58) - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HAL assigned at $55.00) = -$2,738.95
= ($55.00-$64.10)*300 - $8.95 commissions

Total Net Profit (If HAL assigned at $55.00): -$1,405.35
= (+$1,333.60 +$0.00 -$2,738.95)

Absolute Return if Assigned (at $55.00): -7.3%
= -$1,405.35/$19,238.95
Annualized Return If Assigned (ARIA): -46.8%
= (-$1,405.35/$19,238.95)*(365/57 days)

Monday, October 20, 2014

Established Continuing Covered Call Positions -- Agnico Eagle Mines, American Airlines, Bidu Inc., and Micron Technology

Last Friday with Oct2014 Options expiration, options expired in Agnico Eagle Mines Ltd.(Symbol AEM), American Airlines Group (AAL), Bidu Inc. (BIDU), and Micron Technology Inc. (MU).  Today, November 2014 call options were sold to continue positions in each of these four stocks by establishing covered calls.

The transactions to date for each of these positions and some possible resulting return-on-investment results are as follows:

1.  Agnico Eagle Mines Ltd. (AEM) -- Continuation
The transactions are as follows:
09/24/2014 Sold 3 Oct2014 $30.00 Puts @ $1.10
Note: The price of Agnico Eagle was $30.03 when this transaction was executed.
10/17/2014 3 Oct2014 $30.00 Puts expired
Note: the price of AEM was $28.72 when these Puts expired
10/20/2014 Sold 3 Nov2014 $30.00 Calls @ $1.75
Note: the price of AEM was $29.55 when these options were sold.

Two possible overall performance results (including commissions) for this Agnico Eagle Mines transaction would be as follows:
100% Cash-Secured Cost Basis: $9,000.00 = $30.00*300
Note: the price of AEM was $30.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$832.60
= ($1.10+$1.75)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AEM close at current market price of $29.55 at Nov2014 expiration): -$135.00
= ($29.55-$30.00)*300 shares; OR
(c) Capital Appreciation (If AEM close above $30.00 at Nov2014 expiration): +$0.00
= ($30.00-$30.00)*300 shares

1.  Total Net Profit (If AEM closes at current market price of $29.55 at Nov2014 options expiration):+$697.60 
= (+$832.60 +$0.00 -$135.00); OR
2. Total Net Profit (If AEM is above $30.00 strike price at Nov2014 options expiration):+$832.60 
= (+$832.60 +$0.00 +$0.00)

1. Absolute Return (If AEM is at $29.55 current market price at Nov2014 options expiration and Put options thus expire worthless): +7.8%
= +$697.60/$9,000.00
Annualized Return (If AEM is unchanged at $29.55 at Nov2014 expiration): +47.2%
= (+$697.60/$9,000.00)*(365/60 days); OR
2. Absolute Return (If AEM is above $30.00 at Nov2014 options expiration and Put options thus expire worthless): +9.3%
= +$832.60/$9,000.00
Annualized Return (If AEM is above $30.00 at Nov2014 expiration): +56.3%
= (+$832.60/$9,000.00)*(365/60 days)


2.  American Airlines Group (AAL) -- Continuation
The transactions are as follows:
09/23/2014 Sold 4 Oct2014 $35.00 Puts @ $1.44
Note: The price of American Airlines was $35.03 when this transaction was executed.
10/17/2014 3 Oct2014 $35.00 Puts expired
Note: the price of AAL was $33.38 when these Puts expired
10/20/2014 Sold 3 Nov2014 $35.00 Calls @ $2.15
Note: the price of AAL was $34.50 when these options were sold.

Two possible overall performance results (including commissions) for these AAL transactions would be as follows:
100% Cash-Secured Cost Basis: $14,000.00
= $35.00*400
Note: the price of AAL was $35.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$1,412.10
= ($1.44+$2.15) *400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AAL closes unchanged at $34.50 at Nov2014 expiration):
-$200.00
= ($34.50-$35.00)*400 shares; OR
(c) Capital Appreciation (If AAL closes above $35.00 at Nov2014 expiration): +$0.00
= ($35.00-$35.00)*400 shares

1.  Total Net Profit (If AAL is above $35.00 strike price at Nov2014 options expiration):+$1,212.10 
= (+$1,412.10 +$0.00 -$200.00); OR
2. Total Net Profit (If AAL is above $35.00 strike price at Nov2014 options expiration):+$1,412.10 
= (+$1,412.10 +$0.00 +$0.00)

1.  Absolute Return (If AAL is unchanged at $34.50 at Nov2014 options expiration and Put options thus expire worthless): +8.7%
= +$1,212.10/$14,000.00
Annualized Return (If AAL is above $35.00 at Nov2014 expiration): +51.8%
= (+$1,212.10/$14,000.00)*(365/61 days); OR
2. Absolute Return (If AAL is unchanged at $34.50 at Nov2014 options expiration and Put options thus expire worthless): +10.1%
= +$1,412.10/$14,000.00
Annualized Return (If AAL is above $35.00 at Nov2014 expiration): +60.4%
= (+$1,412.10/$14,000.00)*(365/61 days)


3. Bidu Inc. (BIDU) -- Continuation
The transactions are as follows:

09/29/2014 Sold 1 Oct2014 $215.00 Put @ $4.90
Note: The price of Bidu was $218.99 when this transaction was executed.
10/17/2014 1 Oct2014 $215.00 Put expired
Note: the price of Bidu was $211.73 when this Put option expired
10/20/2014 Sold 1 Nov2014 $220.00 Call @ $8.90
Note: the price of BIDU was $216.50 when this Call option were sold.

Two possible overall performance results (including commissions) for these BIDU  transactions would be as follows:
100% Cash-Secured Cost Basis: $21,500.00 = $215.00*100
Note: the price of BIDU was $218.99 when the Put option was sold.

Net Profit:
(a) Options Income: +$1,360.60
= ($4.90+$8.90) *100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BIDU closes unchanged at $216.50 at Nov2014 expiration):
+$150.00
= ($216.50-$215.00)*100 shares; OR
(c) Capital Appreciation (If BIDU closes above $220.00 at Nov2014 expiration): +$500.00
= ($220.00-$215.00)*100 shares

1. Total Net Profit (If BIDU is at current price of $216.50 at Nov2014 options expiration):+$1,510.60 
= (+$1,360.60 +$0.00 +$150.00); OR
2. Total Net Profit (If BIDU is above $220.00 strike price at Nov2014 options expiration):+$1,860.60 
= (+$1,360.60 +$0.00 +$500.00)

1. Absolute Return (If BIDU is unchanged at $216.50 at Nov2014 options expiration): +7.0%
= +$1,510.60/$21,500.00
Annualized Return (If BIDU is above $220.00 at Nov2014 expiration): +46.6%
= (+$1,510.60/$21,500.00)*(365/55 days); OR
2. Absolute Return (If BIDU is unchanged at $216.50 at Nov2014 options expiration: +8.7%
= +$1,860.60/$21,500.00
Annualized Return (If BIDU is above $220.00 at Nov2014 expiration): +57.4%
= (+$1,860.60/$21,500.00)*(365/55 days)The transaction is as follows:


4.  Micron Technology Inc. (MU) -- Continuation
The transaction is as follows:
10/07/2014 Sold 4 Micron Technology Inc. Oct2014 $31.00 Puts @ $.47
Note: The price of Micron was $31.93 when this transaction was executed.
10/17/2014 4 Oct2014 $31.00 Puts expired
Note: the price of MU was $28.77 when these Put options expired
10/20/2014 Sold 4 Nov2014 $31.00 Calls @ $.99
Note: the price of MU was $29.35 when these Call options were sold.

Two possible overall performance results (including commissions) for these transactions would be as follows:
100% Cash-Secured Cost Basis: $12,400.00
= $31.00*400
Note: the price of Micron was $31.93 when these Put options were sold.

Net Profit:
(a) Options Income: +$560.10
= ($.47+$.99)*400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MU is unchanged at $29.35 at Nov2014 expiration): -$660.00
= ($29.35-$31.00)*400 shares; OR
(c) Capital Appreciation (If MU is above $31.00 at Nov2014 expiration): +$0.00
= ($31.00-$31.00)*400 shares

1.  Total Net Profit (If MU is unchanged at $29.35 at Nov2014 options expiration): -$99.90 
= (+$560.10 +$0.00 -$660.00); OR
2. Total Net Profit (If MU is above $31.00 strike price at Oct2014 options expiration):+$560.10 
= (+$560.10 +$0.00 +$0.00)

1. Absolute Return (If MU is unchanged at $29.35 at Nov2014 options expiration): -0.8%
= -$99.90/$12,400.00
Annualized Return (If MU above $31.00 at Nov2014 expiration): -6.3%
= (-$99.90/$12,400.00)*(365/47 days); OR

2. Absolute Return (If MU is above $29.35 at Nov2014 options expiration and Put options thus expire worthless): +4.5%
= +$560.10/$12,400.00
Annualized Return (If MU above $31.00 at Nov2014 expiration): +35.1%
= (+$560.10/$12,400.00)*(365/47 days)

October 2014 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained nine positions with October 2014 expirations.  The results for these nine positions so far are as follows:

- Only one of the nine positions (Citigroup Inc.) was closed out at expiration. This was the optimal result for this position in that the maximum potential return-on-investment (ROI) results was achieved from when this Cititgroup October position was established.  The annualized ROI for this closed position is:
Citigroup Inc. = +0.9% absolute return (equivalent to +15.7% annualized return for the 20 day holding period)

The detailed transactions history and result for this Citigroup position is detailed below. The cash available from the closing of this position will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established (most likely in the next week or two). These transactions will be posted on this blog the same day they occur.

- Eight of the nine positions (Agnico Eagle Mines, American Airlines, Bidu, Chevron, EMC Corp, Google, Halliburton, and Micron Technology) ended at expiration with the price of the stocks below the strike prices.  So the respective options expired and the long shares were retained in the Covered Calls Advisor Portfolio.  A decision will be made early this week to either sell these shares or to establish a covered calls position by selling Nov2014 call options against the current long stock holdings. When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day along with the detailed transactions to-date for each stock position.

Details of the closed Citigroup transaction and the associated return-on-investment result is as follows:

1.  Citigroup Inc.(C) -- Closed
The transactions were as follows:
09/29/2014 Sold 4 Citigroup Inc. Oct2014 $50.00 Puts @ $.46
Note: The price of Citigroup was $51.69 when this transaction was executed.
10/17/2014 4 Citigroup Puts expired
Note: price of Citi was $50.07 upon Oct2014 expiration

The overall performance result (including commissions) for this Citigroup Inc. transaction was as follows:
100% Cash-Secured Cost Basis: $20,000.00 = $50.00*400
Note:  the price of Citigroup was $51.69 when these Put options were sold.

Net Profit:
(a) Options Income: +$172.05
= ($.46*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Citi stock remained above $50.00 at Oct2014 expiration): +$0.00
= ($50.00-$50.00)*400 shares

Total Net Profit:+$172.05 
= (+$172.05 +$0.00 +$0.00)

Absolute Return: +0.9%
= +$172.05/$20,000.00
Annualized Return (If C above $50.00 at expiration): +15.7%
= (+$172.05/$20,000.00)*(365/20 days)

Wednesday, October 8, 2014

Established a 100% Cash-Secured Puts Position in Micron Technology Inc.

Just prior to the market close yesterday, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Micron Technology Inc. (Ticker Symbol MU) with an Oct2014 expiration and at the $31.00 strike price.  As detailed below, this investment will provide a +1.4% absolute return in 11 days (which is equivalent to a +47.1% annualized return) if Micron Technology stock remains at or above $31.00 at options expiration on October 17th.

Details of this transaction along with a potential return-on-investment result are: 

Micron Technology Inc. (MU)
The transaction is as follows:
10/07/2014 Sold 4 Micron Technology Inc. Oct2014 $31.00 Puts @ $.47
Note: The price of Micron was $31.93 when this transaction was executed.

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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $12,400.00
= $31.00*400
Note:  the price of Micron was $31.93 when these Put options were sold.

Net Profit:
(a) Options Income: +$176.05
= ($.47*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MU remains above $31.00 at Oct2014 expiration): +$0.00
= ($31.00-$31.00)*400 shares

Total Net Profit (If MU is above $31.00 strike price at Oct2014 options expiration):+$176.05 
= (+$176.05 +$0.00 +$0.00)

Absolute Return (If MU is above $31.00 at Oct2014 options expiration and Put options thus expire worthless): +1.4%
= +$176.05/$12,400.00
Annualized Return (If MU above $31.00 at expiration): +47.1%
= (+$176.05/$12,400.00)*(365/11 days)

The downside 'breakeven price' at expiration is at $30.53 ($31.00 - $.47), which is 4.4% below the current market price of $51.69.
The 'crossover price' at expiration is $32.40 ($31.93 + $.47).  This is the price above which it would have been more profitable to simply buy-and-hold Micron stock until Oct 17th (the Oct2014 options expiration date) rather than holding these short Put options.