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Monday, May 19, 2014

May 2014 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained three positions with May 2014 expirations. A summary of the results is as follows:

- One of the three positions (Noble Corporation) was closed out at expiration. This was the optimal result for this covered calls position in that the maximum potential return-on-investment (ROI) result from when this May position was established was actually achieved. The annualized ROI result for this closed position is:
Noble Corporation = +2.0% absolute return (equivalent to +41.1% annualized return for the 18 days holding period)

The detailed transactions history and result 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 during the next week).  Any new positions for Jun2014 will be posted on this blog the same day they occur.

- Two of the three positions ended May2014 expiration with long stock positions (Citigroup Inc. and Fusion-io Inc.).  The seven Citigroup covered calls had their call options expire since the stock price closed Friday at $46.44, well below the May2014 options' $49.00 strike price. So, the Covered Calls Advisor Portfolio (CCAP) continues to own 700 long shares in Citigroup.  The seven 100% cash-secured Put options in Fusion-io were assigned at the $9.00 strike price since the stock closed last Friday (May2014 options expiration date) at $8.09.  As a result, the portfolio now owns 700 shares of Fusion-io.  Decisions will be made early this week to either sell these Citigroup and Fusion-io shares or to continue with covered calls positions by selling June 2014 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 with the transaction details and potential performance results.

Details of the transactions and the associated return-on-investment result for the closed Noble Corp. position is as follows:

1. Noble Corporation (NE) -- Closed
The transactions were as follows:
04/30/2013 Bought 700 NE shares @ $30.464
04/30/2013 Sold 7 NE May2014 $30.00 Call Options @ $.74
Note: the price of NE was $30.464 today when these options were sold.
05/01/2014 Ex-dividend of $.375 per share
05/16/2014 Call options assigned and stock sold at $30.00 strike price
Note: NE stock price was $30.03 upon market close on May2014 options expiration

The overall performance result (including commissions) for these Noble Corp covered calls was as follows:
Stock Purchase Cost: $21,333.75
= ($30.464*700+$8.95 commission)

Net Profit:
(a) Options Income: +$503.80
= 700*$.74 - $14.20 commissions
(b) Dividend Income: +$262.50 = $.375 per share * 700 shares
(c) Capital Appreciation (NE assigned at $30.00) = -$333.75
= ($30.00-$30.464)*700 - $8.95 commissions

Total Net Profit (NE stock assigned at $30.00): +$432.55
= (+$503.80 +$262.50 -$333.75)

Absolute Return: +2.0%
= +$432.55/$21,333.75
Annualized Return: +41.1%
= (+$432.55/$21,333.75)*(365/18 days)