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)