Wednesday, January 21, 2015

Continuing Positions --Alibaba Group, Google, and Williams Companies

Covered call positions were established in the Covered Calls Advisor portfolio for three companies (Alibaba Group ADR, Google Inc., and Williams Companies Inc.) where, in each instance, the Jan2015 options expired worthless last Friday when the stock prices closed below the strike prices.  Today, for all three positions, covered calls positions were established by selling Call options for the Feb2015 options expiration against the existing long stock positions. The transactions to-date for these positions and the respective potential return-on-investment results are detailed below:

1.  Alibaba Group ADR  (Ticker BABA) --Continuation
The transactions are 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.
01/16/2015 2 BABA Jan2015 Put options expired
Note: the price of Alibaba was $96.89 upon Jan2015 options expiration.
01/21/2015 Sold 2 Feb2015 $100.00 Call options @ $4.65
Note: BABA stock was $101.20 when these options were sold.

A possible overall performance result (including commissions) for this Alibaba position would be as follows:
100% Cash-Secured Cost Basis: $20,000.00 = $100.00*200

 Net Profit:
(a) Options Income: +$1,429.10
= ($2.60+$4.65)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Alibaba closes above $100.00 at the Feb2015 options expiration): +$0.00
= ($100.00 liquidation price if assigned -$100.00 cash-secured cost basis)*200 shares

Total Net Profit (If Alibaba is above $100.00 strike price upon Feb2015 options expiration): +$1,429.10 
= (+$1,429.10 +$0.00 +$0.00)

Absolute Return (If Alibaba is above $100.00 at Feb2015 options expiration): +7.1%
= +$1,429.10/$20,000.00
Annualized Return (If Alibaba is above $100.00 at expiration): +39.5%
= (+$1,429.10/$20,000.00)*(365/66 days)


2.  Google Inc. (GOOG) -- Continuation

The transactions are 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.

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.
01/16/2015 1 GOOG Jan2015 Put options expired
Note: the price of Google stock was $508.08 upon Jan2015 options expiration.
01/21/2015 Sold 1 Feb2015 $520.00 Call option @ $10.20
Note: Google Inc. stock was $509.22 when this Call option was sold.

Net Profit:
(a) Options Income: +$2,820.60
= ($18.20+$10.20)*100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GOOG closes above $520.00 at Feb2015 expiration): -$1,008.95
= ($520.00 liquidation cost if assigned - $530.00 cash-secured cost basis)*100 shares - $8.95 commission

Total Net Profit (If GOOG is above $520.00 strike price at Feb2015 options expiration): +$1,811.65 
= (+$2,820.60 +$0.00 -$1,008.95)

Absolute Return (If GOOG is above $520.00 at Feb2015 options expiration): +3.4%
= +$1,811.65/$53,000.00
Annualized Return (If GOOG is above $520.00 at expiration): +17.1%
= (+$1,811.65/$53,000.00)*(365/73 days)


3.  Williams Companies Inc. (WMB) -- Continuation
The transactions are 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.
01/16/2015 3 WMB Jan2015 Put options expired
Note: the price of Williams Companies was $42.00 upon Jan2015 options expiration.
01/21/2015 Sold 3 Feb2015 $44.00 Call options @ $.98
Note: WMB stock was $42.49 when these options were sold.

Two possible overall performance results (including commissions) for these transactions 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: +$541.60
= ($.90 + $.98)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If WMB closes at current price of $42.49 at Feb2015 expiration): -$453.00
= ($42.49 if price unchanged at expiration -$44.00 cash-secured cost basis)*300 shares; OR
(c) Capital Appreciation (If WMB is above $44.00 strike price at Feb2015 expiration): +$0.00
= ($44.00 liquidation price if assigned -$44.00 cash-secured cost basis)*300 shares

1. Total Net Profit (If WMB closes at current price of $42.49 at Feb2015 expiration): +$88.60
= (+$541.60 +$0.00 -$453.00); OR
2. Total Net Profit (If WMB is above $44.00 strike price at Jan2015 options expiration): +$541.60
= (+541.60 +$0.00 +$0.00)

1. Absolute Return (If WMB closes at current price of $42.49 at Feb2015 expiration): +0.7%
= +$88.60/$13,200.00
Annualized Return (If WMB closes at current price of $42.49 at Feb2015 expiration): +4.8%
= (+$88.60/$13,200.00)*(365/51 days); OR
2. Absolute Return (If WMB is above $44.00 strike price at Feb2015 options expiration): +4.1%
= +$541.60/$13,200.00
Annualized Return (If WMB above $44.00 at expiration): +29.4%
= (+$541.60/$13,200.00)*(365/51 days)