Wednesday, October 28, 2015

Apple Inc. Position Closed


Today, the Covered Calls Advisor closed the short 100% cash-secured Put options position by buying-to-close the two Apple Inc. (Symbol AAPL) Nov2015 $115.00 Put options.  As detailed below, this investment resulted in a +3.7% absolute return in 30 days (equivalent to a +45.4% annualized return-on-investment).

1. Apple Inc. (AAPL)
The transactions were as follows:
09/28/2015 Sold 2 Apple Inc. Nov2015 $115.00 Puts @ $6.95
Note: The price of AAPL was $113.54 when this transaction was executed
10/28/2015 Bought-to-Close 2 Apple Nov2015 $115 Puts @ $2.55
Note: The price of AAPL was $116.20 when this transaction was made

The Covered Calls Advisor does not use margin, so the return-on-investment information on this position and two potential results shown below reflect the fact that this position was established using 100% cash securitization for the two Put options sold.

The purchase cost basis (including commissions) for this transaction was follows:
100% Cash-Secured Cost Basis: $23,000.00
= $115.00*200

Net Profit:
Options Income: +$859.10
= ($6.95 - $2.55) *200 shares - 2*$10.45 commissions

Absolute Return: +3.7%
= +$859.10/$23,000.00
Annualized Return:  +45.4%
=  (+$859.10/$23,000.00)*(365/30 days)

Monday, October 19, 2015

Continuation -- United Continental Holdings Inc.

Of the eleven Covered Calls Advisor positions with Oct2015 expirations, the only one in which the stock price closed below the strike price was United Continental Holdings Inc. (ticker UAL). Today, an ongoing covered calls position was established by selling three Nov2015 Call options at the $57.50 strike price against the 300 long UAL shares. Details of the transactions and two possible return-on-investment results are as follows:  

1. United Continental Holdings Inc. (UAL) -- Continuation
The transactions are as follows:
09/22/2015 Sold 3 UAL Oct2015 $57.50 100% cash-secured Put options @ $1.30
Note: the price of UAL was $59.56 today when this transaction was executed.  The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.
10/16/2015 3 Put options expired with the stock price below the strike price, so 300 shares of UAL were purchased at the $57.50 strike price.
Note: the price of UAL was $55.97 upon options expiration
10/19 Sold-to-Open 3 UAL Nov2015 $57.50 Call options @ $2.20
Note: the price of UAL was $56.55 when these options were sold

Two possible overall performance results (including commissions) for this UAL position would be as follows:
100% Cash-Secured Cost Basis: $17,250.00
= $57.50*300

 Net Profit:
(a) Options Income: +$1,027.60 = ($1.30 + $2.20)*300 shares) - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL is at current $56.55 price at Nov2015 expiration): -$285.00
= ($56.55-$57.50)*300 shares; or
(c) Capital Appreciation (If UAL is at or above $57.50 strike price at Nov2015 expiration): +$0.00
= ($57.50-$57.50)*300 shares

1. Total Net Profit (If UAL is at current $56.55 price at Nov2015 options expiration): +$742.60
= (+$1,027.60 options income +$0.00 dividend income -$285.00 capital appreciation); or

2. Total Net Profit (If UAL is above $57.50 strike price at Nov2015 options expiration): +$1,027.60
= (+$1,027.60 options income +$0.00 dividend income +$0.00 capital appreciation)

1. Absolute Return (If UAL is at current $56.55 price at Nov2015 options expiration): +4.3%
= +$742.60/$17,250.00
Annualized Return: +26.6%
= (+$742.60/$17,250.00)*(365/59 days); or
2. Absolute Return (If UAL is above $57.50 strike price at Nov2015 options expiration): +6.0%
= +$1,027.60/$17,250.00
Annualized Return: +36.9%
= (+$1,027.60/$17,250.00)*(365/59 days)

Saturday, October 17, 2015

October 2015 Option Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained eleven positions with October 2015 expirations.  The results are as follows:

- Ten of the eleven positions (Amgen Inc., Apple Inc., Dow Chemical Co., EMC Corp, Enterprise Products Partners LP, General Motors Co., JPMorgan Chase and Co., MetLife Inc., Micron Technology Inc., and Prudential Financial Inc.) were closed out at expiration. This was the optimal outcome for these positions in that the maximum potential return-on-investment (ROI) results were achieved for these positions.  The results for these closed positions are:
  • Amgen Inc. = +1.8% absolute return (equivalent to +24.9% annualized return for the 26 days holding period)
  • Apple Inc. = +1.9% absolute return (equivalent to +27.3% annualized return for the 25 days holding period)
  • Dow Chemical Co. = +2.5% absolute return (equivalent to +31.2% annualized return for the 29 days holding period) 
  • EMC Corp = +1.8% absolute return (equivalent to +26.6% annualized return for the 25 days holding period)
  • Enterprise Products Partners LP = +2.3% absolute return (equivalent to +22.8% annualized return for the 36 days holding period)
  • General Motors Co. = +2.0% absolute return (equivalent to +28.7% annualized return for the 25 days holding period)
  • JPMorgan Chase and Co. = +2.7% absolute return (equivalent to +33.9% annualized return for the 29 days holding period)
  • MetLife Inc. = +3.4% absolute return (equivalent to +27.3% annualized return for the 46 days holding period)
  • Micron Technology Inc. = +7.6% absolute return (equivalent to +42.6% annualized return for the 65 days holding period)
  • Prudential Financial Inc. = +2.5% absolute return (equivalent to +36.9% annualized return for the 25 days holding period)

The 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.  New positions will be posted on this site on the same day they are established.

- One of the eleven positions (United Continental Holdings Inc.) ended at expiration with the price of the stock below the strike price, so the options expired and the long shares are now 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 future Call options against the current long stock holding. When this decision is made and the accompanying transaction is completed, a post will be made on this blog on the same day along with the detailed transactions to-date.

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

1. Amgen Inc. (AMGN) -- Closed
The transactions were as follows:
09/21/2015 Sold 2 Amgen Inc. Oct2015 $140.00 Puts @ $2.54
Note: The price of AMGN was $147.10 when this transaction was executed.
10/16/2015 2 Amgen Oct2015 $140.00 Put options expired
Note: the price of AMGN was $152.61 upon Oct2015 options expiration

The Covered Calls Advisor does not use margin, so the detailed information on this position and the result shown below reflect the fact that this position was established using 100% cash securitization for the two Put options sold.

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $28,000.00
= $140.00*200

Net Profit:
(a) Options Income: +$497.55
= ($2.54*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Amgen stock is above $140.00 strike price at Oct2015 expiration): +$0.00
= ($140.00-$140.00)*200 shares

Total Net Profit (Amgen stock closed above $140.00 strike price upon the Oct2015 options expiration): +$497.55
= (+$497.55 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return: +1.8%
= +$497.55/$28,000.00
Annualized Return: +24.9%
= (+$497.55/$28,000.00)*(365/26 days)


2. Apple Inc. (AAPL) -- Closed
The transactions were as follows:
09/22/2015  Bought 200 Apple Inc. shares @ $113.58
09/22/2015 Sold 2 AAPL Oct2015 $110.00 Call options @ $5.80
Note: the price of AAPL was $113.71 today when this options transaction was executed.
10/16/2015 2 AAPL Call options assigned, so the 200 shares of Apple stock were sold at the $110.00 strike price
Note: the price of AAPL stock was $111.04 upon Oct2015 options expiration

The overall performance result (including commissions) was as follows:
Bought 200 shares AAPL: $22,724.95
= $113.58*200 + $8.95 commission

Net Profit:
(a) Options Income: +$1,149.55
= ($5.80*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (AAPL closed above $110.00 strike price at Oct2015 expiration): -$724.95
= ($110.00-$113.58)*200 shares - $8.95 commissions

Total Net Profit (AAPL was above $110.00 strike price at Oct2015 options expiration): +$424.60
= (+$1,149.55 options income +$0.00 dividends -$724.95 capital appreciation)

Absolute Return: +1.9%
= +$424.60/$22,724.95
Annualized Return: +27.3%
= (+$424.60/$22,724.95)*(365/25 days)


3. Dow Chemical Co. (DOW) -- Closed
The transactions were as follows:
09/18/2015 Bought 200 DOW shares @ $43.29
09/18/2015 Sold 2 DOW Oct2015 $42.00 Call options @ $2.04
09/28/2015 Ex-dividend of $.42 per share
10/16/2015 2 DOW Call options assigned, so the 200 shares of DOW stock were sold at the $42.00 strike price
Note: the price of DOW stock was $47.62 upon Oct2015 options expiration

The overall performance result (including commissions) for this Dow Chemical Co. (DOW) covered calls position was as follows:
Stock Purchase Cost: $8,666.95
= ($43.29*200+$8.95 commission)

Net Profit:
(a) Options Income: +$397.55
= ($2.04*200 shares) - $10.45 commissions
(b) Dividend Income: +$84.00
= ($.42 dividend per share x 200 shares)

(c) Capital Appreciation (Stock assigned at $42.00 at Oct2015 expiration): -$266.95
+($42.00-$43.29)*200 - $8.95 commissions
Total Net Profit (Stock assigned at $42.00 at Oct2015 expiration): +$214.60
= (+$397.55 options income +$84.00 dividend income -$266.95 capital appreciation)
Absolute Return: +2.5%
= +$214.60/$8,666.95
Annualized Return: +31.2%
= (+$214.60/$8,666.95)*(365/29 days)


4. EMC Corp. (EMC) -- Closed
The transactions were as follows:
09/22/2015  Bought 400 EMC Corp shares @ $23.71
09/22/2015 Sold 4 EMC Oct2015 $23.00 Call options @ $1.08
Note: the stock purchase and the sale of these call options was done as one simultaneous buy/write transaction.
09/29/2015 Ex-dividend of $46.00 = ($.115 x 400 shares)
10/16/2015 4 EMC Call options assigned, so the 400 shares of EMC stock were sold at the $23.00 strike price
Note: the price of EMC stock was $27.77 upon Oct2015 options expiration

The overall performance result (including commissions) for this EMC Corp (EMC) covered calls position was as follows:
Stock Purchase Cost: $9,492.95
= ($23.71*400+$8.95 commission)

Net Profit:
(a) Options Income: +$420.05
= ($1.08*400 shares) - $11.95 commissions
(b) Dividend Income (Stock assigned at Oct2015 expiration): +$46.00
= ($.115 dividend per share x 400 shares); or

(c) Capital Appreciation (Stock assigned at $23.00 at Oct2015 expiration): -$292.95
+($23.00-$23.71)*400 - $8.95 commissions
Total Net Profit (Stock assigned at $23.00 at Oct2015 expiration): +$173.10
= (+$420.05 options income +$46.00 dividend income -$292.95 capital appreciation)
Absolute Return: +1.8%
= +$173.10/$9,492.95
Annualized Return: +26.6%
= (+$173.10/$9,492.95)*(365/25 days)


5. Enterprise Products Partners LP (EPD) -- Closed
The transactions were as follows:
09/11/2015 Bought 200 Enterprise Products Partners LP shares @ $26.40
09/11/2015 Sold 2 EPD Oct2015 $25.00 Call Options @ $2.10

10/16/2015 2 EPD Call options assigned, so the 200 shares of EPD stock were sold at the $25.00 strike price
Note: the price of EPD stock was $28.89 upon Oct2015 options expiration


The performance result (including commissions) for these Enterprise Products Partners LP covered calls was as follows:
Stock Purchase Cost: $5,288.95
= ($26.40*200+$8.95 commission)

Net Profit:
(a) Options Income: +$409.55
= 200*$2.10 - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (EPD stock assigned at $25.00) = -$288.95
= ($25.00-$26.40)*200 - $8.95 commissions

Total Net Profit (EPD assigned at $25.00): +$120.60
= (+$409.55 +$0.00 -$288.95)

Absolute Return: +2.3%
= +$120.60/$5,288.95
Annualized Return: +22.8%
= (+$120.60/$5,288.95)*(365/36 days)


6. General Motors Co. (GM) -- Closed
The transactions were as follows:
09/22/2015  Bought 300 General Motors Co. shares @ $29.67
09/22/2015 Sold 3 GM Oct2015 $29.00 Call options @ $1.32
Note: the stock purchase and the sale of these call options was done as one simultaneous buy/write transaction.

10/16/2015 3 GM Call options assigned, so the 300 shares of GM stock were sold at the $29.00 strike price
Note: the price of GM stock was $33.15 upon Oct2015 options expiration

The overall performance result (including commissions) was as follows:
Bought 300 shares GM: $8,909.95
= $29.67*300 + $8.95 commission

Net Profit:
(a) Options Income: +$384.80
= ($1.32*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (GM closed above $29.00 strike price at Oct2015 expiration): -$209.95
= ($29.00-$29.67)*300 shares - $8.95 commissions

Total Net Profit (GM above $29.00 strike price at Oct2015 options expiration): +$174.85
= (+$384.80 options income +$0.00 dividend income -$209.95 capital appreciation)

Absolute Return: +2.0%
= +$174.85/$8,909.95
Annualized Return: +28.7%
= (+$174.85/$8,909.95)*(365/25 days)


7. JPMorgan Chase & Co. (JPM) -- Closed
The transactions were as follows:  
09/18/2015 Bought 200 JPM shares @ $60.93
09/18/2015 Sold 2 JPM Oct2015 $60.00 Call options @ $2.23
10/02/2015 Ex-dividend of $88.00 = (200 shares x $.44 per share)

10/16/2015 2 JPM Call options assigned, so the 200 shares of JPM stock were sold at the $60.00 strike price
Note: the price of JPM stock was $62.43 upon Oct2015 options expiration

The overall performance result (including commissions) for this JPMorgan Chase Co. (JPM) covered calls position was as follows:
Stock Purchase Cost: $12,194.95
= ($60.93*200+$8.95 commission)

Net Profit:
(a) Options Income: +$435.55
= ($2.23*200 shares) - $10.45 commissions
(b) Dividend Income (JPM stock assigned at Oct2015 expiration): +$88.00
= ($.44 dividend per share x 200 shares)
(c) Capital Appreciation (JPM stock assigned at $60.00 at Oct2015 expiration): -$194.95
+($60.00-$60.93)*200 - $8.95 commissions
Total Net Profit (Stock assigned at $60.00 at Oct2015 expiration): +$328.60
= (+$435.55 +$88.00 -$194.95)

Absolute Return: +2.7%
= +$328.60/$12,194.95
Annualized Return: +33.9%
= (+$328.60/$12,194.95)*(365/29 days)

8. MetLife Inc. (MET) -- Closed  
The transactions were as follows:
08/31/2015 Sold 4 MetLife Inc. Sep2015 $48.00 Puts @ $.96
Note: The price of MET was $49.55 when this transaction was executed.
09/18/2015 4 MET Sep2015 Put options exercised and 400 shares of MET purchased at $48.00 strike price
Note: the price of MET was $46.52 upon Sep2015 options expiration
09/21/2015 Sold 4 MET $47.50 Oct2015 Call options @ $1.25
Note: the price of MET was $47.20 when this transaction was made

10/16/2015 4 MET Call options assigned, so the 400 shares of MET stock were sold at the $47.50 strike price
Note: the price of MET stock was $48.84 upon Oct2015 options expiration

The overall performance results (including commissions) for these transactions was as follows:
100% Cash-Secured Cost Basis: $19,200.00
= $48.00*400

Net Profit:
(a) Options Income: +$860.10
= ($.96+$1.25) *400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MET closed above $47.50 strike price at Oct2015 expiration): -$200.00
= ($47.50 - $48.00)*400 shares

Total Net Profit (MET stock was above $47.50 strike price upon the Oct2015 options expiration): +$660.10
= (+$860.10 options income +$0.00 dividend income -$200.00 capital appreciation)

Absolute Return: +3.4%
= +$660.10/$19,200.00
Annualized Return: +27.3%
= (+$660.10/$19,200.00)*(365/46 days)


9. Micron Technology Inc. (MU) -- Closed
The transactions were as follows:
08/12//2015  Sold 7 MU 100% cash-secured $17.00 Put options @ $.78
Note: The price of MU was $17.66 when this transaction was executed.
09/18/2015 7 MU Sep2015 Put options exercised and 700 shares of MU purchased at $17.00 strike price
Note: the price of MU was $15.50 upon Sep2015 options expiration
09/21/2015 Sold 7 MU $17.00 Oct2015 Call options @ $.55
Note: the price of MU was $15.80 when this transaction was made

10/16/2015 7 MU Call options assigned, so the 700 shares of MU stock were sold at the $17.00 strike price
Note: the price of MU stock was $18.50 upon Oct2015 options expiration

The overall performance results (including commissions) for these transactions was as follows:
100% Cash-Secured Cost Basis: $11,900.00
= $17.00*700

Net Profit:
(a) Options Income: +$902.60
= ($.78+$.55) * 700 shares - 2*$14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MU was above $17.00 strike price at Oct2015 expiration): +$0.00
= ($17.00 - $17.00)*700 shares

Total Net Profit (MU stock wass above $17.00 strike price upon the Oct2015 options expiration): +$902.60
= (+$902.60 +$0.00 +$0.00)

Absolute Return (MU above $17.00 strike price at Oct2015 options expiration): +7.6%
= +$902.60/$11,900.00
Annualized Return: +42.6%
= (+$902.60/$11,900.00)*(365/65 days)


10. Prudential Financial Inc. (PRU) -- Closed
The transaction was as follows:
09/22/2015  Sold 2 PRU Oct2015 $75.00 100% cash-secured Put options @ $1.95
Note: the price of PRU was $75.60 today when this transaction was executed.
10/16/2015 2 PRU Oct2015 $75.00 Put options expired
Note: the price of Prudential was $79.27 upon Oct2015 options expiration

The Covered Calls Advisor does not use margin, so the detailed information on this position and the result shown below reflect the fact that this position was established using 100% cash securitization for the two Put options sold.

The overall performance result (including commissions) was as follows:
100% Cash-Secured Cost Basis: $15,000.00
= $75.00*200
Note: the price of PRU was $75.60 when these options were sold

Net Profit:
(a) Options Income: +$379.55
= ($1.95*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (PRU was above $75.00 strike price at Oct2015 expiration): +$0.00
= ($75.00-$75.00)*200 shares

Total Net Profit (PRU was above $75.00 strike price at Oct2015 options expiration): +$379.55
= (+$379.55 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return: +2.5%
= +$379.55/$15,000.00
Annualized Return: +36.9%
= (+$379.55/$15,000.00)*(365/25 days) 

Friday, October 16, 2015

Roll Out -- iShares China Large-Cap ETF Covered Calls

Today, with less than an hour before market close, the covered calls position in iShares China Large-Cap ETF (ticker FXI) was rolled out from the Oct2015 $38.00 strike price to another $38.00 strike for the Nov2015 options expiration.  This is a continuation of the initial FXI position established in August.  A Call options roll out limit order was established at a net credit of $.78, and the transaction was executed within a few minutes as follows:
Buy-to-Close 3 FXI Oct2015 Call options @ $1.70
Sell-to-Open 3 FXI Nov2015 Call options  @ $2.48
Net Credit Received                                     $ .78

As detailed below, this iShares China Large-Cap ETF investment will yield a +4.3% absolute return in 95 days (which is equivalent to a +16.6% annualized return-on-investment) if FXI closes above the $38.00 strike price on the Nov2015 options expiration date. 

The transaction history and a potential return on investment result are as follows:

iShares China Large-Cap ETF (FXI) --Continuation
The transactions are as follows:
08/17/2015 Sold 3 iShares China Large-Cap ETF Sep2015 $38.50 Puts @ $.77
Note 1: The price of FXI was $39.75 when this transaction was executed.
Note 2: The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.
09/18/2015 3 FXI Sep2015 Put options exercised and 300 shares of FXI purchased at $38.50 strike price
Note: the price of FXI was $36.32 upon Sep2015 options expiration
09/21/2015 Sold 3 FXI $38.00 Oct2015 Call options @ $.73
Note: the price of FXI was $36.91 when this transaction was made
Roll Out on 10/16/2015 Bought-to-Close 3 FXI $38.00 Oct2015 Call options @ $1.70 
and simultaneously       Sold-to-Open 3 FXI $38.00 Nov2015 Call options @ $2.48
Note: the price of FXI was $39.69 when this roll out transaction was executed, so there was only $.01 [$1.70 - ($39.69 - $38.00)] of time value remaining in the Oct2015 Call options when this roll out transaction occurred.

A possible overall performance result (including commissions) for these transactions would be as follows:
100% Cash-Secured Cost Basis: $11,550.00
= $38.50*300

Net Profit:
(a) Options Income: +$650.40
= ($.77+$.73-$1.70+$2.48) *300 shares - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains above $38.00 strike price at Nov2015 expiration): -$150.00
= ($38.00-$38.50)*300 shares

Total Net Profit (If FXI is above $38.00 strike price upon the Nov2015 options expiration): +$500.40
= (+$650.40 options income +$0.00 dividend income -$150.00 capital appreciation)

Absolute Return (If FXI remains above $38.00 strike price at Nov2015 options expiration): +4.3%
= +$500.40/$11,550.00
Annualized Return: +16.6%
= (+$500.40/$11,550.00)*(365/95 days)

Established New Position in United Continental Holdings Inc.

Today, the Covered Calls Advisor established a new position in United Continental Holdings Inc.(ticker symbol UAL) by selling three Nov2015 Put options at the $55.00 strike price. This position is a somewhat conservative one since it was established with 2.9% downside protection to the strike price.

As detailed below, the United Continental investment will yield a +3.4% absolute return in 36 days (which is equivalent to a +34.3% annualized return-on-investment) if UAL closes above the $55.00 strike price on the Nov2015 options expiration date. 

This potential return is excellent given the 2.9% downside protection (from the $56.67 stock price to the $55.00 strike price) when the position was established.  The implied volatility in the options was high at 37 when this position was established; so the $1.90 price per share received when the Puts were sold is very attractive to us option sellers.  There is some uncertainty in that 3rd quarter earnings will be announced next Thursday, but Delta has already announced earnings, which were slightly above analysts' estimates.  With about 30% of airline companies' operating earnings coming from fuel expense, they airlines will likely continue to achieve substantial earnings benefits (compared with last year) from oil prices that are substantially below their prior year pricing.  Their bookings and their pricing are reasonably stable.  This situation does not appear to be fully appreciated in the price of airlines stocks, including United Continental.    

1.  United Continental Holdings Inc. (UAL) -- New Position
The transaction was as follows:
10/16/2015  Sold 3 UAL 100% cash-secured $55.00 Put options @ $1.90
Note: The price of UAL was $56.67 today when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result 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) would be as follows:
100% Cash-Secured Cost Basis: $16,500.00
= $55.00*300

Net Profit:
(a) Options Income: +$558.80
= ($1.90*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL is above $55.00 strike price at Nov2015 expiration): +$0.00
= ($55.00-$55.00)*300 shares

Total Net Profit (If UAL is above $55.00 strike price at Nov2015 options expiration): +$558.80
= (+$558.80 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If UAL is above $55.00 strike price at Nov2015 options expiration): +3.4%
= +$558.80/$16,500.00
Annualized Return: +34.3%
= (+$558.80/$16,500.00)*(365/36 days)

The downside 'breakeven price' at expiration is at $53.10 ($55.00 - $1.90), which is 6.3% below the current market price of $56.67.
The 'crossover price' at expiration is $58.57 ($56.67 + $1.90).  This is the price above which it would have been more profitable to simply buy-and-hold UAL until Nov 20th (the Nov2015 options expiration date) rather than selling these Put options.

Thursday, October 8, 2015

Early Exercise of Potash Corp of Saskatchewan Inc Covered Calls

Today before market open, I received both an email and a phone call notification from my broker that the covered calls position in Potash Corp of Saskatchewan Inc. (Ticker Symbol POT) with an Oct2015 expiration and at the $20.00 strike price was exercised early. The POT shares had risen from $20.31 when purchased to $22.16 at yesterday's market close and the time value remaining in the call option had declined to less than $.05; so the owner of the Call options exercised his/her option to buy the shares at the $20.00 strike price in order to capture Thursday's (today's) quarterly ex-dividend payment of $.38 per share.

The actual return-on-investment result for this closed position was +1.6% absolute return (equivalent to +72.4% annualized return for the 8 day holding period).

The transactions associated with this Potash Corp of Saskatchewan Inc position were as follows:

09/30/2015 Bought 200 POT shares @ $20.31
09/30/2015 Sold 2 POT Oct2015 $20.00 Call options @ $.73
10/07/2015 Two POT Call options exercised and 200 shares sold a $20.00 strike price
Note: the market closing price of POT stock yesterday was $22.16

The performance result (including commissions) for this Potash Corp covered calls position are as follows:
Stock Purchase Cost: $4,070.95
= ($20.31*200+$8.95 commission)

Net Profit:
(a) Options Income: +$135.55
= ($.73*200 shares) - $10.45 commissions
(b) Dividend Income (Call options exercised early on business day prior to Oct 8th ex-div date): +$0.00
(c) Capital Appreciation [Potash Corp stock assigned early on Oct 7th (business day prior to Oct 8th ex-div date)]: -$70.95
+($20.00-$20.31)*200 - $8.95 commissions

Total Net Profit: +$64.60
= (+$135.55 +$0.00 -$70.95); or

Absolute Return (two Call options exercised on day prior to ex-div date): +1.6%
= +$64.60/$4,070.95
Annualized Return: +72.4%
= (+$64.60/$4,070.95)*(365/8 days)