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Saturday, January 30, 2016

Continuation of Alibaba Group Holdings Ltd. Position

At the Jan2016 options expiration, Alibaba Group Holdings Ltd. (ticker symbol BABA) price was below the $80.00 strike price, so the 2 Jan2016 Put options expired and 200 shares of BABA were purchased at $80.00.  Today, the Covered Calls Advisor continued the Alibaba position by selling 2 Feb2016 $67.50 Call options against the 200 long BABA shares.

As of today, options have now been sold for all fifteen Feb2016 portfolio positions shown under the 'Covered Calls Advisor Portfolio Holdings' section in the right sidebar.  These fifteen positions represent 70.1% of the total portfolio value, with the other 29.9% now in cash. 

A potential return-on-investment is -10.6% absolute return (equivalent to -67.8% annualized) for the 57 days of this Alibaba investment. Details of these Alibaba Group transactions to-date and a potential return-on-investment result are provided below:

1. Alibaba Group Holdings Ltd. (BABA) --Continuation
The transactions are as follows:
12/24/2015  Sold 2 BABA 100% cash-secured $80.00 Put options with Jan2016 expirations @ $1.08
Note: the price of Alibaba was $83.92 today when this transaction was executed.
01/15/2016 2 BABA Puts expired; so 200 shares purchased @ $80.00 each
Note: the price of BABA was $69.59 upon Jan2016 options expiration
01/29/2016 Sold 2 BABA Feb2016 $67.50 Call options @ $3.05
Note: the price of Alibaba was $83.15 today when these two Call options were sold.

A potential performance result (including commissions) could be as follows:
100% Cash-Secured Cost Basis: $16,000.00
= $80.00*200

Net Profit:
(a) Options Income: +$807.10
= [($1.08 +$3.05) * 200 shares] - 2*$9.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BABA closes above $67.50 strike price at Feb2016 expiration): -$2,500.00
= ($67.50 -$80.00)*200 shares

Total Net Profit: -$1,692.90
= (+$807.10 options income +$0.00 dividend income -$2,500.00 capital appreciation)

Absolute Return: -10.6%
= -$1,692.90/$16,000.00
Annualized Return: -67.8%
= (-$1,692.90/$16,000.00)*(365/57 days)