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Saturday, May 20, 2017

May 2017 Option Expiration Results

The Covered Calls Advisor Portfolio had two positions (Devon Energy Corp and JPMorgan Chase & Co.) with May 2017 options expirations.   

For the JPMorgan Chase & Co. covered calls, the price of the stock closed yesterday at $84.78 which was below the $85.00 strike price, so the Covered Calls options expired.  The 400 shares will remain in the Covered Calls Advisor Portfolio until they are either sold or a continuation covered calls position is established by selling four June2017 Call options against the 400 JPMorgan shares now owned.

The Devon Energy short Put options position closed in-the-money, so the maximum possible return-on-investment result was achieved.  The return-on-investment result was +1.5% absolute return (+33.5% annualized return) in 16 days.  Details of this position are provided below.  The cash now available in the Covered Calls Advisor Portfolio from the closing of this Devon Energy position will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.

Devon Energy Corp. -- 100% Cash-Secured Put Options Position Closed at Expiration
This position was established when the price of Devon Energy Corp. (ticker DVN) was $37.21 (3.3% downside protection to the $36.00 strike price) and 16 days remaining until the options expiration date.

The implied volatility of the Put options was 33.3 when this position was established; so the $.54 price received per share received when the Puts were sold was a good premium to receive for these 3.3% out-of-the-money Put options.    

The transactions were as follows:
05/04/2017  Sold 10 DVN May2017 $36.00 100% cash-secured Put options @ $.54
Note: the price of DVN was $37.21 when this transaction was executed.
05/19/2017 10 May2017 DVN Put options expired
Note: the price of DVN was $38.39 at options expiration

The Covered Calls Advisor does not use margin, so the results shown below reflect the fact that this position was established using 100% cash securitization for the ten Put options sold.

The overall performance result (including commissions) was as follows:
100% Cash-Secured Cost Basis: $36,000.00
= $36.00*1,000

Net Profit:
(a) Options Income: +$528.55
= ($.54*1,000 shares) - $11.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (DVN stock closed above $36.00 strike price at May2017 expiration): +$0.00
= ($36.00-$36.00)*1,000 shares

Total Net Profit: +$528.55
= (+$528.55 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return: +1.5%
= +$528.55/$36,000.00
Annualized Return: +33.5%
= (+$528.55/$36,000.00)*(365/16 days)