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Sunday, November 19, 2017

November 17th, 2017 Option Expiration Results

The Covered Calls Advisor Portfolio had seven positions with November 17th, 2017 options expirations.  As posted this past Friday on this blog, two in-the-money Covered Calls positions (Best Buy Inc. and Devon Energy Corp.) were continued by rolling them out to the December 15th expiration at the same strike price they had for the November 17th expiration.

Of the remaining five positions, two (Alibaba Group Holding Ltd. and CVS Health Corporation) closed in-the-money, so the maximum possible return-on-investment result was achieved.  Details of the transactions and results for each of these positions was:
  • Alibaba Group Holding Ltd.:  +2.2% absolute return (+31.2% annualized return) in 26 days
  • CVS Health Corporation:  +2.4% absolute return (+24.0% annualized return) in 36 days 
The cash now available in the Covered Calls Advisor Portfolio from the closing of these two positions 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.  

The remaining three positions (Citigroup Inc., Freeport McMoRan Inc., and Wynn Resorts Ltd.) closed yesterday with their stock price below their strike prices, so those shares will remain in the Covered Calls Advisor Portfolio (see holdings in right sidebar) until they are either sold or a continuation Covered Calls position is established. 

The details for each of the closed positions is as follows:


1. Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position Closed
The implied volatility of the Call options was 39.5 when this position was established.  This is a very high level which in large part is due to the uncertainty associated with the earnings report on Nov 2nd and its annual Singles Day sale on Nov 11th.

The transactions were as follows:
10/23/2017 Bought 300 shares of Alibaba stock @ $174.13 per share 
10/23/2017 Sold 3 Alibaba November 17th, 2017 $165.00 Call options @ $12.73 per share
Note: this was a simultaneous Buy/Write transaction
11/17/2017 3 BABA Call options assigned and 300 shares sold @ $165.00 strike price.
Note: the price of Alibaba stock was $185.13 at options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $48,426.96
= ($174.13 - $12.73)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$3,819.00
= ($12.73* 300 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock was above $165.00 strike price at Nov 17th expiration): -$2,743.95
= ($165.00 -$174.13)* 300 shares - $4.95 commission

Total Net Profit: +$1,075.05
= (+$3,819.00 options income +$0.00 dividend income -$2,743.95 capital appreciation)

Absolute Return: +2.2%
= +$1,075.05/$48,426.96
Equivalent Annualized Return: +31.2%
= (+$1,075.05/$48,426.96)*(365/26 days)



2. CVS Health Corporation (CVS) -- Covered Calls Position Closed
The transactions were as follows:
10/13/2017 Bought 300 shares of CVS stock @ $72.84 per share 
10/13/2017 Sold 3 CVS Nov 17th, 2017 $70.00 Call options @ $3.99 per share
Note: this was a simultaneous Buy/Write transaction
10/23/2017 Ex-dividend of $150.00
= $.50 per share x 300 shares
11/17/2017 3 CVS Call options assigned and 300 shares sold @ $70.00 strike price.
Note: the price of CVS stock was $70.68 at options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $20,661.96
= ($72.84 - $3.99)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$1,197.00
= ($3.99 * 300 shares)
(b) Dividend Income: +$150.00
= $.50 per share * 300 shares 
(c) Capital Appreciation (If CVS is above $70.00 strike price at Nov 17th expiration): -$856.95
= ($70.00 -$72.84)* 300 shares - $4.95 commission

Total Net Profit: +$490.05
= (+$1,197.00 options income +$150.00 dividend income -$856.95 capital appreciation)

Absolute Return: +2.4%
= +$490.05/$20,661.96
Equivalent Annualized Return: +24.0%
= (+$490.05/$20,661.96)*(365/36 days)

2 comments:

  1. I followed you into CVS and FCX. I was considering rolling CVS but decided to allocate the cash elsewhere. KSS upcoming dividend is .55. FOXA and MAT IV rank is ~80% due to possible deals. Also looking at the TSLA 295 strike.

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  2. I put an order in for KSS, but it started to move up shortly after and I did not get a fill. We'll see what happens tomorrow.

    Also, GM goes ex-Div on 12/7 for $.38. Looking at the $44 / $43.5 strikes.

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