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Thursday, December 21, 2017

Early Assignment -- iShares China Large-Cap ETF

Early this morning, the Covered Calls Advisor received notifications from my broker (Schwab) that five iShares China Large-Cap ETF (ticker symbol FXI) January 19th, 2018 $43.00 Call options were exercised early, so the 500 shares of FXI in the Covered Calls Advisor Portfolio (CCAP) were assigned (i.e. sold) at the $43.00 strike price.  This early assignment by the Call owners to capture today's ex-distribution was expected since the Call options were well in-the-money and there was no time value remaining in the Calls at yesterday's market close. 

As detailed below, the actual return-on-investment result achieved for the five iShares China Large-Cap ETF Covered Calls that were assigned today was a +0.7% absolute return (equivalent to +19.1% annualized return) for the 13 days this position was held.  The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established.

iShares China Large-Cap ETF (FXI) -- Covered Calls Position Closed by Early Assignment

The transactions were:
12/07/2017 Bought 500 FXI shares @ $44.52
12/07/2017 Sold 5 FXI Jan 19th, 2018 $43.00 Call options @ $1.82
Note: a simultaneous buy/write transaction was executed.
12/20/2017 Five FXI Call options assigned, so 500 shares of FXI sold at $43.00 strike price
Note: the price of FXI was $45.76 at market close

The overall performance result (including commissions) for this FXI Covered Calls position was as follows:
Covered Calls Purchase Cost Basis: $21,358.30
= ($44.52 - $1.82) *500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$910.00
= ($1.82*500 shares)
(b) Distribution Income (Call options exercised early on business day prior to Dec 21st ex-distribution date): +$0.00
(c) Capital Appreciation (FXI assigned early on Dec 20th): -$764.95
+($43.00-$44.52)*500 shares - $4.95 commissions

Total Net Profit: +$145.05
= (+$910.00 +$0.00 -$764.95)

Absolute Return: +0.7%
= +$145.05/$21,358.30
Annualized Return: +19.1%
= (+$145.05/$21,358.30)*(365/13 days)

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