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Saturday, May 19, 2018

May 18th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had six positions with May 18th, 2018 options expirations:
  • Three positions (Citigroup Inc., Sinclair Broadcast Group Inc., and U.S. Steel Corp.) have previously been rolled out to June 15th, 2018 Covered Calls positions and thus continue to be held in the Covered Calls Advisor Portfolio. 
  • Three positions (Alcoa Corp., Alibaba Group Holding Ltd, and Lam Research Corp.) closed yesterday in-the-money, so those shares were assigned (sold) at their respective strike prices.
So far in 2018, twenty-seven of thirty-two positions (84.4%) were assigned profitably and at an average annualized return-on-investment of +28.9%.  This 84.4% year-to-date result exceeds the Covered Calls Advisor's overall long-term goal of having at least 67% of positions closed out at a profit.  None of the remaining five positions (Blackstone Group, Citigroup Inc., Delta Air Lines Inc., Sinclair Broadcasting Group Inc., and U.S. Steel Corp.) have yet to be closed out, but instead currently remain as open positions in the Covered Calls Advisor Portfolio. 

For the three positions assigned at yesterday's May 18th expiration, the average annualized return-on-investment was +45.9%.  The results for each position was:
  • Alcoa Corp.:  +2.6% absolute return (+43.8% annualized return) in 22 days
  • Alibaba Group Holding Ltd.:  +7.7% absolute return (+42.5% annualized return) in 66 days 
  • Lam Research Corp.:  +4.2% absolute return (+51.4% annualized return) in 30 days
The cash now available in the Covered Calls Advisor Portfolio from the closing of these three 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.  

To demonstrate how return-on-investment results for a closed Covered Calls position are calculated, the details for one of the three assigned positions is detailed below:

Alcoa Corporation (AA) -- Covered Calls Position Closed

The transactions were as follows:
04/27/2018 Bought 400 shares of Alcoa stock @ $51.65 per share 
04/27/2018 Sold 4 Alcoa May 18th, 2018 $50.00 Call options @ $2.95 per share
Note: this was a simultaneous Buy/Write transaction
05/18/2018 4 AA Call options closed in-the-money and stock assigned at $50.00 strike price
Note: Closing price of AA stock was $50.83 upon 5/18/2018 options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $19,487.63
= ($51.65 - $2.95) * 400 shares + $7.63 commission
Net Profit Components:
(a) Option Income: +$1,180.00
= ($2.95 * 400 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Alcoa stock was above $50.00 strike price at May 18th expiration): -$664.95
= ($50.00 -$51.65) * 400 shares - $4.95 commission

Total Net Profit (If assigned at expiration): +$515.05
= (+$1,180.00 options income +$0.00 dividend income -$664.95 capital appreciation)

Absolute Return: +2.6%
= +$515.05/$19,487.63
Equivalent Annualized Return: +43.8%
= (+$515.05/$19,487.63)*(365/22 days)

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