Search This Blog

Tuesday, July 3, 2018

Roll Out Covered Calls in Blackstone Group LP

Today, a continuation Covered Calls position was established in Blackstone Group L.P. (ticker BX) for the July 20th, 2018 options expiration at the $35.00 strike price.  When the stock was at $34.02 today and the July 20th, 2018 $35.00 Calls were priced at $.32, this Advisor decided to sell 5 Call options against the 500 shares of BX stock currently held in the portfolio.

As detailed below, two potential return-on-investment results are (1) a +0.2% absolute return in 170 days (equivalent to a +0.4% annualized return-on-investment) if BX stock price unchanged at $34.02 at July 20th options expiration; or (2) a +3.0% absolute return in 170 days (equivalent to a +6.4% annualized return-on-investment) if assigned at the July 20th expiration.

Blackstone Group L.P. (BX) -- Roll Out Covered Calls Position
The implied volatility of the Call options was 22.5 and the open interest was 2,842 contracts today when this transaction was made. 

The transactions to-date are as follows:
01/31/2018 Bought 500 shares of Blackstone Group stock @ $36.24 per share 
01/31/2018 Sold 5 BX February 16th, 2018 $35.00 Call options @ $1.50 per share
Note: this was a simultaneous Buy/Write transaction
02/01/2018 Rolled-Up-and-Out to the March 16th, 2018 $36.00 strike price at at net debit of $.70 ($2.19 - $1.49) per share
02/08/2018 $425.00 (Ex-distribution of $.85 per share x 500 shares)
03/16/2018 Call options expired with stock price below strike price
05/07/2018 $175.00 received (ex-distribution of $.35 x 500 shares)
07/03/2018 Sold 5 July 20, 2018 $35.00 Call options @ $.32 per share
Note: the price of BX was $34.02 when these options were sold

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $17,378.30
= ($36.24 - $1.50)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$543.40
= ($1.50 - $.70 + $.32) * 500 shares -2*$8.30 commissions

(b) Distribution Income:  $600.00
= ($.85 + $.35) per share * 500 shares 
(c) Capital Appreciation (If BX stock price is unchanged at $34.02 at July 20th options expiration):  -$1,114.95
= ($34.02 - $36.24) * 500 shares -$4.95 commission; OR
(c) Capital Appreciation (If BX stock price is assigned at $35.00 strike price at July 20th options expiration): -$624.95
= ($35.00 - $36.24) * 500 shares -$4.95 commission

1. Total Net Profit (If BX stock price unchanged at $34.02 at July 20th options expiration):  +$28.45
= (+$543.40 options income +$600.00 distribution income -$1,114.95 capital appreciation); OR
2. Total Net Profit (If BX stock price is assigned at $35.00 strike price at July 20th options expiration):  +$518.45
= (+543.40 options income + $600.00 distribution income - $624.95 capital appreciation)

1. Absolute Return (If BX stock price unchanged at $34.02 at July 20th options expiration): +0.2%
= +$28.45/$17,378.30
Equivalent Annualized Return: +0.4%
= (+$28.45/$17,378.30)*(365/170 days); OR
2. Absolute Return (If BX stock price is assigned at $35.00 strike price at July 20th options expiration): +3.0%
= +$518.45/$17,378.30
Equivalent Annualized Return: +6.4%
= (+$518.45/$17,378.30)*(365/170 days)

No comments:

Post a Comment