Establish Family Dollar Stores Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Family Dollar Stores Inc (FDO) covered calls as follows:

Established Family Dollar Stores Inc(FDO) Covered Calls for Jul09:
06/29/09 Bought 500 FDO @ $28.68
06/29/09 Sold 5 FDO Jul09 $27.50 Calls @ $1.88

Family Dollar Stores, Inc. operates a chain of over 6,000 self-service retail discount stores for low to lower-middle income consumers in the United States.
This Advisor currently has a cautious view towards domestic consumer spending. Consequently, a conservative in-the-money position was established with up to 4.1% [($28.68-$27.50)/$28.68] downside protection available while still achieving the maximum potential annualized return-on-investment of 46.8% from this covered calls position.

Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for FDO. It scored above the threshold of 20.0 with a Total Points rating of 20.67.




















Note: For expanded view, left click on the spreadsheet above.

Some potential results from this transaction are:
Absolute Return if Exercised at $27.50: +2.4%
= [($1.88-($28.68-$27.50)]/$28.68
Annualized Return If Exercised (ARIE): +46.8%
= [($1.88-($28.68-$27.50))/$28.68]*(365/19 days)

Downside Breakeven Price Point: $26.80
Downside Breakeven Protection: 6.6%

Continuation Transactions -- China Mobile, iShares MSCI Russell 2000 Small Cap Index ETF and Sohu.com

This past Friday was expiration Friday for June 2009. In this Covered Calls Advisor blog's most recent post, it was noted that of the eleven covered calls positions for June 2009, eight were exercised and the stock was called away. The remaining three June09 positions expired out-of-the-money. Today it was decided to retain the stocks of these three holdings (CHL, IWM, and SOHU) and to establish July09 covered calls for each one. The transactions history to date and the profit potential for each of these companies is detailed below.

1. China Mobile LTD ADR (CHL) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in China Mobile LTD ADR (CHL):
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The transactions history to date is as follows:
04/20/09 Initial Stock Purchase Transaction -- Bought 400 CHL @ $45.65
04/20/09 Inital Calls Sold Transaction -- Sold 4 CHL May09 $45.00 Calls @ $2.40
A debit-spread transaction was executed as follows:
05/06/09 Buy-to-Close (BTC) 4 CHL May09 $45s @ $3.70
05/06/09 Sell-to-Open (STO) 4 CHL May09 $50s @ $.65
Note: The price of CHL was $48.51 today when the debit-spread was transacted.
05/11/09 Ex-Div of $362.32($.9058 * 400 shares)
05/16/09 May09 Options Expired
Note: The closing price of CHL was $46.06 on expiration Friday.
05/18/09 Sell-to-Open (STO) 4 CHL Jun09 $50s @ $1.25
Note: The price of CHL was $47.30 today when the call options were sold.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The overall performance results(including commissions) for the CHL transactions would be as follows:
Stock Purchase Cost: $18,268.95
($45.65*400+$8.95 commission)

Net Profit:
(a) Options Income: +$892.20
= (400*($2.40-$3.70+$.65+$1.25+$1.75) - 4*$11.95 commissions)
(b) Dividend Income: +$362.32 ($.9058 * 400 shares)
(c) Capital Appreciation (If stock price unchanged at $49.75): +$1,631.05
= ($49.75-$45.65)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $50.00): +$1,731.05
= ($50.00-$45.65)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $49.75): +$2,885.57
= (+$892.20 +$362.32 +$1,631.05)
Total Net Profit(If stock price exercised at $50.00): +$2,985.57
= (+$892.20 +$362.32 +$1,731.05)

Absolute Return if Stock Price Unchanged at $49.75: +15.8%
= +$2,885.57/$18,268.95
Annualized Return If Stock Price Unchanged (ARIU): +64.8%
= (+$2,885.57/$18,268.95)*(365/89 days)

Absolute Return if Exercised at $50.00: +16.3%
= +$2,985.57/$18,268.95
Annualized Return If Exercised (ARIE): +67.0%
= (+$2,985.57/$18,268.95)*(365/89 days)


2. iShares MSCI Russell 2000 Small Cap Index ETF (IWM) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 500 shares owned in iShares MSCI Russell 2000 Small Cap Index ETF (IWM):
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The transactions history to date is as follows:
05/21/09 Initial Stock Purchase Transaction -- Bought 500 IWM @ $48.22
05/21/09 Inital Calls Sold Transaction -- Sold 5 IWM Jun09 $47.00 Calls @ $2.87
A roll-up debit-spread transaction was executed as follows:
06/02/09 Buy-to-Close (BTC) 5 IWM Jun09 $47s @ $6.00
06/02/09 Sell-to-Open (STO) 5 IWM Jun09 $53s @ $1.51
Note: The price of IWM was $52.83 today when the debit-spread was transacted.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 5 IWM Jul09 $51s @ $1.13
The price of IWM was $50.15 today when this transaction was executed.

The overall performance results(including commissions) for the IWM transactions would be as follows:
Stock Purchase Cost: $24,118.95
= ($48.22*500+$8.95 commission)

Net Profit:
(a) Options Income: -$283.10
= (500*($2.87-$6.00+$1.51+$1.13) - 3*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $50.15): +$956.05
= ($50.15-$48.22)*500 - $8.95 commissions
(c) Capital Appreciation (If exercised at $51.00): +$1,381.05
= ($51.00-$48.22)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $50.15): +$672.95
= (-$283.10 +$0.00 +$956.05)
Total Net Profit(If stock price exercised at $51.00): +$1,097.95
= (-$283.10 +$0.00 +$1,381.05)

Absolute Return if Unchanged at $50.15: +2.8%
= +$672.95/$24,118.95
Annualized Return If Unchanged (ARIU) +17.6%
= (+$672.95/$24,118.95)*(365/58 days)

Absolute Return if Exercised at $51.00: +4.6%
= +$1,097.95/$24,118.95
Annualized Return If Exercised (ARIE) +28.6%
= (+$1,097.95/$24,118.95)*(365/58 days)


3. Sohu.com Inc (SOHU) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in Sohu.com Inc (SOHU):
06/24/09 Sell-to-Open (STO) 4 SOHU Jul09 $65s @ $2.85

The transactions history to date is as follows:
05/19/09 Initial Stock Purchase Transaction -- Bought 400 SOHU @ $54.50
05/19/09 Inital Calls Sold Transaction -- Sold 4 SOHU Jun09 $55.00 Calls @ $3.00
A debit-spread transaction was executed as follows:
05/29/09 Buy-to-Close (BTC) 4 SOHU Jun09 $55s @ $5.84
05/29/09 Sell-to-Open (STO) 4 SOHU Jun09 $60s @ $2.51
Note: The price of SOHU was $59.85 today when the debit-spread was transacted.
06/03/09 Buy-to-Close (BTC) 4 SOHU Jun09 $60s @ $6.15
06/03/09 Sell-to-Open (STO) 4 SOHU Jun09 $65s @ $2.89
Note: The price of SOHU was $65.02 today when the debit-spread was transacted.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 4 SOHU Jul09 $65s @ $2.85
Note: The price of SOHU was $64.60 today when the debit-spread was transacted.

The overall performance results(including commissions) for this SOHU covered calls position would be as follows:
Stock Purchase Cost: $21,808.95
($54.50*400+$8.95 commission)

Net Profit:
(a) Options Income: -$343.80
= (400*($3.00-$5.84+$2.51-$6.15+$2.89+$2.85) - 4*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $64.60): +$4,031.05
= ($64.60-$54.50)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $65.00): +$4,191.05
= ($65.00-$54.50)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $64.60): +$3,687.25
= (-$343.80 +$0.00 +$4,031.05)
Total Net Profit(If stock price exercised at $65.00): +$3,847.25
= (-$343.80 +$0.00 +$4,191.05)

Absolute Return if Stock Price Unchanged at $64.60: +16.9%
= +$3,687.25/$21,808.95
Annualized Return If Stock Price Unchanged (ARIU): +102.9%
= (+$3,687.25/$21,808.95)*(365/60 days)

Absolute Return if Exercised at $65.00: +17.6%
= +$3,847.25/$21,808.95
Annualized Return If Exercised (ARIE) +107.3%
= (+$3,847.25/$21,808.95)*(365/60 days)

Establish iShares MSCI China ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI China ETF (FXI). A summary of the transactions today is as follows:

Established iShares MSCI China ETF (FXI) Covered Calls for Jul09:
06/22/09 Bought 1200 FXI @ $36.14
06/22/09 Sold 12 FXI Jul09 $37.00 Calls @ $1.40

The prior FXI covered calls for Jun09 were called away upon last Friday's expiration, and given this advisor's continued bullish viewpoint on China, it was decided to re-establish a covered calls position with FXI for Jul09 expiration. China ranks #1 in this advisor's '2009 Country Value Rankings'(see chart below). Some of the key value-oriented metrics for China are as follows:
- Real GDP growth of approximately 6.5% in 2009. This compares with a projection of negative growth this year in most of the world's major countries.
- Estimated inflation of -0.5%
- Price/Book ratio of 2.37 is a below-average valuation relative to other countries (for example, U.S. is currently at 3.41).

Note: left click on image below for an expanded view

The FXI ETF was selected as the primary investment vehicle for achieving wide exposure to China's stock market performance. It consists of market-cap-weighted positions in the 25 largest companies in China, and although it is most heavily weighted in the financial, energy, and telecommunications sectors, it still provides a relatively good way to diversify across the Chinese economy. Since China remains as the Covered Calls Advisor's top investment idea, a major commitment of 17% of the total CCAP is now allocated to FXI covered calls. Moreover, as a direct reflection of this Advisor's current bullishness regarding China, a relatively bullish covered calls position 2.4% [($37.00-$36.14)/$36.14)] out-of-the-money was established despite the CCAP current Overall Market Meter sentiment of 'Neutral'.

Some key indicators for this FXI covered calls position are:

Absolute Return if Stock Price Unchanged at $36.14: +3.9%
= $1.40/$36.14
Annualized Return if Unchanged (ARIU): +54.3%
= ($1.40/$36.14)/(365/26 days)

Absolute Return if Exercised at $37.00: +6.3%
= [$1.40 + ($37.00 - $36.14)]/$36.14
Annualized Return if Exercised(ARIE): +87.8%
= [$1.40 + ($37.00 - $36.14)]/(365/26 days)

Downside Breakeven Price Point: $34.74
Downside Breakeven Protection: 3.9%

June 2009 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of eleven positions with June 2009 expirations, with the following results:
- Eight positions (AMGN, BYI, FLR, HA, HPQ, FXI, NE and 400 shares of SOHU) closed in-the-money. The calls were exercised and the stock was called away. The annualized percent return-on-investment(ROI) results for the eight exercised positions were:

Amgen Inc (AMGN): +45.5%
Bally Technologies Inc.(BYI): +51.4%
Fluor Corporation (FLR): +84.2%
Hawaiian Holdings Inc. (HA): +187.5%
Hewlett-Packard Company (HPQ): +65.1%
iShares MSCI China ETF (FXI): +55.3%
Noble Corp (NE): +85.8%
Sohu.com Inc (SOHU): +93.3%

- Three positions in the CCAP (CHL,IWM,and 400 shares of SOHU) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish Jul09 covered call positions. The related transactions will be made during the next few days and the actual transactions will be posted on this blog site on the same day they occur.

Detailed results for the eight positions that were assigned (called away) upon Jun09 expiration are as follows:

1. Amgen Inc(AMGN) -- Closed
The transactions history for the AMGN covered calls was:
03/23/09 Initial Stock Purchase Transaction -- Bought 300 AMGN @ $48.95
03/23/09 Inital Calls Sold Transaction -- Sold 3 AMGN Apr09 $50.00 Calls @ $1.70
04/18/09 Apr09 Options Expired
04/24/09 Continuation Transaction -- Sell-to-Open (STO) 3 AMGN May09 $50s @ $1.05
Note: The price of AMGN was $48.95 today when the call options were sold.
05/16/09 May09 Options Expired
Note: The closing price of AMGN was $48.16 on expiration Friday.
05/18/09 Sell-to-Open (STO) 3 AMGN Jun09 $50s @ $1.12
Note: The price of AMGN was $48.30 today when the call options were sold.
06/20/09 Jun09 Options Exercised (300 shares of AMGN called away)
Note: Closing price of AMGN was $52.34 on expiration Friday.

The overall performance results(including commissions) for the AMGN transactions were as follows:
Stock Purchase Cost: $14,693.95
($48.95*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,127.40 [300*($1.70+$1.05+$1.12) - 3*$11.20 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $50.00): +$501.05
= ($50.00-$48.30)*300 - $8.95 commissions

Total Net Profit: +$1,628.45
= (+$1,127.40 +$0.00 +$501.05)

Absolute Return with Stock Exercised at $50.00: +11.1%
= +$1,628.45/$14,693.95
Annualized Return: +45.5%
= (+$1,628.45/$14,693.95)*(365/89 days)


2. Bally Technologies Inc. (BYI) -- Closed
The transactions history for the BYI covered calls was:
05/21/09 Bought 500 BYI @ $26.63
05/21/09 Sold 5 BYI Jun09 $25.00 Calls @ $2.80
06/20/09 Jun09 Options Exercised (500 shares of BYI called away)
Note: Closing price of BYI was $28.68 on expiration Friday.

The overall performance results(including commissions) for the BYI transactions were as follows:
Stock Purchase Cost: $13,323.95
($26.63*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,387.30 (500*$2.80 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $25.00): -$823.95
= ($25.00-$26.63)*500 - $8.95 commissions

Total Net Profit: +$563.35
= (+$1,387.30 +$0.00 -$823.95)

Absolute Return with Stock Exercised at $25.00: +4.2%
= +$563.35/$13,323.95
Annualized Return: +51.4%
= (+$563.35/$13,323.95)*(365/30 days)

3. Fluor Corporation (FLR) -- Closed
The Transactions History to date for the FLR covered calls is as follows:
04/24/09 Initial Stock Purchase Transaction -- Bought 500 FLR @ $39.975
04/24/09 Inital Calls Sold Transaction -- Sold 5 FLR May09 $40.00 Calls @ $2.40
Roll-Up-and-Out transactions:
05/12/09 Buy-to-Close (BTC) 5 FLR May09 $40.00s @ $6.10
05/12/09 Sell-to-Open (STO) 5 FLR Jun09 $45.00s @ $3.90
06/20/09 Jun09 Options Exercised (500 shares of FLR called away)
Note: Closing price of FLR was $50.27 on expiration Friday.

The overall performance results(including commissions) for the FLR transactions through the Jun09 expiration would be as follows:

Stock Purchase Cost: $19,996.45
($39.975*500+$8.95 commission)

Net Profit:
(a) Options Income: +$61.90 (500*($2.40-$6.10+$3.90) - 3*$12.70 commissions)
(b) Dividend Income: +$62.50 Ex-Div on 6/3/09 ($.125*500 shares)
(c) Capital Appreciation (Stock exercised at $45.00): +$2,503.55
= ($45.00-$39.975)*500 - $8.95 commissions

Total Net Profit(Stock exercised at $45.00): +$2,627.95
= (+$61.90 +$62.50 +$2,503.55)

Absolute Return (Exercised at $45.00): +13.1%
+$2,627.95/$19,996.45
Annualized Return: +84.2%
(+$2,627.95/$19,996.45)*(365/57 days)

4. Hawaiian Holdings Inc. (HA) -- Closed
The Transactions History to date for the HA covered calls is as follows:
05/14/09 Bought 500 HA @ $4.7896
05/14/09 Sold 5 HA Jun09 $5.00 Calls @ $.70
06/20/09 Jun09 Options Exercised (500 shares of HA called away)
Note: Closing price of HA was $5.30 on expiration Friday.

Stock Purchase Cost: $2,403.75
($4.7896*500+$8.95 commission)

Net Profit:
(a) Options Income: +$337.30 (500*$.70 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $5.00): +$96.25
= ($5.00-$4.7896)*500 - $8.95 commissions

Total Net Profit(Stock exercised at $5.00): +$433.55
= (+$337.30 +$0.00 +$96.25)

Absolute Return (Stock Exercised at $5.00): +19.0%
=[$.70+($5.00-$4.7896)]/$4.7896
Annualized Return If Exercised (ARIE): +187.5%
=([$.70+($5.00-$4.7896)]/$4.7896)*(365/37 days)

5. Hewlett-Packard Company (HPQ) -- Closed
The Transactions History to date for the HPQ covered calls is as follows:
05/18/09 Bought 600 HPQ @ $35.28
05/18/09 Sold 6 HPQ Jun09 $36.00 Calls @ $1.40
06/20/09 Jun09 Options Exercised (600 shares of HPQ called away)
Note: Closing price of HPQ was $38.35 on expiration Friday.

Stock Purchase Cost: $17,648.95
($35.28*500+$8.95 commission)

Net Profit:
(a) Options Income: +$687.30 (500*$1.40 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $36.00): +$351.05
= ($36.00-$35.28)*500 - $8.95 commissions

Total Net Profit(Stock exercised at $36.00): +$1,038.35
= (+$687.30 +$0.00 +$351.05)

Absolute Return (Stock Exercised at $36.00): +5.9%
= $1,038.35/$17,648.95
Annualized Return: +65.1%
= ($1,038.35/$17,648.95)*(365/33 days)

6. iShares MSCI China Fund ETF (FXI) -- Closed
The Transactions History to date for the FXI covered calls is as follows:
05/18/09 Bought 1500 FXI @ $34.98
05/18/09 Sold 15 FXI Jun09 $35.00 Calls @ $1.75
06/20/09 Jun09 Options Exercised (1500 shares of FXI called away)
Note: Closing price of FXI was $37.27 on expiration Friday.

Stock Purchase Cost: $52,478.95
($34.98*1500+$8.95 commission)

Net Profit:
(a) Options Income: +$2,604.80 (1500*$1.75 - $20.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $35.00): +$21.05
= ($35.00-$34.98)*1500 - $8.95 commissions

Total Net Profit(Stock exercised at $35.00): +$2,625.85
= (+2,604.80 +$0.00 +$21.05)

Absolute Return (Stock Exercised at $35.00): +5.0%
= $2,635.85/$52,478.95
Annualized Return: +55.3%
= ($2,635.85/$52,478.95)*(365/33 days)

7. Noble Corp (NE) -- Closed
The Transactions History to date for the FXI covered calls is as follows:
05/18/09 Initial Stock Purchase Transaction -- Bought 500 NE @ $29.000
05/18/09 Inital Calls Sold Transaction -- Sold 5 NE Jun09 $27.50 Calls @ $2.52
A debit-spread transaction was executed as follows:
05/28/09 Buy-to-Close (BTC) 5 NE Jun09 $27.50s @ $5.20
05/28/09 Sell-to-Open (STO) 5 NE Jun09 $32.50s @ $1.50
Note: The price of NE was $32.51 today when the debit-spread was transacted.
06/20/09 Jun09 Options Exercised (500 shares of NE called away)
Note: Closing price of NE was $33.47 on expiration Friday.

The overall performance results(including commissions) for the NE transactions were as follows:
Stock Purchase Cost: $14,508.95
($29.00*500+$8.95 commission)

Net Profit:
(a) Options Income: -$615.40
= (500*($2.52-$5.20+$1.50) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $32.50): +$1,741.05
= ($32.50-$29.00)*500 - $8.95 commissions

Total Net Profit(Stock exercised at $32.50): +$1,125.65
= (-$615.40 +$0.00 +$1,741.05)

Absolute Return (Stock Exercised at $32.50): +7.8%
= +$1,125.65/$14,508.95
Annualized Return If Exercised (ARIE) +85.8%
=(+$1,125.65/$14,508.95)*(365/33 days)

8. Sohu.com Inc (SOHU) -- Closed
The Transactions History to date for the SOHU covered calls were as follows:
02/24/09 Bought 400 SOHU @ $44.617
02/24/09 Sold 4 SOHU Mar09 $45.00 Calls @ $3.20
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 4 SOHU Apr $45s @ $1.45
Note: The price of SOHU was $40.10 today when the call options were sold.
04/13/09 Buy-to-Close (BTC) 4 SOHU Apr09 $45.00s @ $5.20
04/13/09 Sell-to-Open (STO) 4 SOHU May09 $50.00s @ $4.30
Net Debit-Spread upon Roll-Up-and-Forward was $.90 ($5.20 - $4.30)
Note: The price of SOHU was $49.90 today when the call options were sold.
05/04/09 Buy-to-Close (BTC) 4 SOHU May09 $50s @ $8.95
05/04/09 Sell-to-Open (STO) 4 SOHU May09 $60s @ $1.95
Net Debit-Spread upon Roll-Up was $7.00 ($8.95 - $1.95)
Note: The price of SOHU was $58.65 today when the call options were sold.
05/16/09 May09 Options Expired
Note: The closing price of SOHU was $52.58 on expiration Friday.
05/18/09 Sell-to-Open (STO) 4 SOHU Jun09 $60s @ $1.25
Note: The price of SOHU was $53.98 today when the call options were sold.
06/20/09 Jun09 Options Exercised (400 shares of SOHU called away)
Note: Closing price of SOHU was $64.55 on expiration Friday.

The overall performance results(including commissions) for the SOHU transactions are as follows:
Stock Purchase Cost: $17,855.75
($44.617*400+$8.95 commission)

Net Profit:
(a) Options Income: -$852.25 (400*($3.20+$1.45-$5.20+$4.30-$8.95+$1.95+$1.25) - 5*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $60.00): +$6,144.25
= ($60.00-$44.617)*400 - $8.95 commissions

Total Net Profit(Stock exercised at $60.00): +$5,292.00
= (-$852.25 +$0.00 +$6,144.25)

Absolute Return (Stock Exercised at $60.00): +29.6%
= +$5,292.00/$17,855.75
Annualized Return: +93.3%
= (+$5,292.00/$17,855.75)*(365/116 days)