Continuation Transaction -- U.S. Natural Gas Fund

The Covered Calls Advisor's Aug09 UNG covered calls position expired out-of-the-money. Today it was decided to retain the 1000 shares of the U.S. Natural Gas Fund (UNG) and to establish a Sep09 covered calls position as follows:

09/09/09 Sell-to-Open (STO) 10 UNG Sep09 $11.00s @ $.40

The price of Nat Gas has plunged recently and even traded below $2.50, which is well below the $3.00 floor expected by this advisor. However, as the price rebounded somewhat in the past two days to the $2.90 area, it was decided to continue with the UNG covered calls position for the Sep09 expiration and to re-evaluate late next week as to whether the position should be extended to an Oct09 expiration.

The transactions history to date is as follows:
06/30/09 Bought 1000 UNG @ $13.92
06/30/09 Sold 10 UNG Jul09 $14.00 Calls @ $.75
07/18/09 Jul09 Options Expired
The price of UNG closed at $13.16 on expiration Friday.
07/22/09 Sell-to-Open (STO) 10 UNG Aug09 $14.00 Calls @ $.75
The price of UNG was $13.73 today when this transaction was executed.
08/22/09 Aug09 Options Expired
The price of UNG closed at $11.35 on expiration Friday.
09/09/09 Sell-to-Open (STO) 10 UNG Sep09 $11.00s @ $.40
The price of UNG was $10.79 today when this transaction was executed.

The overall performance results(including commissions) for the UNG transactions would be as follows:
Stock Purchase Cost: $13,928.95
($13.92*1000+$8.95 commission)

Net Profit:
(a) Options Income: +$1,850.65
= (1000*($.75+$.75+$.40) - 3*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock unchanged at $10.79): -$3,138.95
= ($10.79-$13.92)*1000 - $8.95 commissions
(c) Capital Appreciation (If exercised at $11.00): -$2,928.95
= ($11.00-$13.92)*1000 - $8.95 commissions

Total Net Profit(If stock price unchanged at $10.79): -$1,288.30
= (+$1,850.65 +$0.00 -$3,138.95)
Total Net Profit(If stock price exercised at $11.00): -$1,078.30
= (+$1,850.65 +$0.00 -$2,928.95)

Absolute Return if Stock Price Unchanged at $10.79: -9.2%
= -$1,288.30/$13,928.95
Annualized Return If Unchanged (ARIU): -41.7%
= (-$1,288.30/$13,928.95)*(365/81 days)

Absolute Return if Exercised at $11.00: -7.7%
= -$1,078.30/$13,928.95
Annualized Return If Exercised (ARIE): -34.9%
= (-$1,078.30/$13,928.95)*(365/81 days)

Establish Herbalife Ltd. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Herbalife Ltd (HLF) covered calls as follows:

Established Herbalife Ltd (HLF) Covered Calls for Sep09:
09/02/09 Bought 300 HLF @ $30.09
09/02/09 Sold 3 HLF Sep09 $30.00 Calls @ $1.00

Herbalife Ltd., a distributor network marketing company, sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide. Herbalife obtains about 80% of its sales internationally. Its most attractive current growth opportunity is in China where they have been recently licensed to increase their presence from five to ten provinces.

You might recall that a covered calls position with an AUG09 expiration was held in Herbalife. The position ended in-the-money and the stock was called away. As demonstrated by this advisor's 'Buy Alerts' spreadsheet below, the strong fundamentals and value-oriented conditions that existed when the previous position was established still remain; so it was decided today to re-establish a covered calls position in HLF with a SEP09 expiration. This Advisor currently has a moderately cautious view towards consumer spending, so a slightly in-the-money covered calls position was established.

Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for HLF. It scored well above the minimum threshold of 20.0 with a Total Points rating of 21.82.






















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

Some potential results from this transaction are:
Absolute Return if Exercised at $30.00: +3.3%
= [($1.00-($30.09-$30.00)]/$30.09
Annualized Return If Exercised (ARIE): +64.9%
= [($1.00 -($30.09-$30.00))]/($30.09)]*(365/17 days)

Downside Breakeven Price Point: $29.09
Downside Breakeven Protection: 3.6%

Establish Noble Corp. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Noble Corp.(NE) covered calls as follows:

Established Noble Corp.(NE) Covered Calls for Sep09:
09/02/09 Bought 300 NE @ $33.98
09/02/09 Sold 3 NE Sep09 $34.00 Calls @ $1.30

Noble Corporation provides contract drilling services for the oil and gas industry. It supplies its 43 jack-ups and 20 deepwater rigs to a worldwide exploration and production market for corporate and state-owned customers in the Gulf of Mexico, Brazil, Middle East, W. Africa, and India.

Noble Corp's stock is attractively priced -- the entire company is valued slightly below the liquidation value of its rig fleet. And it is also attractive on several other key valuation metrics, including: (1) lowest P/E ratio in 20 years; (2) strong balance sheet with debt-to-capitalization declining to 11.7%; and a good cash position; (3) an ongoing commitment to share buybacks; (4) strong and increasing cash flow; (5) very strong recent cost control performance. These results are a testimony to the capabilities being demonstrated by the relatively new senior management team. This Covered Calls Advisor believes that the decision to re-domicile to Switzerland (from the Caymans) was one important demonstration of management's good strategic vision. And in the highly cyclical oil & gas industry, their prudent, conservative approach to cost controls as well as contract management seems very sensible. If oil pricing can show some stability above $60 over the next few months, then the continuing softness in rig demand will begin to improve -- and Noble is well positioned to benefit as this occurs. In addition, management's future growth focus on worldwide deepwater rigs should serve it well.

Some potential results from this transaction are:
Absolute Return if Stock Price Unchanged at $33.98: +3.8%
Annualized Return If Unchanged (ARIU): +82.1%

Absolute Return if Exercised at $34.00: +3.9%
Annualized Return If Exercised (ARIE): +83.4%

Downside Breakeven Price Point: $32.68
Downside Breakeven Protection: 3.8%

Establish EMCOR Group Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of EMCOR Group Inc (EME) covered calls as follows:

Established EMCOR Group Inc(EME) Covered Calls for Sep09:
09/02/09 Bought 300 EME @ $22.36
09/02/09 Sold 3 EME Sep09 $22.50 Calls @ $.85

You might recall that a covered calls position with an AUG09 expiration was held in EMCOR Group, Inc. The position ended in-the-money and the stock was called away. The strong fundamentals and value-oriented conditions that existed when the previous position was established still remain; so it was decided today to re-establish a covered calls position in EME with a SEP09 expiration.

EMCOR Group, Inc. is an engineering and construction company that provides electrical and mechanical construction and facilities services worldwide. It engages in the design, integration, installation, start-up, operation, and maintenance of various electrical and mechanical systems; heating, ventilation, air conditioning, and refrigeration; fire protection systems; plumbing systems; and various industrial maintenance services.

Some potential results from this transaction are:
Absolute Return if Stock Price Unchanged at $22.36: +3.8%
Annualized Return If Unchanged (ARIU): +81.5%

Absolute Return if Exercised at $22.50: +4.4%
Annualized Return If Exercised (ARIE): +95.1%

Downside Breakeven Price Point: $21.51
Downside Breakeven Protection: 3.8%