Establish Aeropostale Inc. Covered Calls

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

Established Aeropostale Inc. (ARO) Covered Calls for Dec09:
11/25/09 Bought 300 ARO @ $30.56
11/25/09 Sold 3 ARO Dec09 $31.00 Calls @ $1.30

Aeropostale, Inc. operates as a mall-based specialty retailer offering proprietary branded, value-priced, active-oriented casual apparel and accessories. Their market is primarily teens between 14 and 17 years old. The company offers a collection of apparel, including graphic t-shirts, tops, bottoms, sweaters, jeans, and outerwear; and various accessories including sunglasses, belts, socks, and hats under AEROPOSTALE, AERO, 87, and other related trademarks. It has a very strong competitor in Gap Inc. and to a lesser extent the higher-end teen mall retailers of American Eagle Outfitters and Abercrombie & Fitch. Nevertheless, Standard & Poor's calls Aeropostale "the best performing teen apparel retailer in the mall." Aeropostale operates a total of over 900 stores located almost exclusively in the U.S.

Aeropostale provides both good growth and value characteristics; this year it is continuing its perennial store-for-store sales growth and this has afforded management the opportunity to be selectively less aggressive with promotional markdowns. As a result, merchandise gross margins are likely to increase this year by more than 3.0 percentage points. This, in combination with management's continuing excellent expense controls are resulting in outstanding profitability (measured by return on invested capital) results. Yet at its current price, it is also a compelling value investment since its P/E ratio is below 10.0 based on its expected current year earnings of $3.20 per share. Third quarter earnings will be announced on Dec 2nd, but these results are well known since the company has already announced its sales results and has a tight window of $.90-$.91 for quarterly earnings. The more important announcement that day will be ARO's November sales results; this advisor believes this could be a positive catalyst for the stock price since this year will be compared with the relatively depressed sales levels during last year's credit crisis.

The 'Buy Alerts' spreadsheet below shows that ARO has a 'Total Points' rating of 21.49 which exceeds the Covered Calls Advisor's desired threshold of 20.0 points.





















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


Some possible overall performance results(including commissions) for the ARO transactions would be as follows:
Stock Purchase Cost: $9,176.95
= ($30.56*300+$8.95 commission)

Net Profit:
(a) Options Income: +$378.80
= (300*$1.30 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $30.56):
-$8.95 = ($30.56-$30.56)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $31.00): +$123.05
= ($31.00-$30.56)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $30.56): +$369.85
= (+$378.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $31.00): +$501.85
= (+$378.80 +$0.00 +$123.05)

Absolute Return if Unchanged at $30.56: +4.1%
= +$369.85/$9,176.95
Annualized Return If Unchanged (ARIU) +62.8%
= (+$132.85/$9,176.95)*(365/24 days)

Absolute Return if Exercised at $46.00: +5.5%
= +$501.85/$9,176.95
Annualized Return If Exercised (ARIE) +83.2%
= (+$144.85/$9,176.95)*(365/24 days)

Continuation Transactions to Re-Establish Covered Calls For Seven Holdings

Last Friday was expiration Friday for November 2009. In a Covered Calls Advisor's blog recent post, it was noted that of the seventeen covered calls positions for November 2009: (1) Four were in-the-money at expiration and were therefore exercised and the stocks were called away; and (2) Thirteen positions ended out-of-the-money. Yesterday it was decided to retain seven equities in the CCAP and to establish Dec09 covered calls positions. The seven equities are Accenture Ltd(ACN), Amgen Inc(AMGN), EMCOR Group(EME), ITT Corporation(ITT), Noble Corporation(NE), Sohu.com Inc(SOHU), and UnitedHealth Group Inc(UNH). The results so far for these seven holdings are as follows:

1. Accenture Ltd.(ACN) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in ACN is as follows:
08/24/09 Bought 300 ACN @ $35.51
08/24/09 Sold 3 ACN Sep09 $35.00 Calls @ $1.15
Roll-Out Transaction:
09/18/09 Buy-to-Close (BTC) 10 ACN Sep09 $35.00s @ $1.10
09/18/09 Sell-to-Open (STO) 10 ACN Oct09 $35.00s @ $1.90
Note: The price of ACN was $36.08 today when this debit-spread was transacted.
10/13/09 Buy-to-Close (BTC) 3 ACN Oct09 $35.00s @ $4.20
10/13/09 Sell-to-Open (STO) 3 ACN Nov09 $40.00s @ $.80
Note: The price of ACN was $39.18 today when this debit-spread was transacted.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 ACN Dec09 $40.00s @ $1.25

Stock Purchase Cost: $10,661.95
= ($35.51*300+$8.95 commission)

Net Profit:
(a) Options Income: -$104.80
= (300*($1.15-$1.10+$1.90-$4.20+$.80+$1.25) - 4*$11.20 commissions)
(b) Dividend Income: +$225.00 ($.75 * 300 shares)
(c) Capital Appreciation (If exercised at $40.00): +$1,338.05
= ($40.00-$35.51)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $40.00): +$1,458.25
= (-$104.80 +$225.00 +$1,338.05)

Absolute Return if Exercised at $40.00: +13.7%
= +$1,458.25/$10,661.95
Annualized Return If Exercised (ARIE): +42.7%
= (+$1,458.25/$10,661.95)*(365/117 days)

2. Amgen Inc.(AMGN) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in AMGN is as follows:
10/22/09 Bought 200 AMGN @ $56.40
10/22/09 Sold 2 AMGN Nov09 $57.50 Calls @ $1.20
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 AMGN Dec09 $57.50s @ $.93
Note: Price of AMGN was $56.15 when the Dec09 options were sold.

Stock Purchase Cost: $11,288.95
= ($56.40*200+$8.95 commission)

Net Profit:
(a) Options Income: +$405.10
= (200*($1.20+$.93) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged at $56.15): -$58.95
= ($56.15-$56.40)*200 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $57.50): +$211.05
= ($57.50-$56.40)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $56.15): +$346.15
= (+$405.10 +$0.00 -$58.95)
Total Net Profit(If stock exercised at $57.50): +$616.15
= (+$405.10 +$0.00 +$211.05)

Absolute Return if Stock Price Unchanged at $56.15: +3.1%
= +$346.15/$11,288.95
Annualized Return If Unchanged (ARIU): +19.3%
= (+$346.15/$11,288.95)*(365/58 days)

Absolute Return if Stock Exercised at $57.50: +5.5%
= +$616.15/$11,288.95
Annualized Return If Exercised (ARIE): +34.3%
= (+$616.15/$11,288.95)*(365/58 days)

3. EMCOR Group(EME) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in EME is as follows:
10/20/09 Bought 400 EME @ $24.35
10/20/09 Sold 4 EME Nov09 $25.00 Calls @ $.85
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 4 EME Dec09 $25.00s @ $1.25
Note: Price of EME was $25.30 when the Dec09 options were sold.

Stock Purchase Cost: $9,748.95
= ($24.35*400+$8.95 commission)

Net Profit:
(a) Options Income: +$816.10
= (400*($.85+$1.25) - 2*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $25.00): +$251.05
= ($25.00-$24.35)*400 - $8.95 commissions

Total Net Profit(If stock exercised at $25.00): +$1,067.15
= (+$816.10 +$0.00 +$251.05)

Absolute Return if Stock Exercised at $25.00: +10.9%
= +$1,067.10/$9,748.95
Annualized Return If Exercised (ARIE): +66.6%
= (+$1,067.10/$9,748.95)*(365/60 days)

4. ITT Corporation(ITT) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in ITT is as follows:
10/23/09 Bought 300 ITT @ $55.28
10/23/09 Sold 3 ITT Nov09 $55.00 Calls @ $2.60
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 ITT Jan10 $55.00s @ $.85
Note: Price of ITT was $51.55 when the Jan10 options were sold.

Stock Purchase Cost: $16,592.95
($55.28*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,012.60 (300*($2.60+$.85) - 2*$11.20 commissions)
(b) Dividend Income: +$63.90 ($.213 * 300 shares)
c) Capital Appreciation(If stock price unchanged at $51.55): -$1,127.95
= ($51.55-$55.28)*300 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $55.00): -$92.95
= ($55.00-$55.28)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $51.55): -$51.45
= (+$1,012.60 +$63.90 -$1,127.95)
Total Net Profit(If stock exercised at $55.00): +$983.55
= (+$1,012.60 +$63.90 -$92.95)

Absolute Return if Stock Price Unchanged at $51.55: -0.3%
= -$51.45/$16,592.95
Annualized Return If Unchanged (ARIU): -1.3%
= (-$51.45/$16,592.95)*(365/85 days)

Absolute Return if Stock Exercised at $55.00: +5.9%
= +$983.55/$16,592.95
Annualized Return If Exercised (ARIE): +25.5%
= (+$983.55/$16,592.95)*(365/85 days)

5. Noble Corporation(NE) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in NE is as follows:
09/02/09 Bought 300 NE @ $33.98
09/02/09 Sold 3 NE Sep09 $34.00 Calls @ $1.30
Roll-Up-and-Out Transaction:
09/17/09 Buy-to-Close (BTC) 3 NE Sep09 $34.00s @ $5.22
09/17/09 Sell-to-Open (STO) 3 NE Oct09 $36.00s @ $3.87
Note: The price of NE was $39.19 today when this debit-spread was transacted and the remaining time value in the Sep09 option was only $.03 [$5.22-($39.19-$34.00)].
Roll-Up-and-Out Transaction:
10/16/09 Buy-to-Close (BTC) 3 NE Oct09 $36.00s @ $5.60
10/16/09 Sell-to-Open (STO) 3 NE Nov09 $42.00s @ $1.75
Note: The price of NE was $41.56 today when this transaction occurred.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 NE Dec09 $42.00s @ $1.45
Note: Price of NE was $41.30 when the Dec09 options were sold.

The overall performance results(including commissions) for this NE covered calls position would be as follows:
Stock Purchase Cost: $10,202.95
($33.98*300+$8.95 commission)

Net Profit:
(a) Options Income: -$779.80
= (300*($1.30-$5.22+$3.87-$5.60+$1.75+$1.45) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $41.30): +$2,187.05
= ($41.30-$33.98)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $42.00): +$2,397.05
= ($42.00-$33.98)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $41.30): +$1,407.25
= (-$779.80 +$0.00 +$2,187.05)
Total Net Profit(If stock price exercised at $42.00): +$1,617.25
= (-$779.80 +$0.00 +$2,397.05)

Absolute Return if Stock Price Unchanged at $41.30: +13.8%
= +$1,407.25/$10,202.95
Annualized Return If Unchanged (ARIU) +46.6%
= (+$1,061.45/$10,202.95)*(365/108 days)

Absolute Return if Exercised at $42.00: +15.9%
= +$1,617.25/$10,202.95
Annualized Return If Exercised (ARIE) +53.6%
= (+$1,617.25/$10,202.95)*(365/108 days)

6. Sohu.com Inc.(SOHU) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in SOHU is as follows:
10/16/09 Bought 200 SOHU @ $64.05
10/16/09 Sold 2 SOHU Nov09 $65.00 Calls @ $3.50
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 2 SOHU Dec09 $60.00s @ $.75
Note: Price of SOHU was $55.10 when the Dec09 options were sold.

Some possible overall performance results(including commissions) for the SOHU transactions would be as follows:
Stock Purchase Cost: $12,818.95
= ($64.05*200+$8.95 commission)

Net Profit:
(a) Options Income: +$829.10
= (200*($3.50+$.75) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $55.10):
-$1,798.95 = ($55.10-$64.05)*200 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $60.00): -$818.95
= ($60.00-$64.05)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $55.10): -$969.85
= (+$829.10 +$0.00 -$1,798.95)
Total Net Profit(If stock exercised at $60.00): +$10.15
= (+$829.10 +$0.00 -$818.95)

Absolute Return if Stock Price Unchanged at $55.10: -7.6%
= -$969.85/$12,818.95
Annualized Return If Unchanged (ARIU): -43.1%
= (-$969.85/$12,818.95)*(365/64 days)

Absolute Return if Stock Exercised at $60.00: +0.1%
= +$10.15/$12,818.95
Annualized Return If Exercised (ARIE): +0.5%
= (+$10.15/$12,818.95)*(365/64 days)

7. UnitedHealth Group Inc.(UNH) -- Continuation
The transactions history to date and the profit potential for the continuation covered calls position in UNH is as follows:
09/23/09 Bought 400 UNH @ $27.05
09/23/09 Sold 4 UNH Oct09 $26.00 Calls @ $1.95
10/17/09 Oct09 Options Expired
The closing price of UNH was $24.45 on expiration Friday.
10/19/09 Sell-to-Open (STO) 4 UNH Nov09 $26.00s @ $.80
The price of UNH was $24.77 today when this transaction was executed.
Roll-Up Transaction:
11/09/09 Buy-to-Close (BTC) 4 UNH Nov09 $26.00s @ $3.15
11/09/09 Sell-to-Open (STO) 4 UNH Nov09 $29.00s @ $.92
Note: Net Debit-Spread upon Roll-Up was $2.23 ($3.15 - $.92) and the price of UNH was $29.02 when this debit-spread was transacted.
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 4 UNH Dec09 $30.00s @ $.80
Note: Price of UNH was $29.34 when the Dec09 options were sold.

Some potential overall performance results(including commissions) for this UNH covered calls position would be as follows:
Stock Purchase Cost: $10,828.95
= ($27.05*400+$8.95 commission)

Net Profit:
(a) Options Income: +$480.20
= (400*($1.95+$.80-$3.15+$.92+$.80) - 4*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.34):
+$907.05 = ($29.34-$27.05)*400 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $30.00): +$1,171.05
= ($30.00-$27.05)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.34): +$1,387.25
= (+$480.20 +$0.00 +$907.05)
Total Net Profit(If stock exercised at $30.00): +$1,651.25
= (+$480.20 +$0.00 +$1,171.05)

Absolute Return if Stock Price Unchanged at $29.34: +12.8%
= +$1,387.25/$10,828.95
Annualized Return If Unchanged (ARIU): +53.7%
= (+$1,171.05/$10,828.95)*(365/87 days)

Absolute Return if Stock Exercised at $30.00: +15.2%
= +$1,651.25/$10,828.95
Annualized Return If Exercised (ARIE): +64.0%
= (+$1,651.25/$10,828.95)*(365/87 days)

Quidel Corporation (QDEL) -- Closed

Last Friday was expiration Friday for November 2009. In a Covered Calls Advisor's blog recent post, it was noted that of the seventeen covered calls positions for October 2009, four were in-the-money at expiration and were therefore exercised and the stocks were called away, and thirteen positions ended out-of-the-money. Today, it was decided to sell the 300 shares of Quidel Corporation(QDEL) as follows:

1. Quidel Corporation(QDEL) -- Closed
The transactions history was as follows:
10/26/09 Bought 300 QDEL @ $15.10
10/26/09 Sold 3 QDEL Nov09 $15.00 Calls @ $.90
11/21/09 Nov09 Options Expired
11/23/09 Sold 300 QDEL @ $13.26

The overall performance results(including commissions) for the QDEL transactions were as follows:
Stock Purchase Cost: $4,538.95
= ($15.10*300+$8.95 commission)

Net Profit:
(a) Options Income: +$258.80
= (300*$.90 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$560.95
= ($13.26-$15.10)*300 - $8.95 commissions

Total Net Profit: -$302.15
= (+$258.80 +$0.00 -$560.95)

Absolute Return: -6.7%
= -$302.15/$4,538.95
Annualized Return: -86.8%
= (-$302.15/$4,538.95)*(365/28 days)

November 2009 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of seventeen positions with November 2009 expirations, with the following results:
- Four positions (INTC, FXI, EWY, and AMTD) closed in-the-money. The calls were exercised and the stock was called away. The annualized percent return-on-investment(ROI) results for the four exercised positions were:

Intel Corporation (INTC): +21.3%
iShares MSCI China ETF (FXI): +43.2%
iShares MSCI South Korea ETF (EWY): +44.8%
TD Ameritrade Holding (AMTD): +52.3%

- Thirteen positions in the CCAP (ACN, AMGN, AHL, CHU, EME, FLR, FUQI, ITT, MFLX, NE, QDEL, SOHU, and UNH) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish Dec09 covered call positions. The related transactions will be made this week and the actual transactions will be posted on this blog site on the same day they occur.

Detailed results for the four positions that were assigned (called away) upon Nov09 expiration are as follows:

1. Intel Corporation (INTC) -- Closed
The transactions history was as follows:
10/27/09 Bought 700 INTC @ $19.70
10/27/09 Sold 7 INTC Nov09 $19.00 Calls @ $.88
11/04/09 $98.00 ($.14 * 700 shares) Ex-dividend
11/21/09 Nov09 Options Exercised (700 shares of INTC called away at $19.00)
Note: Closing price of INTC was $19.24 on expiration Friday.

The overall performance results(including commissions) for the INTC transactions are as follows:
Stock Purchase Cost: $13,798.95
($19.70*700+$8.95 commission)

Net Profit:
(a) Options Income: +$601.80 (700*$.88 - $14.20 commissions)
(b) Dividend Income: +$98.00 ($.14 * 700 shares)
(c) Capital Appreciation: -$498.95
= ($19.70-$19.00)*700 - $8.95 commissions

Total Net Profit: +$200.85
= (+$601.80 +$98.00 -$498.95)

Absolute Return: +1.5%
= +$200.85/$13,798.95

Annualized Return: +21.3%
= (+$200.85/$13,798.95)*(365/25 days)


2. iShares MSCI China ETF (FXI) -- Closed
The transactions history was as follows:
10/16/09 Bought 500 FXI @ $43.29
10/16/09 Sold 5 FXI Nov09 $44.00 Calls @ $1.40
10/22/09 Bought 500 FXI @ $43.73
10/22/09 Sold 5 FXI Nov09 $44.00 Calls @ $1.40
11/21/09 Nov09 Options Exercised (1000 shares of FXI called away at $44.00)
Note: Closing price of FXI was $44.60 on expiration Friday.

The overall performance results(including commissions) for the FXI transactions are as follows:
Stock Purchase Cost: $43,527.90
($43.29*500+$43.73*500+$8.95*2 commissions)

Net Profit:
(a) Options Income: +$1,374.60
= [1000*$1.40) - $25.40 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$481.05
= [$44.00-($43.29+$43.73)/2)*1000 - $8.95 commissions

Total Net Profit: +$1,855.65
= (+$1,374.60 +$0.00 +$481.05)

Absolute Return: +4.3%
= +$1,855.65/$43,527.90
Annualized Return: +43.2%
= (+$1,855.65/$43,527.90)*(365/36 days)


3. iShares MSCI South Korea ETF (EWY) -- Closed
The transactions history was as follows:
10/16/09 Bought 400 EWY @ $45.82
10/16/09 Sold 4 EWY Nov09 $46.00 Calls @ $1.90
11/21/09 Nov09 Options Exercised (400 shares of EWY called away at $46.00)
Note: Closing price of EWY was $46.08 on expiration Friday.

The overall performance results(including commissions) for the FXI transactions are as follows:
Stock Purchase Cost: $18,336.95
($45.82*400 +$8.95 commissions)

Net Profit:
(a) Options Income: +$748.05
= [400*$1.90) - $11.95 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$63.05
= ($46.00-$45.82)*400 - $8.95 commissions

Total Net Profit: +$811.10
= (+$748.05 +$0.00 +$63.05)

Absolute Return: +4.4%
= +$811.10/$18,336.95
Annualized Return: +44.8%
= (+$811.10/$18,336.95)*(365/36 days)


4. TD Ameritrade Holding (AMTD) -- Closed
The transactions history was as follows:
10/22/09 Bought 400 AMTD @ $19.70
10/22/09 Sold 4 AMTD Nov09 $20.00 Calls @ $.60
11/21/09 Nov09 Options Exercised (400 shares of AMTD called away at $20.00)
Note: Closing price of AMTD was $20.91 on expiration Friday.

The overall performance results(including commissions) for the AMTD transactions are as follows:
Stock Purchase Cost: $7,888.95
= ($19.70*400+$8.95 commission)

Net Profit:
(a) Options Income: +$228.05
= (400*$.60 - $11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation with Stock Exercised at $20.00: +$111.05
= ($20.00-$19.70)*400 - $8.95 commissions

Total Net Profit: +$339.10
= (+$228.05 +$0.00 +$111.05)

Absolute Return with Stock Exercised at $20.00: +4.3%
= +$339.10/$7,888.95
Annualized Return: +52.3%
= (+$339.10/$7,888.95)*(365/30 days)