Both 2008 year-to-date and 2007 performance results for the Covered Calls Advisor Portfolio (CCAP) are presented below. In each instance, CCAP results are compared against the Russell 3000 Index ETF(IWV) benchmark.
1. 2008 Year-to-Date Results (Jan 1st through Aug 31st, 2008):
CCAP 2008 Year-to-Date Absolute Return = -5.42%
($243,909.06-$257,886.51)/$257,886.51
Benchmark Russell 3000(IWV) 2008 Yr-to-Date Absolute Return =
-10.90%
($75.20-$84.40)/$84.40
2. 2007 Results:
The Covered Calls Advisor Portfolio (CCAP) was initiated on September 14th, 2007 with a beginning balance of $250,000. The CCAP balance at year-end (12/31/07) was $257,886.51. Below are the returns of the CCAP for this 2007 timeframe compared with the results of the Russell 3000 (IWV) benchmark during the same time period.
CCAP 2007 Absolute Return = +3.2%
($257,886.51-$250,000.00)/$250,000.00
Benchmark (IWV) 2007 Absolute Return = -1.2%
($84.40-$85.43)/$85.43
The corresponding annualized return for the 108 days the CCAP existed in 2007 (between Sept 14, 2007 and Dec 31, 2007) was:
CCAP 2007 Annualized Return = +10.7%
[($257,886.51-$250,000.00)/$250,000.00]*(365/108 days)
Benchmark Russell 3000(IWV) 2007 Annualized Return =
-4.1%
[($84.40-$85.43)/$85.43]*(365/108 days)
This Advisor's Overall Market Meter continues to indicate that a NEUTRAL investment posture is appropriate at this time. The corresponding covered calls investing approach is to write near-month primarily at-the-money covered calls. By 'at-the-money', this advisor means that for a covered calls portfolio, on average covered calls positions should be established somewhere between 1.0% below and 1.0% above the strike price.
Saturday, August 30, 2008
Tuesday, August 19, 2008
Establish Altria Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established Altria (MO) Covered Calls for Sep08.
08/19/08 Bought 500 MO @ $20.91
08/19/08 Sold 5 MO Sep08 $21.00 Calls @ $.51
Note: Returns below include $.29 ex-dividend on 9/11/08.
Annualized Return If Stock Price Unchanged (ARIU): +43.6%
Annualized Return If Exercised (ARIE): +48.5%
Downside Breakeven Protection: 3.8%
Note: If the call options are exercised early on 9/10/08 to capture the dividend on 9/11/08, then an annualized return of 47.6% would be achieved.
With this investment, the Covered Calls Advisor Portfolio (CCAP) is now fully invested with Sep08 covered calls positions.
Established Altria (MO) Covered Calls for Sep08.
08/19/08 Bought 500 MO @ $20.91
08/19/08 Sold 5 MO Sep08 $21.00 Calls @ $.51
Note: Returns below include $.29 ex-dividend on 9/11/08.
Annualized Return If Stock Price Unchanged (ARIU): +43.6%
Annualized Return If Exercised (ARIE): +48.5%
Downside Breakeven Protection: 3.8%
Note: If the call options are exercised early on 9/10/08 to capture the dividend on 9/11/08, then an annualized return of 47.6% would be achieved.
With this investment, the Covered Calls Advisor Portfolio (CCAP) is now fully invested with Sep08 covered calls positions.
Establish SunTrust Banks Inc Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established SunTrust Banks Inc (STI) Covered Calls for Sep08.
08/19/08 Bought 300 STI @ $39.91
08/19/08 Sold 3 STI Sep08 $40.00 Calls @ $2.70
Note: Returns below include $.77 ex-dividend on 8/28/08.
Annualized Return If Stock Price Unchanged (ARIU): +99.1%
Annualized Return If Exercised (ARIE): +101.7%
Downside Breakeven Protection: 8.7%
Established SunTrust Banks Inc (STI) Covered Calls for Sep08.
08/19/08 Bought 300 STI @ $39.91
08/19/08 Sold 3 STI Sep08 $40.00 Calls @ $2.70
Note: Returns below include $.77 ex-dividend on 8/28/08.
Annualized Return If Stock Price Unchanged (ARIU): +99.1%
Annualized Return If Exercised (ARIE): +101.7%
Downside Breakeven Protection: 8.7%
Monday, August 18, 2008
Establish St Jude Medical Inc Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established St Jude Medical Inc (STJ) Covered Calls for Sep08.
08/18/08 Bought 400 STJ @ $46.36
08/18/08 Sold 4 STJ Sep08 $45.00 Calls @ $2.40
Annualized Return If Stock Price Unchanged (ARIU): +24.8%
Annualized Return If Exercised (ARIE): +24.8%
Downside Breakeven Protection: 5.2%
Established St Jude Medical Inc (STJ) Covered Calls for Sep08.
08/18/08 Bought 400 STJ @ $46.36
08/18/08 Sold 4 STJ Sep08 $45.00 Calls @ $2.40
Annualized Return If Stock Price Unchanged (ARIU): +24.8%
Annualized Return If Exercised (ARIE): +24.8%
Downside Breakeven Protection: 5.2%
Establish Spirit Aerosystems Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established Spirit Aerosystems (SPR) Covered Calls for Sep08.
08/18/08 Bought 300 SPR @ $23.35
08/18/08 Sold 3 SPR Sep08 $25.00 Calls @ $.70
Annualized Return If Stock Price Unchanged (ARIU): +33.1%
Annualized Return If Exercised (ARIE): +111.3%
Downside Breakeven Protection: 3.0%
Established Spirit Aerosystems (SPR) Covered Calls for Sep08.
08/18/08 Bought 300 SPR @ $23.35
08/18/08 Sold 3 SPR Sep08 $25.00 Calls @ $.70
Annualized Return If Stock Price Unchanged (ARIU): +33.1%
Annualized Return If Exercised (ARIE): +111.3%
Downside Breakeven Protection: 3.0%
Establish Microsoft Corp Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established Microsoft Corp (MSFT) Covered Calls for Sep08.
08/18/08 Bought 500 MSFT @ $27.95
08/18/08 Sold 5 MSFT Sep08 $28.00 Calls @ $.81
Annualized Return If Stock Price Unchanged (ARIU): +32.0%
Annualized Return If Exercised (ARIE): +34.0%
Downside Breakeven Protection: 4.9%
Established Microsoft Corp (MSFT) Covered Calls for Sep08.
08/18/08 Bought 500 MSFT @ $27.95
08/18/08 Sold 5 MSFT Sep08 $28.00 Calls @ $.81
Annualized Return If Stock Price Unchanged (ARIU): +32.0%
Annualized Return If Exercised (ARIE): +34.0%
Downside Breakeven Protection: 4.9%
Establish Accenture Ltd Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established Accenture Ltd.(ACN) Covered Calls for Sep08.
08/18/08 Bought 300 ACN @ $41.01
08/18/08 Sold 3 ACN Sep08 $40.00 Calls @ $1.90
Annualized Return If Stock Price Unchanged (ARIU): +24.0%
Annualized Return If Exercised (ARIE): +24.0%
Downside Breakeven Protection: 4.6%
Established Accenture Ltd.(ACN) Covered Calls for Sep08.
08/18/08 Bought 300 ACN @ $41.01
08/18/08 Sold 3 ACN Sep08 $40.00 Calls @ $1.90
Annualized Return If Stock Price Unchanged (ARIU): +24.0%
Annualized Return If Exercised (ARIE): +24.0%
Downside Breakeven Protection: 4.6%
Establish iShares MSCI South Korea ETF Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established iShares MSCI South Korea ETF (EWY) Covered Calls for Sep08.
08/18/08 Bought 700 EWT @ $48.35
08/18/08 Sold 7 EWT Sep08 $50 Calls @ $1.05
Annualized Return If Stock Price Unchanged (ARIU): +24.0%
Annualized Return If Exercised (ARIE): +61.8%
Downside Breakeven Protection: 2.2%
Established iShares MSCI South Korea ETF (EWY) Covered Calls for Sep08.
08/18/08 Bought 700 EWT @ $48.35
08/18/08 Sold 7 EWT Sep08 $50 Calls @ $1.05
Annualized Return If Stock Price Unchanged (ARIU): +24.0%
Annualized Return If Exercised (ARIE): +61.8%
Downside Breakeven Protection: 2.2%
Establish iShares MSCI Taiwan ETF Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established iShares MSCI Taiwan ETF (EWT) Covered Calls for Sep08.
08/18/08 Bought 2000 EWT @ $13.13
08/18/08 Sold 20 EWT Sep08 $13.00 Calls @ $.55
Annualized Return If Stock Price Unchanged (ARIU): +35.3%
Annualized Return If Exercised (ARIE): +35.3%
Downside Breakeven Protection: 4.2%
Established iShares MSCI Taiwan ETF (EWT) Covered Calls for Sep08.
08/18/08 Bought 2000 EWT @ $13.13
08/18/08 Sold 20 EWT Sep08 $13.00 Calls @ $.55
Annualized Return If Stock Price Unchanged (ARIU): +35.3%
Annualized Return If Exercised (ARIE): +35.3%
Downside Breakeven Protection: 4.2%
Establish iShares MSCI China ETF Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established iShares MSCI China ETF (FXI) Covered Calls for Sep08.
08/18/08 Bought 800 FXI @ $40.60
08/18/08 Sold 8 FXI Sep08 $44.00 Calls @ $.60
Annualized Return If Stock Price Unchanged (ARIU): +16.3%
Annualized Return If Exercised (ARIE): +109.0%
Downside Breakeven Protection: 1.5%
Established iShares MSCI China ETF (FXI) Covered Calls for Sep08.
08/18/08 Bought 800 FXI @ $40.60
08/18/08 Sold 8 FXI Sep08 $44.00 Calls @ $.60
Annualized Return If Stock Price Unchanged (ARIU): +16.3%
Annualized Return If Exercised (ARIE): +109.0%
Downside Breakeven Protection: 1.5%
Establish Hewlett-Packard Covered Calls
The Covered Calls Advisor Portfolio(CCAP) Aug08 position in Hewlett-Packard (HPQ) was in-the-money on expiration Friday and the stock was therefore called away. It was decided to re-buy HPQ to re-establish a new covered calls position in HPQ for Sep08 as follows:
Established Hewlett-Packard(HPQ) Covered Calls for Sep08.
08/18/08 Bought 200 HPQ @ $44.34
08/08/08 Sold 2 HPQ Sep08 $45.00 Calls @ $1.55
Annualized Return If Stock Price Unchanged (ARIU): +37.2%
Annualized Return If Exercised (ARIE): +52.4%
Downside Breakeven Protection: 3.7%
Established Hewlett-Packard(HPQ) Covered Calls for Sep08.
08/18/08 Bought 200 HPQ @ $44.34
08/08/08 Sold 2 HPQ Sep08 $45.00 Calls @ $1.55
Annualized Return If Stock Price Unchanged (ARIU): +37.2%
Annualized Return If Exercised (ARIE): +52.4%
Downside Breakeven Protection: 3.7%
Devon Energy and Travelers Cos. -- Closed
Two Aug08 covered calls positions that expired with the stock prices out-of-the-money were closed out today by selling the stock. It was decided to sell these two stocks rather than rolling-out to Sep08 covered calls to raise cash in order to enable improved portfolio diversification by replacing them with covered calls positions in international ETFs. The detailed results for the completed positions in Devon Energy and Travelers Cos Inc. are as follows:
1. Devon Energy (DVN) -- Closed
The position in Devon Energy (DVN) was closed today by selling the 200 shares owned.
The Transactions History to date is as follows:
07/24/08 Initial Stock Purchase Transaction -- Bought 200 DVN @ $94.45
07/24/08 Initial Calls Sold Transaction -- Sold 2 DVN Aug08 $105.00 Calls @ $2.30
08/16/08 Aug08 Options Expired
08/18/08 Sold 200 DVN at $96.00
The overall performance results(including commissions) for the DVN transactions are as follows:
Stock Purchase Cost: $18,881.05
($94.45*200-$8.95 commission)
Net Profit:
(a) Options Income: +$449.55 (200*$2.30 - $10.45 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$292.10
= ($96.00-$94.45)*200 - 2*$8.95 commissions
Total Net Profit: +$741.65
= ($449.55 + $0 + $292.10)
Annualized Return: +57.3%
(+$741.65/$18,881.05)*(365/25 days)
2. Travelers Cos. Inc. (TRV) -- Closed
The position in Travelers Cos Inc (TRV) was closed today by selling the 500 shares owned.
The Transactions History to date is as follows:
05/22/08 Initial Stock Purchase Transaction -- Bought 500 TRV @ $49.28
06/05/08 Initial Calls Sold Transaction -- Sold 5 TRV Jun08 $50 Calls @ $.85
06/08/08 Ex-Dividend Date ($.30 per share)
06/20/08 Jun08 Options Expired
07/10/08 Covered Calls Continuation Transaction -- Sold 5 Jul08 $45.00 Calls @ $.80
Note: Price of TRV was $44.50 when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Sold 500 TRV at $44.16
The overall performance results(including commissions) for the TRV transactions are as follows:
Stock Purchase Cost: $24,648.95
($49.28*500+$8.95 commission)
Net Profit:
(a) Options Income: +$797.60 (500*($.85+$.80) - 2*$13.70 commissions)
(b) Dividend Income: $150 ($.30 x 500 shares)
(c) Capital Appreciation: -$2,577.90
= ($44.16-$49.28)*500 - 2*$8.95 commissions
Total Net Profit: -$1,630.30
= (+$797.60 + $150 - $2,577.90)
Annualized Return: -27.4%
(-$1,63.30/$24,648.95)*(365/88 days)
1. Devon Energy (DVN) -- Closed
The position in Devon Energy (DVN) was closed today by selling the 200 shares owned.
The Transactions History to date is as follows:
07/24/08 Initial Stock Purchase Transaction -- Bought 200 DVN @ $94.45
07/24/08 Initial Calls Sold Transaction -- Sold 2 DVN Aug08 $105.00 Calls @ $2.30
08/16/08 Aug08 Options Expired
08/18/08 Sold 200 DVN at $96.00
The overall performance results(including commissions) for the DVN transactions are as follows:
Stock Purchase Cost: $18,881.05
($94.45*200-$8.95 commission)
Net Profit:
(a) Options Income: +$449.55 (200*$2.30 - $10.45 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$292.10
= ($96.00-$94.45)*200 - 2*$8.95 commissions
Total Net Profit: +$741.65
= ($449.55 + $0 + $292.10)
Annualized Return: +57.3%
(+$741.65/$18,881.05)*(365/25 days)
2. Travelers Cos. Inc. (TRV) -- Closed
The position in Travelers Cos Inc (TRV) was closed today by selling the 500 shares owned.
The Transactions History to date is as follows:
05/22/08 Initial Stock Purchase Transaction -- Bought 500 TRV @ $49.28
06/05/08 Initial Calls Sold Transaction -- Sold 5 TRV Jun08 $50 Calls @ $.85
06/08/08 Ex-Dividend Date ($.30 per share)
06/20/08 Jun08 Options Expired
07/10/08 Covered Calls Continuation Transaction -- Sold 5 Jul08 $45.00 Calls @ $.80
Note: Price of TRV was $44.50 when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Sold 500 TRV at $44.16
The overall performance results(including commissions) for the TRV transactions are as follows:
Stock Purchase Cost: $24,648.95
($49.28*500+$8.95 commission)
Net Profit:
(a) Options Income: +$797.60 (500*($.85+$.80) - 2*$13.70 commissions)
(b) Dividend Income: $150 ($.30 x 500 shares)
(c) Capital Appreciation: -$2,577.90
= ($44.16-$49.28)*500 - 2*$8.95 commissions
Total Net Profit: -$1,630.30
= (+$797.60 + $150 - $2,577.90)
Annualized Return: -27.4%
(-$1,63.30/$24,648.95)*(365/88 days)
Continuation Transactions -- Honeywell Inc and Petrobras
Today, covered calls positions were established against two companies already owned in the Covered Calls Advisor Portfolio(CCAP). As shown by the transactions history below, the Aug08 options expired worthless and new options were sold today to roll-out to Sep08 covered call positions. As you can see below, both of these positions are currently tracking at a net loss. The Covered Calls Advisor continues to believe in the fundamental value of these companies and therefore is attempting to manage these positions back to profitability.
1. Honeywell(HON) Continuation Transaction
The following transaction was made today to establish a covered calls position against the 500 shares owned in Honeywell(HON):
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00
The Transactions History to date is as follows:
05/23/08 Initial Stock Purchase Transaction -- Bought 500 HON @ $58.89
05/23/08 Initial Calls Sold Transaction -- Sold 5 HON Jun08 $60 Calls @ $1.20
06/20/08 Jun08 Options Expired
07/02/08 Covered Calls Continuation Transaction -- Sold 5 Jul08 $52.50 Calls @ $.85
Note: Price of HON was $50.12 when the calls were sold today.
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 5 HON Aug08 $52.50 Calls @ $1.38
Note: Price of HON was $52.02 when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00
Note: Price of HON was $50.86 when the calls were sold today.
The overall performance results(including commissions) for the HON transactions through the Sep08 expiration would be as follows:
Stock Purchase Cost: $29,453.95
($58.89*500+$8.95 commission)
Net Profit:
(a) Options Income: +$2,164.20 (500*($1.20+$.85+$1.38+$1.00) - 4*$12.70 commissions)
(b) Dividend Income: +$137.50 ($.275 per share*500 shares ex-div on 8/15/08)
(c) Capital Appreciation (If exercised): -$3,177.10
= ($52.50-$58.89)*500 - 2*$8.95 commissions
Total Net Profit(If stock price exercised at $52.50): -$875.40
= (+$2,164.20 +$137.50-$3,177.10)
Annualized Return If Exercised (ARIE) -9.0%
(-$875.40/$29,453.95)*(365/120 days)
2. Petrobras(PBR) Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in Petrobras(PBR):
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90
The Transactions History to date is as follows:
07/07/08 Initial Stock Purchase Transaction -- Bought 400 PBR @ $65.95
07/07/08 Initial Calls Sold Transaction -- Sold 4 PBR Jul08 $65.00 Calls @ $2.95
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 4 PBR Aug08 $60.00 Calls @ $1.00
Note: Price of PBR was $56.86 at the time when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90
Note: Price of PBR was $49.45 when the calls were sold today.
The overall performance results(including commissions) for the PBR transactions are as follows:
Stock Purchase Cost: $26,388.95
($65.95*500+$8.95 commission)
Net Profit:
(a) Options Income: +$1,904.15 (400*($2.95+$1.00+$.90) - 3*$11.95 commissions)
(b) Dividend Income: +$0
(c) Capital Appreciation (If exercised): -$2,397.90
= ($55.00-$65.95)*400 - 2*$8.95 commissions
Total Net Profit(If stock price exercised at $60.00): -$493.75
= (+$1,904.15+$0-$2,397.90)
Annualized Return If Exercised (ARIE) -9.1%
(-$493.75/$26,388.95)*(365/75 days)
1. Honeywell(HON) Continuation Transaction
The following transaction was made today to establish a covered calls position against the 500 shares owned in Honeywell(HON):
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00
The Transactions History to date is as follows:
05/23/08 Initial Stock Purchase Transaction -- Bought 500 HON @ $58.89
05/23/08 Initial Calls Sold Transaction -- Sold 5 HON Jun08 $60 Calls @ $1.20
06/20/08 Jun08 Options Expired
07/02/08 Covered Calls Continuation Transaction -- Sold 5 Jul08 $52.50 Calls @ $.85
Note: Price of HON was $50.12 when the calls were sold today.
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 5 HON Aug08 $52.50 Calls @ $1.38
Note: Price of HON was $52.02 when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00
Note: Price of HON was $50.86 when the calls were sold today.
The overall performance results(including commissions) for the HON transactions through the Sep08 expiration would be as follows:
Stock Purchase Cost: $29,453.95
($58.89*500+$8.95 commission)
Net Profit:
(a) Options Income: +$2,164.20 (500*($1.20+$.85+$1.38+$1.00) - 4*$12.70 commissions)
(b) Dividend Income: +$137.50 ($.275 per share*500 shares ex-div on 8/15/08)
(c) Capital Appreciation (If exercised): -$3,177.10
= ($52.50-$58.89)*500 - 2*$8.95 commissions
Total Net Profit(If stock price exercised at $52.50): -$875.40
= (+$2,164.20 +$137.50-$3,177.10)
Annualized Return If Exercised (ARIE) -9.0%
(-$875.40/$29,453.95)*(365/120 days)
2. Petrobras(PBR) Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in Petrobras(PBR):
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90
The Transactions History to date is as follows:
07/07/08 Initial Stock Purchase Transaction -- Bought 400 PBR @ $65.95
07/07/08 Initial Calls Sold Transaction -- Sold 4 PBR Jul08 $65.00 Calls @ $2.95
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 4 PBR Aug08 $60.00 Calls @ $1.00
Note: Price of PBR was $56.86 at the time when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90
Note: Price of PBR was $49.45 when the calls were sold today.
The overall performance results(including commissions) for the PBR transactions are as follows:
Stock Purchase Cost: $26,388.95
($65.95*500+$8.95 commission)
Net Profit:
(a) Options Income: +$1,904.15 (400*($2.95+$1.00+$.90) - 3*$11.95 commissions)
(b) Dividend Income: +$0
(c) Capital Appreciation (If exercised): -$2,397.90
= ($55.00-$65.95)*400 - 2*$8.95 commissions
Total Net Profit(If stock price exercised at $60.00): -$493.75
= (+$1,904.15+$0-$2,397.90)
Annualized Return If Exercised (ARIE) -9.1%
(-$493.75/$26,388.95)*(365/75 days)
Saturday, August 16, 2008
August 2008 Expiration Transactions
The Covered Calls Advisor Portfolio (CCAP) contained a total of 12 positions with August 2008 expirations, with the following results:
(a) 7 positions (ACN,CSCO,EME,FRX,HPQ,JPM, and MSFT) closed in-the-money. The calls were exercised and the stocks were called away. The transactions history for each of these positions is detailed below. The annualized percent return-on-investment(ROI) results were:
ACN +63.3%
CSCO +65.8%
EME +82.9%
FRX +67.6%
HPQ +48.6%
JPM +71.6%
MSFT -13.5%
(b) 1 position (HUM) was in-the-money and was rolled-up-and-out on expiration Friday yesterday. Yesterday's post on this blog details the status of this continuing covered calls position.
(c) 4 positions in the CCAP (DVN,HON,PBR, and TRV) ended out-of-the-money. Decisions will be made to either sell the stock, or to keep the stock and sell calls to establish Sep08 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.
Closing result details for each of the seven exercised positions are as follows:
1. Accenture Ltd. (ACN) -- Closed
Transactions History:
05/23/08 Initial Stock Purchase Transaction -- Bought 500 ACN @ $36.70
05/27/08 Initial Calls Sold Transaction -- Sold 5 ACN Jul08 $40 Calls @ $.80
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 5 ACN Aug08 $40 Calls @ $1.40
08/16/08 Aug08 Options Exercised (Note: Closing price of ACN on 8/15/08 was $41.02)
The overall performance results(including commissions)for the ACN transactions was as follows:
Stock Purchase Cost: $18,358.95
($36.70*500+$8.95 commission)
Net Profit:
(a) Options Income: +$1,074.60 (500*($.80+$1.40) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$1,632.10
= ($40.00-$36.70)*500 - 2*$8.95 commissions
Total Net Profit: +$2,706.70
= (+$1,074.60+$0+$1,632.10)
Annualized Return: +63.3%
(+$2,706.70/$18,358.95)*(365/85 days)
2. Cisco Systems,Inc. (CSCO) -- Closed
Transactions History:
07/22/08 Initial Stock Purchase Transaction: Bought 700 CSCO @ $21.66
07/22/08 Initial Calls Sold Transaction: Sold 7 CSCO Aug08 $22 Calls @ $.68
08/16/08 Aug08 Options Exercised (Note: Closing price of CSCO on 8/15/08 was $24.91)
The overall performance results(including commissions)for the CSCO transactions was as follows:
Stock Purchase Cost: $15,170.95
($21.66*700+$8.95 commission)
Net Profit:
(a) Options Income: +$463.30 (700*$.68 - $12.70 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$220.10
= ($22.00-$21.66)*700 - 2*$8.95 commissions
Total Net Profit: +$683.40
= (+$463.30+$0+$220.10)
Annualized Return: +65.8%
(+$683.40/$15,170.95)*(365/25 days)
3. EMCOR Group (EME) -- Closed
Transactions History:
07/02/08 Initial Stock Purchase Transaction -- Bought 500 EME @ $26.64
07/02/08 Initial Calls Sold Transaction -- Sold 5 EME Jul08 $27.50 Calls @ $.70
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 5 EME Aug08 $27.50 Calls @ $1.25
08/16/08 Aug08 Options Exercised (Note: Closing price of EME on 8/15/08 was $33.34)
The overall performance results(including commissions)for the EME transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $13,328.95
($26.64*500+$8.95 commission)
Net Profit:
(a) Options Income: +$949.60 (500*($.70+$1.25) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$412.10
= ($27.50-$26.64)*500 - 2*$8.95 commissions
Total Net Profit: +$1,361.70
= (+$949.60+$0+$412.10)
Annualized Return: +82.9%
(+$1,361.70/$13,328.95)*(365/45 days)
4. Forest Laboratories (FRX) -- Closed
Transactions History:
06/26/08 Initial Stock Purchase Transaction: Bought 500 FRX @ $32.70
06/27/08 Initial Calls Sold Transaction: Sold 5 FRX Aug08 $35 Calls @ $.85
08/16/08 Aug08 Options Exercised (Note: Closing price of FRX on 8/15/08 was $38.71)
The overall performance results(including commissions)for the FRX transactions was as follows:
Stock Purchase Cost: $16,358.95
($32.70*500+$8.95 commission)
Net Profit:
(a) Options Income: +$412.30 (500*$.85 - $12.70 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$1,132.10
= ($35.00-$32.70)*500 - 2*$8.95 commissions
Total Net Profit: +$1,544.40
= (+$1,132.10+$0+$412.30)
Annualized Return: +67.6%
(+$1,544.40/$16,358.95)*(365/51 days)
5. Hewlett-Packard Co. (HPQ) -- Closed
07/08/08 Initial Stock Purchase Transaction -- Bought 400 HPQ @ $43.74
07/08/08 Initial Calls Sold Transaction -- Sold 4 HPQ Jul08 $45.00 Calls @ $.50
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 4 HPQ Aug08 $45.00 Calls
@ $.85
08/16/08 July08 Options Exercised (Note: Closing price of HPQ on 8/15/08 was $45.59)
The overall performance results(including commissions)for the HPQ transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $21,878.95
($43.74*400+$8.95 commission)
Net Profit:
(a) Options Income: +$649.60 (500*($.50+$.85) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$486.10
= ($45.00-$43.74)*400 - 2*$8.95 commissions
Total Net Profit: +$1,135.70
= (+$649.60+$0+$486.10)
Annualized Return: +48.6%
(+$1,135.70/$21,878.95)*(365/39 days)
6. JPMorgan Chase & Co. (JPM) -- Closed
07/22/08 Initial Stock Purchase Transaction -- Bought 800 JPM @ $37.91
07/22/08 Initial Calls Sold Transaction -- Sold 8 JPM Aug08 $37.50 Calls @ $2.31
08/16/08 Aug08 Options Exercised (Note: Closing price of JPM on 8/15/08 was $38.07)
The overall performance results(including commissions)for the JPM transactions was as follows:
Stock Purchase Cost: $30,336.95
($37.91*800+$8.95 commission)
Net Profit:
(a) Options Income: +$1,833.05 (800*$2.31 - $14.95 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: -$345.90
= ($37.50-$37.91)*800 - 2*$8.95 commissions
Total Net Profit: +$1,487.15
= (+$1,833.05+$0-$345.90)
Annualized Return: +71.6%
(+$1,487.15/$30,336.95)*(365/25 days)
7. Microsoft Corporation (MSFT) -- Closed
04/22/08 Initial Stock Purchase Transaction -- Bought 1000 MSFT @ $30.02
04/22/08 Initial Calls Sold Transaction -- Sold 10 MSFT May08 $31 Calls @ $.82
05/13/08 Ex-Dividend Date -- $.110 per share
05/17/08 May08 Options Expired
06/25/08 Covered Calls Continuation Transaction -- STO 10 Jul08 29 Calls @ $.60
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 10 MSFT Aug08 $27.00 Calls
@ $.49
08/16/08 Aug08 Options Exercised (Note: Closing price of MSFT on 8/15/08 was $27.81)
The overall performance results(including commissions)for the MSFT transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $30,028.95
($30.02*1000+$8.95 commission)
Net Profit:
(a) Options Income: +$1,860.65 (1000*($.82+$.60+$.49 - 3*$16.45 commissions)
(b) Dividend Income: $110 (1000 shares * $.110)
(c) Capital Appreciation: -$3,037.90
= ($27.00-$30.02)*1000 - 2*$8.95 commissions
Total Net Profit: -$1,287.25
= (+$1,860.65+$110.00-$3,037.90)
Annualized Return: -13.5%
(-$1,287.25/$30,028.95)*(365/116 days)
(a) 7 positions (ACN,CSCO,EME,FRX,HPQ,JPM, and MSFT) closed in-the-money. The calls were exercised and the stocks were called away. The transactions history for each of these positions is detailed below. The annualized percent return-on-investment(ROI) results were:
ACN +63.3%
CSCO +65.8%
EME +82.9%
FRX +67.6%
HPQ +48.6%
JPM +71.6%
MSFT -13.5%
(b) 1 position (HUM) was in-the-money and was rolled-up-and-out on expiration Friday yesterday. Yesterday's post on this blog details the status of this continuing covered calls position.
(c) 4 positions in the CCAP (DVN,HON,PBR, and TRV) ended out-of-the-money. Decisions will be made to either sell the stock, or to keep the stock and sell calls to establish Sep08 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.
Closing result details for each of the seven exercised positions are as follows:
1. Accenture Ltd. (ACN) -- Closed
Transactions History:
05/23/08 Initial Stock Purchase Transaction -- Bought 500 ACN @ $36.70
05/27/08 Initial Calls Sold Transaction -- Sold 5 ACN Jul08 $40 Calls @ $.80
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 5 ACN Aug08 $40 Calls @ $1.40
08/16/08 Aug08 Options Exercised (Note: Closing price of ACN on 8/15/08 was $41.02)
The overall performance results(including commissions)for the ACN transactions was as follows:
Stock Purchase Cost: $18,358.95
($36.70*500+$8.95 commission)
Net Profit:
(a) Options Income: +$1,074.60 (500*($.80+$1.40) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$1,632.10
= ($40.00-$36.70)*500 - 2*$8.95 commissions
Total Net Profit: +$2,706.70
= (+$1,074.60+$0+$1,632.10)
Annualized Return: +63.3%
(+$2,706.70/$18,358.95)*(365/85 days)
2. Cisco Systems,Inc. (CSCO) -- Closed
Transactions History:
07/22/08 Initial Stock Purchase Transaction: Bought 700 CSCO @ $21.66
07/22/08 Initial Calls Sold Transaction: Sold 7 CSCO Aug08 $22 Calls @ $.68
08/16/08 Aug08 Options Exercised (Note: Closing price of CSCO on 8/15/08 was $24.91)
The overall performance results(including commissions)for the CSCO transactions was as follows:
Stock Purchase Cost: $15,170.95
($21.66*700+$8.95 commission)
Net Profit:
(a) Options Income: +$463.30 (700*$.68 - $12.70 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$220.10
= ($22.00-$21.66)*700 - 2*$8.95 commissions
Total Net Profit: +$683.40
= (+$463.30+$0+$220.10)
Annualized Return: +65.8%
(+$683.40/$15,170.95)*(365/25 days)
3. EMCOR Group (EME) -- Closed
Transactions History:
07/02/08 Initial Stock Purchase Transaction -- Bought 500 EME @ $26.64
07/02/08 Initial Calls Sold Transaction -- Sold 5 EME Jul08 $27.50 Calls @ $.70
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 5 EME Aug08 $27.50 Calls @ $1.25
08/16/08 Aug08 Options Exercised (Note: Closing price of EME on 8/15/08 was $33.34)
The overall performance results(including commissions)for the EME transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $13,328.95
($26.64*500+$8.95 commission)
Net Profit:
(a) Options Income: +$949.60 (500*($.70+$1.25) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$412.10
= ($27.50-$26.64)*500 - 2*$8.95 commissions
Total Net Profit: +$1,361.70
= (+$949.60+$0+$412.10)
Annualized Return: +82.9%
(+$1,361.70/$13,328.95)*(365/45 days)
4. Forest Laboratories (FRX) -- Closed
Transactions History:
06/26/08 Initial Stock Purchase Transaction: Bought 500 FRX @ $32.70
06/27/08 Initial Calls Sold Transaction: Sold 5 FRX Aug08 $35 Calls @ $.85
08/16/08 Aug08 Options Exercised (Note: Closing price of FRX on 8/15/08 was $38.71)
The overall performance results(including commissions)for the FRX transactions was as follows:
Stock Purchase Cost: $16,358.95
($32.70*500+$8.95 commission)
Net Profit:
(a) Options Income: +$412.30 (500*$.85 - $12.70 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$1,132.10
= ($35.00-$32.70)*500 - 2*$8.95 commissions
Total Net Profit: +$1,544.40
= (+$1,132.10+$0+$412.30)
Annualized Return: +67.6%
(+$1,544.40/$16,358.95)*(365/51 days)
5. Hewlett-Packard Co. (HPQ) -- Closed
07/08/08 Initial Stock Purchase Transaction -- Bought 400 HPQ @ $43.74
07/08/08 Initial Calls Sold Transaction -- Sold 4 HPQ Jul08 $45.00 Calls @ $.50
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 4 HPQ Aug08 $45.00 Calls
@ $.85
08/16/08 July08 Options Exercised (Note: Closing price of HPQ on 8/15/08 was $45.59)
The overall performance results(including commissions)for the HPQ transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $21,878.95
($43.74*400+$8.95 commission)
Net Profit:
(a) Options Income: +$649.60 (500*($.50+$.85) - 2*$12.70 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: +$486.10
= ($45.00-$43.74)*400 - 2*$8.95 commissions
Total Net Profit: +$1,135.70
= (+$649.60+$0+$486.10)
Annualized Return: +48.6%
(+$1,135.70/$21,878.95)*(365/39 days)
6. JPMorgan Chase & Co. (JPM) -- Closed
07/22/08 Initial Stock Purchase Transaction -- Bought 800 JPM @ $37.91
07/22/08 Initial Calls Sold Transaction -- Sold 8 JPM Aug08 $37.50 Calls @ $2.31
08/16/08 Aug08 Options Exercised (Note: Closing price of JPM on 8/15/08 was $38.07)
The overall performance results(including commissions)for the JPM transactions was as follows:
Stock Purchase Cost: $30,336.95
($37.91*800+$8.95 commission)
Net Profit:
(a) Options Income: +$1,833.05 (800*$2.31 - $14.95 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: -$345.90
= ($37.50-$37.91)*800 - 2*$8.95 commissions
Total Net Profit: +$1,487.15
= (+$1,833.05+$0-$345.90)
Annualized Return: +71.6%
(+$1,487.15/$30,336.95)*(365/25 days)
7. Microsoft Corporation (MSFT) -- Closed
04/22/08 Initial Stock Purchase Transaction -- Bought 1000 MSFT @ $30.02
04/22/08 Initial Calls Sold Transaction -- Sold 10 MSFT May08 $31 Calls @ $.82
05/13/08 Ex-Dividend Date -- $.110 per share
05/17/08 May08 Options Expired
06/25/08 Covered Calls Continuation Transaction -- STO 10 Jul08 29 Calls @ $.60
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 10 MSFT Aug08 $27.00 Calls
@ $.49
08/16/08 Aug08 Options Exercised (Note: Closing price of MSFT on 8/15/08 was $27.81)
The overall performance results(including commissions)for the MSFT transactions through the Aug08 expiration were as follows:
Stock Purchase Cost: $30,028.95
($30.02*1000+$8.95 commission)
Net Profit:
(a) Options Income: +$1,860.65 (1000*($.82+$.60+$.49 - 3*$16.45 commissions)
(b) Dividend Income: $110 (1000 shares * $.110)
(c) Capital Appreciation: -$3,037.90
= ($27.00-$30.02)*1000 - 2*$8.95 commissions
Total Net Profit: -$1,287.25
= (+$1,860.65+$110.00-$3,037.90)
Annualized Return: -13.5%
(-$1,287.25/$30,028.95)*(365/116 days)
Friday, August 15, 2008
Continuation Transaction -- Humana Inc.
Late in the trading day today (expiration Friday), a roll-up-and-out transaction was made to continue the covered calls position in Humana (HUM):
08/15/08 Bought to Close 2 Aug08 $45.00 Calls @ $4.90
08/15/08 Sold to Open 2 Sep08 $50.00 Calls @ $2.40
After purchasing HUM in February, the price declined dramatically shortly thereafter in March when it was determined that the New Medicare Prescription Program policies initiated Jan 1st this year were sold for prices lower than what the subsequent prescription reimbursments would have required for profitability. Company earnings this year are of course being adversely effected as a result of the losses in this new program. Since initial rates for this program were guaranteed for one year, rate increases to enable an acceptable profit margin will commence beginning in Jan 2009. In this advisor's opinion, this one-time pricing error does not qualify as a 'fundamental breakdown' in the investment case for Humana. Consequently, as long as this company's fundamentals continue to remain strong, this currently losing covered calls position will continue to be 'managed' -- hopefully back towards profitability.
The Transactions History to date is as follows:
02/20/08 Initial Stock Purchase Transaction -- Bought 200 HUM @ $68.65
02/20/08 Initial Calls Sold Transaction -- Sold 2 HUM Mar08 $70 Calls @ $2.20
03/22/08 Mar08 Options Expired
03/24/08 Covered Calls Continuation Transaction -- Sold 2 Apr08 $50 Calls @ $1.25
Note: Price of HUM was $46.10 when the calls were sold today.
04/19/08 Apr08 Options Expired
04/28/08 Covered Calls Continuation Transaction -- STO 2 May08 $45 Calls @ $2.10
Note: Price of HUM was $45.35 when the calls were sold today.
05/17/08 May08 Options Expired
05/29/08 Covered Calls Continuation Transaction -- STO 2 Jun08 $50 Calls @ $2.50
Note: Price of HUM was $50.80 when the calls were sold today.
06/21/08 Jun08 Options Expired
06/25/08 Covered Calls Continuation Transaction -- STO 2 Jul08 $45 Calls @ $.65
Note: Price of HUM was $41.95 when the calls were sold today.
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 2 HUM Aug08 $45.00 Calls
@ $1.30
08/15/08 Covered Calls Continuation Transaction -- Bought to Close 2 Aug08 $45.00 Calls @ $4.90
08/15/08 Covered Calls Continuation Transaction -- Sold to Open 2 Sep08 $50.00 Calls @ $2.40
Note: Price of HUM was $49.85 this afternoon (Expiration Friday) when this roll-up-and-out transaction was made.
If exercised, the overall performance results(including commissions) for the HUM positions through the Sep08 expiration would be as follows:
Stock Purchase Cost: $13,739.95
($68.65*200+$9.95 commission)
Net Profit:
(a) Options Income: +$1,416.40 = 200*($2.20+$1.25+$2.10+2.50+$.65+1.30-$4.90+$2.40) - 8*$10.45 commissions
(b) Dividend Income: $0
(c) Capital Appreciation(If exercised): -$3,747.90
= ($50.00-$68.65)*200 - 2*$8.95 commissions
Total Net Profit(If stock price exercised): -$2,331.50
= (+$1,416.40+$0-$3,747.90)
Annualized Return If Exercised (ARIE) -29.1%
(-$2,331.50/$13,739.95)*(365/213 days)
08/15/08 Bought to Close 2 Aug08 $45.00 Calls @ $4.90
08/15/08 Sold to Open 2 Sep08 $50.00 Calls @ $2.40
After purchasing HUM in February, the price declined dramatically shortly thereafter in March when it was determined that the New Medicare Prescription Program policies initiated Jan 1st this year were sold for prices lower than what the subsequent prescription reimbursments would have required for profitability. Company earnings this year are of course being adversely effected as a result of the losses in this new program. Since initial rates for this program were guaranteed for one year, rate increases to enable an acceptable profit margin will commence beginning in Jan 2009. In this advisor's opinion, this one-time pricing error does not qualify as a 'fundamental breakdown' in the investment case for Humana. Consequently, as long as this company's fundamentals continue to remain strong, this currently losing covered calls position will continue to be 'managed' -- hopefully back towards profitability.
The Transactions History to date is as follows:
02/20/08 Initial Stock Purchase Transaction -- Bought 200 HUM @ $68.65
02/20/08 Initial Calls Sold Transaction -- Sold 2 HUM Mar08 $70 Calls @ $2.20
03/22/08 Mar08 Options Expired
03/24/08 Covered Calls Continuation Transaction -- Sold 2 Apr08 $50 Calls @ $1.25
Note: Price of HUM was $46.10 when the calls were sold today.
04/19/08 Apr08 Options Expired
04/28/08 Covered Calls Continuation Transaction -- STO 2 May08 $45 Calls @ $2.10
Note: Price of HUM was $45.35 when the calls were sold today.
05/17/08 May08 Options Expired
05/29/08 Covered Calls Continuation Transaction -- STO 2 Jun08 $50 Calls @ $2.50
Note: Price of HUM was $50.80 when the calls were sold today.
06/21/08 Jun08 Options Expired
06/25/08 Covered Calls Continuation Transaction -- STO 2 Jul08 $45 Calls @ $.65
Note: Price of HUM was $41.95 when the calls were sold today.
07/19/08 July08 Options Expired
07/23/08 Covered Calls Continuation Transaction -- Sold 2 HUM Aug08 $45.00 Calls
@ $1.30
08/15/08 Covered Calls Continuation Transaction -- Bought to Close 2 Aug08 $45.00 Calls @ $4.90
08/15/08 Covered Calls Continuation Transaction -- Sold to Open 2 Sep08 $50.00 Calls @ $2.40
Note: Price of HUM was $49.85 this afternoon (Expiration Friday) when this roll-up-and-out transaction was made.
If exercised, the overall performance results(including commissions) for the HUM positions through the Sep08 expiration would be as follows:
Stock Purchase Cost: $13,739.95
($68.65*200+$9.95 commission)
Net Profit:
(a) Options Income: +$1,416.40 = 200*($2.20+$1.25+$2.10+2.50+$.65+1.30-$4.90+$2.40) - 8*$10.45 commissions
(b) Dividend Income: $0
(c) Capital Appreciation(If exercised): -$3,747.90
= ($50.00-$68.65)*200 - 2*$8.95 commissions
Total Net Profit(If stock price exercised): -$2,331.50
= (+$1,416.40+$0-$3,747.90)
Annualized Return If Exercised (ARIE) -29.1%
(-$2,331.50/$13,739.95)*(365/213 days)
Thursday, August 14, 2008
Following Our Covered Calls Investing 'Processes'
I have found that it is very easy to stray from adherence to our own covered calls investing principles and processes. This week I took some time to evaluate if my current Covered Calls Advisor Portfolio (CCAP) is in synch with the principles as described in the various posts this advisor has made on this blog during the past year (reference the 'Covered Calls Processes' link under 'Categories' in the sidebar on the right side of this page).
During my assessment, I discovered that there is one major disconnect -- that is, an area in which the CCAP is dreadfully out-of-synch with my own recommended processes. It is in the area of portfolio diversification and, more specifically, the area of asset allocation. For this advisor, the 'normal weighting' of asset classes is:
Domestic Stocks -- 65%
International Stocks -- 30%
Cash (i.e. Money Markets) -- 5%
The current, more detailed, recommendations in this regard are presented in a prior post as shown here: link
As seen in the current CCAP in the sidebar of this page, only one of the current positions (Petrobras) is in an internationally-based equity; and the International category should normally represent about 30% of the overall portfolio's value.
Suffice it to say that going forward I plan to do a better job of practicing what I preach. Fortunately, since I write primarily near-month covered calls, the Aug08 expiration tomorrow provides me a timely opportunity to get back on track with my asset class diversification as I establish new Sep08 covered calls positions in the CCAP.
So in conclusion, each of us develops our own methods (i.e. 'processes') for how we select and manage our covered calls positions. These processes are (and should always be) a work-in-progress in the sense that we are constantly seeking to refine and improve on our decision-making methodology. But once our 'processes' are established, we should be very diligent in trying to adhere to them as closely as we can!
Question: What's the bottom line??
Answer: Another lesson learned!!
Regards and Godspeed,
Jeff
During my assessment, I discovered that there is one major disconnect -- that is, an area in which the CCAP is dreadfully out-of-synch with my own recommended processes. It is in the area of portfolio diversification and, more specifically, the area of asset allocation. For this advisor, the 'normal weighting' of asset classes is:
Domestic Stocks -- 65%
International Stocks -- 30%
Cash (i.e. Money Markets) -- 5%
The current, more detailed, recommendations in this regard are presented in a prior post as shown here: link
As seen in the current CCAP in the sidebar of this page, only one of the current positions (Petrobras) is in an internationally-based equity; and the International category should normally represent about 30% of the overall portfolio's value.
Suffice it to say that going forward I plan to do a better job of practicing what I preach. Fortunately, since I write primarily near-month covered calls, the Aug08 expiration tomorrow provides me a timely opportunity to get back on track with my asset class diversification as I establish new Sep08 covered calls positions in the CCAP.
So in conclusion, each of us develops our own methods (i.e. 'processes') for how we select and manage our covered calls positions. These processes are (and should always be) a work-in-progress in the sense that we are constantly seeking to refine and improve on our decision-making methodology. But once our 'processes' are established, we should be very diligent in trying to adhere to them as closely as we can!
Question: What's the bottom line??
Answer: Another lesson learned!!
Regards and Godspeed,
Jeff
Tuesday, August 12, 2008
Analysis Sheet -- Updated
NOTE: PLEASE BE PATIENT -- IT TAKES APPROX 15 SECONDS FOR THE SPREADSHEET EMBEDDED IN THIS POST TO LOAD BEFORE YOU CAN NAVIGATE THIS BLOG SITE!!
In a prior post last November, the 'Analysis Sheet' used by the Covered Calls Advisor to analyze the relative worthiness of a particular covered calls investment was presented. As mentioned then, the 'Analysis Sheet' is a 'work in progress' in the sense that periodic refinements are made to the sheet to reflect this advisor's preferences as to the most important indicators and their relative importance in analyzing a potential covered calls investment.
Recently, there have been several posts on the Yahoo!Groups 'justcoveredcalls' site related to which factors should be used when analyzing a potential covered calls investment -- several people are searching for a disciplined, objective, and quantitative decision-making approach that incorporates a variety of indicators (aka metrics) in their own analysis. This is encouraging to this Covered Calls Advisor because it is precisely the approach advocated here.
Below is an 'Analysis Sheet' for this advisor's current largest position, which is in Microsoft:
This 'Analysis Sheet' includes 37 financial metrics in 9 categories, which is a much more detailed approach than most investors would be willing to undertake. But for those of you who are seeking a more objective, quantitative approach to your covered calls analysis process, reviewing the categories and the financial metrics on the spreadsheet above should give you some ideas that you might consider including as part of your own analysis.
As always, I welcome your comments or questions.
Simply click on the 'comments' link below to provide your feedback.
Regards and Godspeed to All,
Jeff
In a prior post last November, the 'Analysis Sheet' used by the Covered Calls Advisor to analyze the relative worthiness of a particular covered calls investment was presented. As mentioned then, the 'Analysis Sheet' is a 'work in progress' in the sense that periodic refinements are made to the sheet to reflect this advisor's preferences as to the most important indicators and their relative importance in analyzing a potential covered calls investment.
Recently, there have been several posts on the Yahoo!Groups 'justcoveredcalls' site related to which factors should be used when analyzing a potential covered calls investment -- several people are searching for a disciplined, objective, and quantitative decision-making approach that incorporates a variety of indicators (aka metrics) in their own analysis. This is encouraging to this Covered Calls Advisor because it is precisely the approach advocated here.
Below is an 'Analysis Sheet' for this advisor's current largest position, which is in Microsoft:
This 'Analysis Sheet' includes 37 financial metrics in 9 categories, which is a much more detailed approach than most investors would be willing to undertake. But for those of you who are seeking a more objective, quantitative approach to your covered calls analysis process, reviewing the categories and the financial metrics on the spreadsheet above should give you some ideas that you might consider including as part of your own analysis.
As always, I welcome your comments or questions.
Simply click on the 'comments' link below to provide your feedback.
Regards and Godspeed to All,
Jeff
Saturday, August 2, 2008
Returns -- Through July 2008
One-month, year-to-date, and prior year performance results of the Covered Calls Advisor Portfolio (CCAP) are presented below. In each instance, CCAP results are compared against the Russell 3000 Index ETF(IWV) benchmark.
1. One-Month Result (July 2008):
At market close on 07/31/2008, the total Covered Calls Advisor Portfolio (CCAP) value was $242,367.48, a $1,077.38 decrease in the overall portfolio value compared with the $243,444.86 at the end of June(06/30/2008).
CCAP July 2008 Absolute Return = -0.44%
($242,367.48-$243,444.86)/$243,444.86
Benchmark Comparison: July 2008 Absolute Return for IWV
= -1.7%
($73.63-$74.90)/$74.90
2. 2008 Year-to-Date Results (Jan 1st through July 31st, 2008):
CCAP 2008 Year-to-Date Absolute Return = -6.0%
($242,367.48-$257,886.51)/$257,886.51
Benchmark Russell 3000(IWV) 2008 Yr-to-Date Absolute Return = -12.8%
($73.63-$84.40)/$84.40
3. Prior Year Results (2007):
The Covered Calls Advisor Portfolio (CCAP) was initiated on September 14th, 2007 with a beginning balance of $250,000. The CCAP balance at year-end (12/31/07) was $257,886.51. Below are the returns of the CCAP for this 2007 timeframe compared with the results of the Russell 3000 (IWV) benchmark during the same time period.
CCAP 2007 Absolute Return = +3.2%
($257,886.51-$250,000.00)/$250,000.00
Benchmark (IWV) 2007 Absolute Return = -1.2%
($84.40-$85.43)/$85.43
The corresponding annualized return for the 108 days the CCAP existed in 2007 (between Sept 14, 2007 and Dec 31, 2007) was:
CCAP 2007 Annualized Return = +10.7%
[($257,886.51-$250,000.00)/$250,000.00]*(365/108 days)
Benchmark Russell 3000(IWV) 2007 Annualized Return = -4.1%
[($84.40-$85.43)/$85.43]*(365/108 days)
This Advisor's Overall Market Meter continues to indicate that a NEUTRAL investment posture is appropriate at this time. The corresponding covered calls investing approach is to write near-month primarily at-the-money covered calls. By 'at-the-money', this advisor means that for a covered calls portfolio, on average covered calls positions should be established somewhere between 1.0% below and 1.0% above the strike price.
1. One-Month Result (July 2008):
At market close on 07/31/2008, the total Covered Calls Advisor Portfolio (CCAP) value was $242,367.48, a $1,077.38 decrease in the overall portfolio value compared with the $243,444.86 at the end of June(06/30/2008).
CCAP July 2008 Absolute Return = -0.44%
($242,367.48-$243,444.86)/$243,444.86
Benchmark Comparison: July 2008 Absolute Return for IWV
= -1.7%
($73.63-$74.90)/$74.90
2. 2008 Year-to-Date Results (Jan 1st through July 31st, 2008):
CCAP 2008 Year-to-Date Absolute Return = -6.0%
($242,367.48-$257,886.51)/$257,886.51
Benchmark Russell 3000(IWV) 2008 Yr-to-Date Absolute Return = -12.8%
($73.63-$84.40)/$84.40
3. Prior Year Results (2007):
The Covered Calls Advisor Portfolio (CCAP) was initiated on September 14th, 2007 with a beginning balance of $250,000. The CCAP balance at year-end (12/31/07) was $257,886.51. Below are the returns of the CCAP for this 2007 timeframe compared with the results of the Russell 3000 (IWV) benchmark during the same time period.
CCAP 2007 Absolute Return = +3.2%
($257,886.51-$250,000.00)/$250,000.00
Benchmark (IWV) 2007 Absolute Return = -1.2%
($84.40-$85.43)/$85.43
The corresponding annualized return for the 108 days the CCAP existed in 2007 (between Sept 14, 2007 and Dec 31, 2007) was:
CCAP 2007 Annualized Return = +10.7%
[($257,886.51-$250,000.00)/$250,000.00]*(365/108 days)
Benchmark Russell 3000(IWV) 2007 Annualized Return = -4.1%
[($84.40-$85.43)/$85.43]*(365/108 days)
This Advisor's Overall Market Meter continues to indicate that a NEUTRAL investment posture is appropriate at this time. The corresponding covered calls investing approach is to write near-month primarily at-the-money covered calls. By 'at-the-money', this advisor means that for a covered calls portfolio, on average covered calls positions should be established somewhere between 1.0% below and 1.0% above the strike price.
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