04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit-Spread upon Roll-Up was $1.90 ($3.10 - $1.20)
The 'Roll-Up Analyzer' worksheet for this transaction is shown below:
The Covered Calls Advisor's key criterion in analyzing whether or not to roll-up to the next strike price is if the potential 'Annualized Return if Stock Price Unchanged' (ARIU) increase is greater than 40%? That is, what is the difference between the ARIU for the remaining 16 days of the current position compared with the ARIU for the remaining 16 days for the proposed new position? In this case, and as shown on the worksheet above, the difference is +59.8%(79.7%-19.9%). Since 59.8% is greater than the 40% threshold, the decision was made to execute the roll-up transaction in this instance. There is confirmation of this decision from the ongoing underlying value in the JCOM stock, which remains buy-rated by both Schwab Equity Ratings and StockGrader.com.
The transactions history to date is as follows:
01/23/09 Initial Stock Purchase Transaction -- Bought 300 JCOM @ $16.76
01/23/09 Inital Calls Sold Transaction -- Sold 3 JCOM Feb09 $17.50 Calls @ $1.00
Roll-Up Spread Transaction:
02/03/09 Buy-to-Close (BTC) 3 JCOM Feb09 $17.5s @ $2.76
02/03/09 Sell-to-Open (STO) 3 JCOM Feb09 $20s @ $1.06
Note: The price of JCOM was $19.90 today when this transaction was executed.
02/21/09 Feb09 Options Expired
02/25/09 Sell-to-Open (STO) 3 JCOM Mar09 $20s @ $.75
Note: JCOM stock was priced at $19.37 today when the calls were sold.
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 3 JCOM Apr $20s @ $.90
Note: The price of JCOM was $19.75 today when the call options were sold.
Roll-Up Spread Transaction:
04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit on Roll Up $1.90 ($3.10 - $1.20)
Note: The price of JCOM was $22.90 today when the roll-up debit-spread transaction was transacted.
The overall performance results(including commissions) for the JCOM transactions through the Apr09 expiration would be as follows:
Stock Purchase Cost: $5,036.95
($16.76*300+$8.95 commission)
Net Profit:
(a) Options Income: -$341.00 (300*($1.00-$2.76+$1.06+$.75+$.90-$3.10+$1.20) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $22.50): +$1,713.05
= ($22.50-$16.76)*300 - $8.95 commissions
Total Net Profit(If stock price exercised at $22.50): +$1,372.05
= (-$341.00 +$0.00 +$1,713.05)
Absolute Return If Exercised at $22.50 = +27.2%
+$1,372.05/$5,036.95
Annualized Return If Exercised (ARIE) +117.0%
(+$1,372.05/$5,036.95)*(365/85 days)
