The Covered Calls Advisor Portfolio (CCAP) covered calls position in China Mobile LTD ADR (CHL) was rolled-up today (05/06/09) from the May09 $45s to the May09 $50s. The 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
Net Debit-Spread upon Roll-Up was $3.05 ($3.70 - $.65)
Note: The price of CHL was $48.51 today when the debit-spread was transacted, so the remaining time-value was $.19 [$3.70-($48.51-$45.00)] when this transaction was executed.
CHL goes ex-dividend next Monday (5/11/09) at $.9058. With the remaining time-value on the May09 $45 strike at only $.19, these options would almost assuredly be exercised between now and the close of business this Friday, 5/8/09. Since the Covered Calls Advisor remains bullish on China Mobile, it was decided that retaining the stock to ensure capturing the dividend would be the best course of action. So, the May09 $45 strike was closed out and a roll-up to a new May09 $50 strike covered calls position was established. This will ensure that the CHL dividend payment will be received while simultaneously retaining a covered calls position for May09 expiration on 5/16.
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.
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: -$283.90
= (400*($2.40-$3.70+$.65) - 2*$11.95 commissions)
(b) Dividend Income: +$362.32 ($.9058 * 400 shares)
(c) Capital Appreciation (If stock price unchanged at $48.51): +$1,135.05
= ($48.51-$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 $48.51): +$1,213.47= (-$283.90 +$362.32 +$1,135.05)
Total Net Profit(If stock price exercised at $50.00): +$1,809.47
= (-$283.90 +$362.32 +$1,731.05)
Absolute Return if Stock Price Unchanged at $48.51: +6.6%
= +$1,213.47/$18,268.95
Annualized Return If Stock Price Unchanged (ARIU) +93.2%
=(+$1,213.47/$18,268.95)*(365/26 days)
Absolute Return if Exercised at $50.00: +9.9%
= +$1,809.47/$18,268.95
Annualized Return If Exercised (ARIE) +139.0%
=(+$1,809.47/$18,268.95)*(365/26 days)
