With today being options expiration Friday for September 2009, it was decided to retain the Covered Calls Advisor Portfolio position in Accenture Ltd. (ACN) and to roll-out to the Oct09 expiration at the same $35.00 strike price. The Sep09 $35.00covered calls were in-the-money today (with ACN at $36.08), and since the time value remaining in the options was only $.02 [$1.10-($36.08-$35.00)], a roll-out debit spread transaction was executed as follows:
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: Net Debit-Spread upon Roll-Up was $.80 ($1.10 - $1.90)
The transactions history to date 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.
The overall performance results(including commissions) for the ACN transactions would be as follows:
Stock Purchase Cost: $10,661.95
= ($35.51*300+$8.95 commission)
Net Profit:
(a) Options Income: +$562.60
= (300*($1.15-$1.10+$1.90) - 2*$11.20 commissions)
(b) Dividend Income: +$225.00 ($.75 * 300 shares)
(c) Capital Appreciation (If exercised at $35.00): -$161.95
= ($35.00-$35.51)*300 - $8.95 commissions
Total Net Profit(If stock price exercised at $35.00): +$625.65
= (+$562.60 +$225.00 -$161.95)
Absolute Return if Exercised at $35.00: +5.9%
= +$625.65/$10,661.95
Annualized Return If Exercised (ARIE) +39.7%
= (+$625.65/$10,661.95)*(365/54 days)
An annual dividend of $.75 per share will be made with an ex-div date of 10/14/09. In this case, it is possible (if the stock remains in-the-money) that an early exercise might occur on 10/13/09 in order for the option owner to call the stock away at $35.00 to capture the dividend payment. If this occurs, the Covered Calls Advisor will achieve a somewhat reduced 29.2% annualized return for this ACN covered calls investment instead of the 39.7% if the position were to be exercised at expiration.
