Today is expiration Friday for October 2009. A decision was made to retain Noble Corp.(NE) in the Covered Calls Advisor Portfolio and to roll-out-and-up to the Nov09 expiration at the $42.00 strike price. The current Oct09 $36.00 covered calls were well in-the-money today (with NE at $41.56), and since the time value remaining in the options was only $.04 [$5.60-($41.56-$36.00)], a roll-up-and-out debit spread transaction was executed as follows:
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: Net Debit-Spread upon Roll-Up was $3.85 ($5.60 - $1.75)
The transactions history to date 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.
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: -$1,203.60
= (300*($1.30-$5.22+$3.87-$5.60+$1.75) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $41.56): +$2,265.05
= ($41.56-$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 $41.56): +$1,061.45
= (-$1,203.60 +$0.00 +$2,265.05)
Total Net Profit(If stock price exercised at $42.00): +$1,193.45
= (-$1,203.60 +$0.00 +$2,397.05)
Absolute Return if Stock Price Unchanged at $41.56: +10.4%
= +$1,061.45/$10,202.95
Annualized Return If Unchanged (ARIU) +47.5%
= (+$1,061.45/$10,202.95)*(365/80 days)
Absolute Return if Exercised at $42.00: +11.7%
= +$1,193.45/$10,202.95
Annualized Return If Exercised (ARIE) +53.4%
= (+$1,193.45/$10,202.95)*(365/80 days)
