Last Friday, the Covered Calls Advisor Portfolio (CCAP) Jan2010 covered calls position in the Market Vectors Russia ETF (RSX) was in-the-money and was called away for a very nice profit. Goldman Sachs views being long Russia equities as one of their top 10 trading ideas for 2010, citing a 25% return potential. So today, this advisor decided to establish a new RSX slightly out-of-the-money covered calls position with a Feb2010 expiration as follows:Established Market Vectors Russia ETF (RSX) Covered Calls for Feb2010:
01/20/2010 Bought 300 RSX @ $33.68
01/20/2010 Sold 3 RSX Feb2010 $34.00 Calls @ $1.20
Some possible overall performance results(including commissions) for the RSX transactions would be as follows:
Stock Purchase Cost: $10,112.95
= ($33.68*300+$8.95 commission)
Net Profit:
(a) Options Income: +$348.80
= (300*$1.20 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $33.68):
-$8.95 = ($33.68-$33.68)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $34.00): +$87.05
= ($34.00-$33.68)*300 - $8.95 commissions
Total Net Profit(If stock price unchanged at $33.68): +$339.85
= (+$348.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $34.00): +$435.85
= (+$348.80 +$0.00 +$87.05)
Absolute Return if Unchanged at $33.68: +3.4%
= +$339.85/$10,112.95
Annualized Return If Unchanged (ARIU) +39.6%
= (+$339.85/$10,112.95)*(365/31 days)
Absolute Return if Exercised at $34.00: +4.3%
= +$435.85/$10,112.95
Annualized Return If Exercised (ARIE) +50.7%
= (+$435.85/$10,112.95)*(365/31 days)
