Last Friday was expiration Friday for February 2010. In a Covered Calls Advisor's blog recent post, it was noted that of the nine covered calls positions held until Mar2010 expiration, three were in-the-money at expiration and were therefore exercised and the stocks were called away, and six positions ended out-of-the-money. One of the out-of-the-money positions was in Aspen Insurance Holdings Ltd.(AHL). A decision was made today to sell the 300 shares owned in AHL, and the two primary reasons are: (1) The options liquidity in AHL for Apr2010 is low and with an associated relatively wide bid/ask spread; and (2) The implied volatility in the AHL options is now in the 15.0 area, which is lower than that required by this advisor to achieve a satisfactory options premium income. The transactions history for this completed position is as follows:
1. Aspen Insurance Holdings Ltd.(AHL) -- Closed
10/20/09 Bought 300 AHL @ $28.20
10/20/09 Sold 3 AHL Nov09 $30.00 Calls @ $.35
11/06/09 Ex-Dividend $45.00 = $.15*300 shares
11/21/09 Nov09 Options Expired
01/21/2010 Sell-to-Open (STO) 3 AHL Mar2010 $30.00s @ $.35
Note: The price of AHL was $27.78 when this call option sale was transacted
02/10/2010 Ex-Dividend $45.00 = $.15*300 shares
03/20/2010 Mar2010 Options Expired
03/24/2010 Sold 300 AHL @ $28.60
The performance results (including commissions) for the AHL transactions were:
Stock Purchase Cost: $8,468.95
= ($28.20*300+$8.95 commission)
Net Profit:
(a) Options Income: +$187.60
= (300*($.35+$.35) - 2*$11.20 commissions)
(b) Dividend Income: +$90.00 = 2*$.15*300 shares
(c) Capital Appreciation (Stock sold at $28.60): +$111.05
= ($28.60-$28.20)*300 - $8.95 commissions
Total Net Profit: +$388.65
= (+$187.60 +$90.00 +$111.05)
Absolute Return (Stock sold at $28.60): +4.6%
= +$388.65/$8,468.95
Annualized Return: +10.8%
= (+$388.65/$8,468.95)*(365/155 days)
