The Covered Calls Advisor Portfolio (CCAP) contained a total of fifteen covered calls positions with April 2010 expirations. Six positions were adjusted earlier this week (one was closed due to early exercise and five were rolled-up-and-out to May2010 expirations), with the following results:
- The covered calls position in International Paper (IP) was in-the-money and was exercised early on the day prior to Apr2010 expiration. The results from this position were detailed in a prior post this week on this Covered Calls Advisor blog.
- During this past week, in-the-money covered call positions in five equities [Apple Inc.(AAPL), Fluor Corp.(FLR), Gap Inc.(GPS), Interdigital Inc.(IDCC), and iShares MSCI China ETF(FXI)] were rolled-up-and-out to May2010 expirations. These roll-up-and-out transactions were detailed in prior posts this week on this blog.
As described above, of the fifteen covered calls with Apr2010 expirations, six were adjusted prior to expiration and the remaining nine were held until expiration. Of these nine covered calls positions:
- Three positions [(ITT Corporation(ITT), National Oilwell Varco(NOV), and Packaging Corporation of America(PKG)] closed in-the-money. The calls were exercised and the equities were called away. The annualized percent return-on-investment(ROI) results for these three exercised positions were:
ITT Corporation(ITT): +15.2%
National Oilwell Varco(NOV): -6.8%
Packaging Corporation of America(PKG): +37.8%
- Six positions in the CCAP [Neutral Tandem Inc(TNDM), Noble Corportation(NE) with $41.00 strike price, Noble Corportation(NE) with $42.00 strike price, ProShares UltraShort 20-Year Treasury Bonds(TBT), Quanta Services Inc(PWR), and Sohu.com(SOHU)] ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish May2010 covered call positions. The related transactions will be made this week and the actual transactions will be posted on this blog site on the same day they occur.
Detailed results for the three positions that were assigned (called away) upon Apr2010 expiration are as follows:
1. ITT Corporation(ITT) -- Closed
The transactions history was as follows:
10/23/09 Bought 300 ITT @ $55.28
10/23/09 Sold 3 ITT Nov09 $55.00 Calls @ $2.60
11/10/09 Ex-Dividend $63.75 = $.2125 * 300 shares
11/21/09 Nov09 Options Expired
11/23/09 Sell-to-Open (STO) 3 ITT Jan10 $55.00s @ $.85
Note: Price of ITT was $51.55 when the Jan10 options were sold.
01/16/2010 Jan2010 Options Expired
02/22/2010 Sell-to-Open (STO) 3 ITT Apr2010 $55.00s @ $.55
03/01/2010 Ex-Dividend $75.00 = $.25 * 300 shares
04/17/2010 Apr2010 Options Expired
Note: Price of ITT was $55.87 upon Apr2010 expiration.
The overall performance results(including commissions) for the ITT transactions were as follows:
Stock Purchase Cost: $16,592.95
($55.28*300+$8.95 commission)
Net Profit:
(a) Options Income: +$1,166.40 (300*($2.60+$.85+$.55) - 3*$11.20 commissions)
(b) Dividend Income: +$138.75 = ($.2125+$.250) * 300 shares
(c) Capital Appreciation (Stock assigned at $55.00): -$92.95
= ($55.00-$55.28)*300 - $8.95 commissions
Total Net Profit(Stock assigned at $55.00): +$1,212.20
= (+$1,166.40 +$138.75 -$92.95)
Absolute Return (Stock Assigned at $55.00): +7.3%
= +$1,212.20/$16,592.95
Annualized Return: +15.2%
= (+$1,212.20/$16,592.95)*(365/176 days)
In this example, the price of the ITT stock declined after it was originally purchased. But through continuing to sell monthly call options against the underlying stock, the position was ultimately closed at a reasonably good profit (+15.2% annualized). This overall result benefited substantially from the monthly options income received despite the fact that the stock was sold at a loss (i.e. slightly below the original purchase price).
2. National Oilwell Varco(NOV) -- Closed
The transactions history was as follows:
01/20/2010 Bought 300 NOV @ $45.80
01/20/2010 Sold 3 NOV Feb2010 $46.00 Calls @ $1.75
02/20/2010 Feb2010 Options Expired
03/01/2010 Sold 3 NOV Mar2010 $44.00 Calls @ $.95
Note: The price of NOV was $43.55 today when these Mar2010 options were sold.
03/20/2010 Mar2010 Options Expired
03/29/2010 Sell-to-Open (STO) 3 NOV Apr2010 $42.00s @ $.50
Note: Price of NOV was $40.31 when the Apr2010 options were sold.
04/17/2010 Apr2010 Options Expired
Note: Price of NOV was $42.48 upon Apr2010 expiration.
The overall performance results(including commissions) for the NOV transactions were as follows:
Stock Purchase Cost: $13,748.95
= ($45.80*300+$8.95 commission)
Net Profit:
(a) Options Income: +$926.40
= (300*($1.75+$.95+$.50) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $42.00): -$1,148.95
= ($42.00-$45.80)*300 - $8.95 commissions
Total Net Profit(Stock assigned at $42.00): -$222.55
= (+$926.40 +$0.00 -$1,148.95)
Absolute Return (Stock Assigned at $42.00): -1.6%
= -$222.55/$13,748.95
Annualized Return: -6.8%
= (-$222.55/$13,748.95)*(365/87 days)
3. Packaging Corporation of America(PKG) -- Closed
The transactions history was as follows:
01/08/2010 Bought 300 PKG @ $23.89
01/08/2010 Sold 3 PKG Feb2010 $25.00 Calls @ $.80
02/20/2010 Feb2010 Options Expired
02/23/2010 Sell-to-Open (STO) 3 PKG Apr2010 $25.00s @ $.50
Note: Price of PKG was $23.38 when these call options were sold.
03/11/2010 Ex-Dividend of $45.00=$.15*300 shares
04/17/2010 Apr2010 Options Expired
Note: Price of PKG was $25.32 upon Apr2010 expiration.
The overall performance results(including commissions) for the PKG transactions were as follows:
Stock Purchase Cost: $7,175.95
= ($23.89*300+$8.95 commission)
Net Profit:
(a) Options Income: +$367.60
= 300*($.80+$.50) - 2*$11.20 commissions
(b) Dividend Income: +$45.00 = $.15*300 shares
(c) Capital Appreciation (Stock assigned at $25.00): +$324.05
= ($25.00-$23.89)*300 - $8.95 commissions
Total Net Profit(Stock assigned at $25.00): +$736.65
= (+$367.60 +$45.00 +$324.05)
Absolute Return (Stock Assigned at $25.00): +10.3%
= +$736.65/$7,175.95
Annualized Return: +37.8%
= (+$736.65/$7,175.95)*(365/99 days)
