Most of the remaining cash (except for 5% of the total portfolio value) in the Covered Calls Advisor Portfolio(CCAP) was used to establish an out-of-the-money position in the S&P 500 Spyder (SPY) covered calls as follows:
06/03/2010 Bought 900 SPY @ $110.519
06/03/2010 Sold 9 SPY Jun2010 $112.00 Call Options @ $1.54
Two possible overall performance results(including commissions) for the SPY transactions would be as follows:
Stock Purchase Cost: $99,476.05
= ($110.519*900+$8.95 commission)
Net Profit:
(a) Options Income: +$1,370.30
= 900*$1.54 - $15.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $110.519):
-$8.95 = ($110.519-$110.519)*900 - $8.95 commissions
(c) Capital Appreciation (If exercised at $112.00): +$1,323.95
= ($112.00-$110.519)*900 - $8.95 commissions
Total Net Profit(If stock price unchanged at $110.519): +$1,361.35
= (+$1,370.30 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $112.00): +$2,694.25
= (+$1,370.30 +$0.00 +$1,323.95)
Absolute Return if Unchanged at $110.519: +1.4%
= +$1,361.35/$99,476.05
Annualized Return If Unchanged (ARIU): +31.2%
= (+$1,361.35/$99,476.05)*(365/16 days)
Absolute Return if Exercised at $112.00: +2.7%
= +$2,694.25/$99,476.05
Annualized Return If Exercised (ARIE): +61.8%
= (+$2,694.25/$99,476.05)*(365/16 days)
Establishing positions for the Jun2010 Covered Calls Advisor Portfolio are now completed. The current covered calls positions are always shown in the right sidebar. These positions were established in accordance with the Slightly Bullish strategy which is to sell options that are, on average, 2% out-of-the-money and for the near-month expiration.
