Returns -- Through October 2010

1. October 2010 Year-to-Date Results:

As shown in the table below, the Covered Calls Advisor Portfolio (CCAP) has underperformed the Russell 3000 benchmark by 6.39 percentage points (+7.46-1.07%) so far in 2010:
















CCAP Absolute Return (Jan 1st through October 31st, 2010) = +1.07%
($278,44.54-$275,491.90)/$275,491.90

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through October 31st, 2010) = +7.46%
($70.15-$65.28)/$65.28


2. Prior Years Results:
The Covered Calls Advisor Portfolio (CCAP) began in September, 2007. The annualized returns achieved for 2007, 2008, and 2009 compared with the Russell 3000 benchmark results were as follows:











As a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all positions in the CCAP are also held in the personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

The Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff

Establish Guess? Inc. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Guess? Inc.(GES) covered calls. Guess was one of the covered calls positions that was called away upon Oct2010 options expiration. Today, the price of GES retreated significantly, largely as a result of a Wedbush downgrade from Buy to Hold. The Covered Calls Advisor took that opportunity to re-establish a Guess? Inc. covered calls position for Nov2010 expiration as follows:

Established Guess? Inc.(GES) Covered Calls for Nov2010:
10/27/2010 Bought 300 GES @ $39.51
10/27/2010 Sold 3 GES Nov2010 $40.00 Calls @ $1.30

Guess?, Inc. designs, markets, distributes and licenses its lifestyle collections of contemporary apparel and accessories for a style-conscious 18-to-32-year-old target audience of men and women around the world. In addition to wholesale and retail distribution channels, GES operates in 67 countries via its licensing and distributor partnerships. Apparel and accessories design teams are located in California in the U.S., and in Florence and Bologna, Italy. It offers collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, and knitwear. The company also grants licenses to manufacture and distribute a range of products that include eyewear, watches, handbags, footwear, kids' and infants' apparel, leather apparel, swimwear, fragrance, jewelry, intimate apparel, and other fashion accessories. With these collections, Guess is one of the very few international growth retail companies, and the only wonen's-oriented global aspirational/affordable luxury brands with a full lifestyle and accessories offering.

Guess , Inc. markets its apparel under various trademarks, including GUESS, GUESS , GUESS U.S.A., GUESS Jeans, GUESS and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO, and Gc. The company sells its products through retail, wholesale, e-commerce, and licensing distribution channels. Guess operates 425 stores in North America and 96 stores abroad; licensees and distributors operated another 594 non-North American stores.

The Buy Alerts spreadsheet below shows that GES is an attractive value at this time since the total points rating of 16.40 exceeds the Covered Calls Advisor's desired "Buy" threshold of 16.0. Guess is trading at a P/E of 11 based on 2011 estimated forward earnings, which is a 30% discount from both its peers (think RL and ANF) and from its own historic multiple. Also very importantly, at its current price, the future growth potential of the Guess brand seems under-appreciated by investors based on its potential growth drivers related to: (1) rapid expansion in Europe, Asia, and Latin America; (2) expanding new product categories; and (3) potential new store formats. The company's management is very strong, and it recently made good additions to their team -- a new COO from Nike and a new President for Asia who formerly oversaw Levi's huge growth there. The company has $480 million cash, is debt-free, and generates more than $2.50 a share of free cash flow. So it is conceivable that when Guess reports third-quarter results on Nov. 23rd, it might also outline plans for a dividend raise (currently a 64-cents dividend yielding 1.6%), a share buy-back program, and/or even more aggressive expansion plans.























Note: For expanded view, left click on the spreadsheet above.

Some possible overall performance results(including commissions) for the Guess? Inc.(GES) transactions would be as follows:
Stock Purchase Cost: $11,861.95
= ($39.51*300+$8.95 commission)

Net Profit:
(a) Options Income: +$378.80
= (300*$1.30 - $11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price unchanged at $39.51):
-$8.95 = ($39.51-$39.51)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $40.00): +$138.05
= ($40.00-$39.51)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $39.51): +$369.85
= (+$378.80 +$0.00 -$8.95)
Total Net Profit(If stock assigned at $40.00): +$516.85
= (+$378.80 +$0.00 +$138.05)

Absolute Return if Unchanged at $39.51: +3.1%
= +$369.85/$11,861.95
Annualized Return If Unchanged (ARIU) +47.4%
= (+$369.85/$11,861.95)*(365/24 days)

Absolute Return if Assigned at $40.00: +4.4%
= +$516.85/$11,861.95
Annualized Return If Assigned (ARIA) +66.3%
= (+$516.85/$11,861.95)*(365/24 days)

Establish iShares MSCI Emerging Markets Fund ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI Emerging Markets Fund ETF (EEM) covered calls as follows:

Established iShares MSCI Emerging Markets Fund ETF (EEM) Covered Calls for Nov2010:
10/27/2010 Bought 300 EEM @ $45.55
10/27/2010 Sold 3 EEM Nov2010 $46.00 Calls @ $.99

The iShares MSCI Emerging Markets Fund ETF is a diversified Exchange Traded Fund(ETF) with investment exposure in global emerging market(GEM) countries such as Brazil, China, S Korea, Taiwan, and India. During the past year, emerging market stocks have slightly underperformed developed market stocks, but this advisor believes that trend is poised to reverse. In this regard, six key factors that favor emerging markets include: cheap exchange rates, cheap labor, improving quality of labor, a clearly superior quantity of labor, lower corporate tax rates, and growing economies of scale.

Two possible overall performance results(including commissions) for the EEM transactions would be as follows:
Stock Purchase Cost: $13,673.95
= ($45.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$285.80
= (300*$.99 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM price unchanged at $45.55):
-$8.95 = ($45.55-$45.55)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $46.00): +$126.05
= ($46.00-$45.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $45.55): +$276.85
= (+$285.80 +$0.00 -$8.95)
Total Net Profit(If stock assigned at $46.00): +$411.85
= (+$285.80 +$0.00 +$126.05)

Absolute Return if Unchanged at $45.55: +2.0%
= +$276.85/$13,673.95
Annualized Return If Unchanged (ARIU) +30.8%
= (+$276.85/$13,673.95)*(365/24 days)

Absolute Return if Assigned at $46.00: +3.0%
= +$411.85/$13,673.95
Annualized Return If Assigned (ARIA) +45.8%
= (+$411.85/$13,673.95)*(365/24 days)

Downside Breakeven Price Point: $44.56
Downside Breakeven Protection: 2.0%

Establish iPath S&P 500 VIX Short-Term Futures ETN Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iPath S&P 500 VIX Short-Term Futures ETN (VXX) covered calls as follows:

Established iPath S&P 500 VIX Short-Term Futures ETN (VXX) Covered Calls for Nov2010:
10/25/2010 Bought 300 VXX @ $12.37
10/25/2010 Sold 3 VXX Nov2010 $13.00 Calls @ $.70
The current implied volatility of VXX is above 70 whereas, even with the dramatic and persistent decline in the volatility index (VIX) during the past several months, the VXX 3-month historic volatility is only in the mid 40s. The Covered Calls Advisor views this wide disparity as an opportune time to consider selling the very high implied volatility currently available in VXX options.

Some possible overall performance results(including commissions) for the iPath S&P 500 VIX Short-Term Futures ETN (VXX) transactions would be as follows:
Stock Purchase Cost: $3,719.95
= ($12.37*300+$8.95 commission)

Net Profit:
(a) Options Income: +$198.80
= (300*$.70 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If VXX price unchanged at $12.37):
-$8.95 = ($12.37-$12.37)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $13.00): +$180.05
= ($13.00-$12.37)*300 - $8.95 commissions

Total Net Profit(If VXX price unchanged at $12.37): +$189.85
= (+$198.80 +$0.00 -$8.95)
Total Net Profit(If VXX assigned at $13.00): +$378.85
= (+$198.80 +$0.00 +$180.05)

Absolute Return if Unchanged at $12.37: +5.1%
= +$189.85/$3,719.95
Annualized Return If Unchanged (ARIU) +71.6%
= (+$189.85/$3,719.95)*(365/26 days)

Absolute Return if Assigned at $13.00: +10.2%
= +$378.85/$3,719.95
Annualized Return If Assigned (ARIA): +143.0%
= (+$378.85/$3,719.95)*(365/26 days)

Downside Breakeven Price Point: $11.74 = $12.37 - $.70 option income + commissions
Downside Breakeven Protection: 5.1%

If you have any comments or questions on this article please submit them by clicking on the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site. Your comments are always welcomed.

Establish Intel Corp. Covered Calls

This past Friday was options expiration for Oct2010. An Oct2010 covered calls position in Intel Corp.(INTC) was in the money at expiration, so the stock was called away for a small profit. Since the fundamental valuation (as shown on the Buy Alerts spreadsheet below) remains strong for Intel, a new covered calls position was established today as follows:

10/20/2010 Bought 300 INTC @ $19.45
10/20/2010 Sold 3 INTC Nov2010 $20.00 Call Options @ $.21

Intel Corp.(INTC) is the world's leading semiconductor producer and has been the industry leader since the inception of the personal computer. Intel produces products for many facets of advanced technology including flash memory products, motherboards, wired and wireless connectivity products and networked storage products. Its 2009 annual sales exceeded $35 billion and should approximate $40 billion this year. This sales increase coupled with an operating margin above 60% should enable Intel to achieve all-time record earnings per share of approximately $2.00 this year. Applying a P/E of 13 (historically low for Intel) against these earnings implies a very reasonable target price potential of $26, which represents an attractive 34% annualized return potential for the underlying stock over the next year.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 16.42 is above the desired threshold of 16 points for a new investment.






















Note: For expanded view, left click on the spreadsheet above.


Two possible overall performance results(including commissions) for the INTC transactions would be as follows:
Stock Purchase Cost: $5,843.95
= ($19.45*300+$8.95 commission)

Net Profit:
(a) Options Income: +$51.80
= 300*$.21 - $11.20 commissions
(b) Dividend Income: +$47.25 = ($.1575*300 shares) ex-div on 11/3/2010
(c) Capital Appreciation (If stock price unchanged at $19.45):
-$8.95 = ($19.45-$19.45)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $20.00): +$156.05
= ($20.00-$19.45)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $19.45): +$90.10
= (+$51.80 +$47.25 -$8.95)
Total Net Profit(If stock price assigned at $20.00): +$255.10
= (+$51.80 +$47.25 +$156.05)

Absolute Return if Unchanged at $19.45: +1.5%
= +$90.10/$5,843.95
Annualized Return If Unchanged (ARIU) +18.2%
= (+$90.10/$5,843.95)*(365/31 days)

Absolute Return if Assigned at $20.00: +4.4%
= +$255.10/$6,098.95
Annualized Return If Assigned (ARIA) +51.4%
= (+$255.10/$6,098.95)*(365/31 days)

Petrobras (PBR) -- Continuation Transaction

This past Friday was expiration Friday for October 2010 options. In the Covered Calls Advisor's most recent blog post, it was noted that of the thirteen covered calls positions with Oct2010 expirations, three positions ended out-of-the-money. Today, a decision was made to retain the shares in one of these three positions (Petrobras) and to establish a Nov2010 covered calls position. The transactions history for each position as well as some possible results for each of these investments are as follows:

1. Petrobras (PBR) -- Continuation
The transactions history is as follows:
06/21/2010 Bought 300 PBR @ $39.34
06/21/2010 Sold 3 PBR Jul2010 $40.00 Calls @ $1.05
7/17/2010 Jul2010 Options Expired
Note: The closing price of PBR was $34.51 on expiration Friday.
07/22/2010 Sold 3 PBR Aug2010 $38.00 Calls @ $.55
Note: The price of PBR was $36.52 today when these options were sold.
08/02/2010 +$57.90 Ex-Dividend = ($.193 Net Dividend x 300 shares)
08/21/2010 Aug2010 Options Expired
Note: The closing price of PBR was $34.42 on expiration Friday.
09/01/2010 Sold 3 PBR Sept2010 $36.00 Call Options @ $.58
Note: The price of PBR was $35.20 today when these call options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 3 PBR Oct2010 $37.00 Call Options @ $.63
Note: The price of PBR was $35.24 today when these options were sold.
10/16/2010 Oct2010 Options Expired
Note: Price of PBR at expiration was $34.29
10/18/2010 Sell-to-Open (STO) 3 PBR Oct2010 $36.00 Call Options @ $.62
Note: The price of PBR was $34.20 today when these call options were sold.

Two possible overall performance results(including commissions) for the Petrobras (PBR) transactions would be as follows:
Stock Purchase Cost: $11,810.95
= ($39.34*300+$8.95 commission)

Net Profit:
(a) Options Income: +$973.00
= (300*($1.05+$.55+$.58+$.63+$.62) - 5*$11.20 commissions)
(b) Dividend Income: +$57.90 ($.193 * 300 shares) Net Ex-Dividend on 8/2/2010
(c) Capital Appreciation (If PBR unchanged at $34.20): $-1,550.95
= ($34.20-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $36.00): -$1,010.95
= ($36.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR price unchanged at $34.20): -$520.05
= (+$973.00 +$57.90 -$1,550.95)
Total Net Profit(If PBR assigned at $36.00): +19.95
= (+$973.00 +$57.90 -$1,010.95)

Absolute Return (If PBR unchanged at $34.20): -4.4%
= -$520.05/$11,810.95
Annualized Return If Unchanged (ARIU): -10.6%
= (-$577.95/$11,810.95)*(365/152 days)

Absolute Return (If Assigned at $36.00): +0.2%
= +$19.95/$11,810.95
Annualized Return If Assigned: +0.4%
= (+$19.95/$11,810.95)*(365/152 days)

Medicis Pharmaceutical Corp. (MRX) -- Closed

Last Friday was expiration Friday for October 2010. A decision was made today to sell the 300 shares owned in Medicis Pharmaceutical Corp.(MRX). The results shown below provide a good example of the triple-income opportunity with covered calls being realized. That is, income received from all three potential sources of income through covered calls investing: (1) capital appreciation; (2) options income; and (3) dividend income.

1. Medicis Pharmaceutical Corp. (MRX) -- Closed
The transactions history was as follows:
09/23/2010 Bought 300 MRX @ $29.27
09/23/2010 Sold 3 MRX Oct2010 $30.00 Calls @ $.55
10/16/2010 Oct2010 Options Expired
Note: Price of MRX at expiration was $29.86
10/18/2010 Sold 300 MRX @ $30.09

The overall performance result(including commissions) for the Medicis transactions was as follows:
Stock Purchase Cost: $8,789.95
= ($29.27*300+$8.95 commission)

Net Profit:
(a) Options Income: +$153.80
= (300*$.55 - $11.20 commissions)
(b) Dividend Income: +$18.00 ($.06*300 shares). Went Ex-Dividend on 9/29/2010.
(c) Capital Appreciation (Stock sold at $30.09): +$237.05
= ($30.09-$29.27)*300 - $8.95 commissions

Total Net Profit(With stock sold at $30.09): +$408.85
= (+$153.80 +$18.00 +$237.05)

Absolute Return: +4.7%
= +$408.85/$8,789.95
Annualized Return: +67.9%
= (+$381.85/$8,789.95)*(365/25 days)

October 2010 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of thirteen covered calls positions with October 2010 expirations, with the following results:

- Five covered calls position were well in-the-money this past week. Since the Covered Calls Advisor wanted to retain these positions going forward, decisions were made earlier this week to roll-up-and-out to Nov2010 covered calls positions in Domtar Corp, iShares MSCI China ETF, Microsoft, Oshkosh Corp, and Research in Motion. Separate posts were made on this blog earlier this week for each of these transactions on the day they occurred.

- Five positions (Guess? Inc, Intel, Neutral Tandem, ProShares UltraShort 20+ Years Treasury ETF, and Symantec Corp) closed in-the-money. The calls were exercised and the shares were called away. The annualized return-on-investment results achieved were as follows:
1. Guess? Inc. -- +110.0%
2. Intel Corp. -- +6.2%
3. Neutral Tandem Inc. -- +73.8%
4. ProShares UltraShort 20+ Years Treasury ETF -- +53.7%
5. Symantec Corp. -- +31.2%
Detailed results for each of these five covered calls positions that were assigned (called away) upon Oct2010 expiration are described below.

- The remaining three positions in the CCAP (Bank of America, Medicis Pharmaceuticals, and Petrobras) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish Nov2010 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.

The overall performance results for the five assigned covered calls positions were as follows:

1. Guess? Inc.(GES) -- Closed
The transactions history was as follows:
09/22/2010 Bought 300 GES @ $37.75
09/22/2010 Sold 3 GES Oct2010 $40.00 Calls @ $.55
10/16/2010 300 shares of GES were in-the-money and the shares were called away (assigned) at $40.00. Note: The closing price of GES was $43.33 on expiration Friday.

The overall performance results(including commissions) for the Guess? Inc.(GES) transactions were as follows:
Stock Purchase Cost: $11,333.95
= ($37.75*300+$8.95 commission)

Net Profit:
(a) Options Income: +$153.80
= (300*$.55 - $11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (Stock assigned at $40.00): +$666.05
= ($40.00-$37.75)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $40.00): +$819.85
= (+$153.80 +$0.00 +$666.05)

Absolute Return (Stock assigned at $40.00): +7.2%
= +$819.85/$11,333.95
Annualized Return: +110.0%
= (+$819.85/$11,333.95)*(365/24 days)


2. Intel Corp.(INTC) -- Closed
The transactions history was as follows:
05/21/2010 Bought 300 INTC @ $20.30
05/21/2010 Sold 3 INTC Jun2010 $22.00 Call Options @ $.52
06/21/2010 Sold 3 INTC Jul2010 $22.00 Call Options @$.46
Note: The price of INTC was $21.60 when these options were sold.
7/17/2010 Jul2010 Options Expired
Note: The closing price of INTC was $21.02 on expiration Friday.
07/22/2010 Sold 3 INTC Aug2010 $22.00 Calls @ $.42
Note: The price of INTC was $21.70 today when these options were sold.
08/04/2010 Ex-Dividend $4.00 = $.1575*300 shares
08/21/2010 Aug2010 Option Expired
Note: The closing price of INTC was $18.91 on expiration Friday.
09/03/2010 Sold 3 INTC Oct2010 $19.00 Call Options @ $.43
Note: The price of INTC was $18.24 today when these options were sold.
10/16/2010 300 shares of INTC were in-the-money and the shares were called away (assigned) at $19.00. Note: The closing price of INTC was $19.32 on expiration Friday.

The overall performance results(including commissions) for the Intel Corp(INTC) transactions were as follows:
Stock Purchase Cost: $6,098.95
= ($20.30*300+$8.95 commission)

Net Profit:
(a) Options Income: +$504.20
= 300*($.52+$.46+$.42+$.43) - 4*$11.20 commissions
(b) Dividend Income: +$47.25 ($.1575 * 300 shares)
(c) Capital Appreciation (Stock assigned at $19.00): -$398.95
= ($19.00-$20.30)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $19.00): +$152.50
= (+$504.20 +$47.25 -$398.95)

Absolute Return (Stock assigned at $19.00): +2.5%
= +$152.50/$6,098.95
Annualized Return: +6.2%
= (+$152.50/$6,098.95)*(365/148 days)


3. Neutral Tandem (TNDM) -- Closed
The transactions history was as follows:
09/22/2010 Bought 500 TNDM @ $12.48
09/22/2010 Sold 5 TNDM Oct2010 $12.50 Calls @ $.63
10/16/2010 500 shares of TNDM were in-the-money and the shares were called away (assigned) at $12.50. Note: The closing price of TNDM was $14.31 on expiration Friday.

The overall performance results(including commissions) for the TNDM transactions were as follows:
Stock Purchase Cost: $6,248.95
= ($12.48*500+$8.95 commission)

Net Profit:
(a) Options Income: +$302.30
= (500*$.63 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $12.50): +$1.05
= ($12.50-$12.48)*500 - $8.95 commissions

Total Net Profit(Stock assigned at $12.50): +$303.35
= (+$302.30 +$0.00 +$1.05)

Absolute Return (Stock assigned at $12.50): +4.9%
= +$303.35/$6,248.95
Annualized Return: +73.8%
= (+$303.35/$6,248.95)*(365/24 days)


4. ProShares UltraShort 20+ Year Treasury ETF (TBT) -- Closed
The transactions history was as follows:
09/22/2010 Bought 300 TBT @ $31.75
09/22/2010 Sold 3 TBT Oct2010 $32.00 Calls @ $.94
10/16/2010 300 shares of TBT were in-the-money and the shares were called away (assigned) at $32.00. Note: The closing price of TBT was $34.17 on expiration Friday.

The overall performance results(including commissions) for the TBT transactions were as follows:
Stock Purchase Cost: $9,533.95
= ($31.75*300+$8.95 commission)

Net Profit:
(a) Options Income: +$270.80
= 300*$.94 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TBT shares assigned at $32.00): +$66.05
= ($32.00-$31.75)*300 - $8.95 commissions

Total Net Profit(TBT assigned at $32.00): +$336.85
= (+$270.80 +$0.00 +$66.05)

Absolute Return (TBT shares assigned at $32.00): +3.5%
= +$336.85/$9,533.95
Annualized Return: +53.7%
= (+$336.85/$9,533.95)*(365/24 days)


5. Symantec Corporation (SYMC) -- Closed
The transactions history was as follows:
06/23/2010 Bought 300 SYMC @ $14.70
06/23/2010 Sold 3 SYMC Jul2010 $15.00 Call Options @ $.31
7/17/2010 Jul2010 Options Expired
Note: The closing price of SYMC was $14.59 on expiration Friday.
07/22/2010 Sold 3 SYMC Aug2010 $15.00 Calls @ $.54
Note: The price of SYMC was $14.86 today when these options were sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of SYMC was $13.80 on expiration Friday.
09/01/2010 Sold 3 SYMC Oct2010 $15.00 Call Options @ $.44
Note: The price of SYMC was $14.07 today when these options were sold.
10/16/2010 300 shares of SYMC were in-the-money and the shares were called away (assigned) at $15.00. Note: The closing price of SYMC was $15.73 on expiration Friday.

The overall performance results(including commissions) for the Symantec Corporation (SYMC) transactions were as follows:
Stock Purchase Cost: $4,418.95
= ($14.70*300+$8.95 commission)

Net Profit:
(a) Options Income: +$353.40
= 300*($.31+$.54+$.44) - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $15.00): +$81.05
= ($15.00-$14.70)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $15.00): +$434.45
= (+$353.40 +$0.00 +$81.05)

Absolute Return (Stock assigned at $15.00): +9.8%
= +$434.45/$4,418.95
Annualized Return: +31.2%
= (+$434.45/$4,418.95)*(365/115 days)

Roll Up and Out -- Microsoft Corporation Covered Calls

Today is Oct2010 options expiration. With the five Microsoft Corporation (MSFT) Oct2010 $25.00 calls in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Nov2010 expiration at the $26.00 strike price. The transactions history as well as possible return results are detailed below:

1. Microsoft Corporation (MSFT) -- Continuation Transaction
With Microsoft Corporation (MSFT) trading at $25.29, the five existing Oct2010 $25.00 calls were bought back for $.32 (only $.03 of time value remaining in each call option) and then replaced by selling five Nov2010 $26.00 strike options at $.47 as follows:
10/15/2010 Buy-to-Close (BTC) 5 MSFT Oct2010 $25.00 Call Options @ $.32
10/15/2010 Sell-to-Open (STO) 5 MSFT Nov2010 $26.00 Call Options @ $.47
The price of MSFT was $25.29 today when this roll-up-and-out credit spread transaction was executed.

The transactions history to date for Microsoft Corporation (MSFT) is as follows:
07/23/2010 Bought 500 MSFT @ $25.47
07/23/2010 Sold 5 MSFT Aug2010 $26.00 Calls @ $.44
08/17/2010 Ex-Dividend $65.00 = $.13 * 500 shares
08/21/2010 Aug2010 Option Expired
Note: The closing price of MSFT was $24.23 on expiration Friday.
09/03/2010 Sold 5 MSFT Oct2010 $25.00 Call Options @ $.49
Note: The price of MSFT was $24.31 today when these options were sold.
10/15/2010 Buy-to-Close (BTC) 5 MSFT Oct2010 $25.00 Call Options @ $.32
10/15/2010 Sell-to-Open (STO) 5 MSFT Nov2010 $26.00 Call Options @ $.47

Two possible overall performance results(including commissions) for the Microsoft Corp.(MSFT) transactions would be as follows:
Stock Purchase Cost: $12,743.95
= ($25.47*500+$8.95 commission)

Net Profit:
(a) Options Income: +$489.20
= (500*($.44+$.49-$.32+$.47) - 4*$12.70 commissions)
(b) Dividend Income: +$65.00 =($.13 * 500 shares)
(c) Capital Appreciation (If stock price unchanged at $25.29):
-$98.95 = ($25.29-$25.47)*500 - $8.95 commissions
(c) Capital Appreciation (If assigned at $26.00): +$256.05
= ($26.00-$25.47)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $25.29): +455.25
= (+$489.20 +$65.00 -$98.95)
Total Net Profit(If stock assigned at $26.00): +$810.25
= (+$489.20 +$65.00 +$256.05)

Absolute Return if Unchanged at $25.29: +2.0%
= +$455.25/$12,743.95
Annualized Return If Unchanged (ARIU): +6.2%
= (+$455.25/$12,743.95)*(365/120 days)

Absolute Return if Assigned at $25.00: +6.4%
= +$810.25/$12,743.95
Annualized Return If Assigned (ARIA): +19.3%
= (+$810.25/$12,743.95)*(365/120 days)

Roll Up and Out -- iShares MSCI China ETF Covered Calls

Today, with one day remaining until Oct2010 options expiration (and with the eleven iShares MSCI China ETF (FXI) Oct2010 $43.00 calls well in-the-money), the Covered Calls Advisor decided to roll-up-and-out to the Nov2010 expiration at the $47.00 strike price. The transactions history as well as possible return results are detailed below:

1. iShares MSCI China ETF (FXI) -- Continuation Transaction
With iShares MSCI China ETF (FXI) priced at $45.67, the eleven existing Oct2010 $43.00 calls were bought back for $2.69 (only $.02 of time value remaining in each call option) and then replaced by selling eleven Nov2010 $47.00 strike options at $.85 as follows:
10/14/2010 Buy-to-Close (BTC) 11 FXI Oct2010 $43.00 Call Options @ $2.69
10/14/2010 Sell-to-Open (STO) 11 FXI Nov2010 $47.00 Call Options @ $.85
The price of FXI was $45.67 today when this roll-up-and-out debit spread transaction was made.

The transactions history is as follows:
06/21/2010 Bought 1,100 FXI @ $41.85
06/21/2010 Sold 11 FXI Jul2010 $43.00 Calls @ $.71
7/17/2010 Jul2010 Options Expired
Note: The closing price of FXI was $38.74 on expiration Friday.
07/22/2010 Sold 7 FXI Aug2010 $42.00 Calls @ $.73
07/22/2010 Sold 4 FXI Aug2010 $43.00 Calls @ $.42
Note: The price of FXI was $41.02 today when these options were sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of FXI was $40.54 on expiration Friday.
09/02/2010 Sold 11 FXI Sep2010 $42.00 Call Options @ $.20
Note: The price of FXI was $40.52 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 11 FXI Oct2010 $43.00 Call Options @ $.62
Note: The price of FXI was $42.19 today when these options were sold.
10/14/2010 Buy-to-Close (BTC) 11 FXI Oct2010 $43.00 Call Options @ $2.69
10/14/2010 Sell-to-Open (STO) 11 FXI Nov2010 $47.00 Call Options @ $.85

Some possible overall performance results(including commissions) for the iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $46,043.95
= ($41.85*1,100+$8.95 commission)

Net Profit:
(a) Options Income: +$252.25
= (1,100*($.71+$.20+$.62-$2.69+$.85) + 700*$.73 + 400*$.40 - ($17.20*3 +$14.20 +$11.95) commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI unchanged at $45.67): +$4,193.05
= ($45.67-$41.85)*1,100 - $8.95 commissions
(c) Capital Appreciation (If all FXI shares are assigned at $47.00): +$5,656.05 = ($47.00-$41.85)*1,100 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $45.67): +$4,445.30
= (+$252.25 +$0.00 +$4,193.05)
Total Net Profit (If FXI assigned at $47.00): +$5,908.30
= (+$252.25 +$0.00 +$5,656.05)

Absolute Return (If FXI unchanged at $45.67): +9.7%
= +$4,445.30/$46,043.95
Annualized Return If Unchanged (ARIU): +23.2%
= (+$4,445.30/$46,043.95)*(365/152 days)

Absolute Return (If Assigned at $47.00): +12.8%
= +$5,908.30/$46,043.95
Annualized Return If Assigned (ARIA): +30.8%
= (+$5,908.30/$46,043.95)*(365/152 days)

Overall Market Meter Rating Remains "Slightly Bullish"

Each month during expiration week, the Covered Calls Advisor re-calculates each of the current values for the nine factors used to determine the "Overall Market Meter" rating. As shown in the chart below, the new Overall Market Meter Average rating (blue bar at the bottom of the chart) remains unchanged at "Slightly Bullish":
















The current Market Meter Average of 3.89 is lower than the 4.22 of last month, but nevertheless remains at Slightly Bullish (Note: the range for Slightly Bullish is from 3.5 to 4.5) for establishing covered calls investing positions for the next options expiration month of November 2010. Of the nine factors used, six remained unchanged from last month and three declined by one rating category. The three that changed were:
- Baltic Dry Index factor declined from Bullish to Slightly Bullish
- Total Market Index-to-GDP Ratio factor declined from Neutral to Slightly Bearish
- Future Earnings Growth factor deteriorated from Bullish to Slightly Bullish

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 2% out-of-the-money covered calls for the nearest expiration month." So with the October 2010 options expiration this week, new positions for Nov2010 expiration will be established in accordance with this guideline.

For a more detailed explanation of each of the Covered Calls Advisor's nine indicators, please refer to this prior blog post on that topic -- link.

Your comments or questions regarding this post are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Roll Up and Out -- Research In Motion Ltd. Covered Calls

Today, with two days remaining until Oct2010 options expiration (and with the three Research In Motion Ltd.(RIMM) Oct2010 $47.50 calls well in-the-money), the Covered Calls Advisor decided to roll-up-and-out to the Nov2010 expiration at the $50.00 strike price. The transactions history as well as possible return results are detailed below:

1. Research In Motion Ltd.(RIMM) -- Continuation Transaction
With Research In Motion Ltd.(RIMM) stock priced at $50.05, the four existing Oct2010 $47.50 calls were bought back for $2.60 (only $.05 of time value remaining in each call option) and then replaced by selling three at-the-money Nov2010 $50.00 strike options at $2.44 as follows:
10/13/2010 Buy-to-Close (BTC) 3 RIMM Oct2010 $47.50 Call Options @ $2.60
10/13/2010 Sell-to-Open (STO) 3 RIMM Nov2010 $50.00 Call Options @ $2.44
The price of RIMM was $50.05 today when this roll-up-and-out debit spread transaction was made.

The transactions history is as follows:
09/23/2010 Bought 300 RIMM @ $46.55
09/23/2010 Sold 3 RIMM Oct2010 $47.50 Calls @ $1.64
10/13/2010 Buy-to-Close (BTC) 3 RIMM Oct2010 $47.50 Call Options @ $2.60
10/13/2010 Sell-to-Open (STO) 3 RIMM Nov2010 $50.00 Call Options @ $2.44

A possible overall performance result(including commissions) for these Research In Motion Ltd.(RIMM) transactions would be as follows:
Stock Purchase Cost: $13,973.95
= ($46.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$410.40
= (300*($1.64-$2.60+$2.44) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $50.00): +$1,026.05
= ($50.00-$46.55)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $50.00): +$1,436.45
= (+$410.40 +$0.00 +$1,026.05)

Absolute Return if Assigned at $50.00: +10.3%
= +$1,436.45/$13,973.95
Annualized Return If Assigned (ARIA): +64.7%
= (+$1,436.45/$13,973.95)*(365/58 days)

Roll Up and Out -- Domtar Corp. Covered Calls

Today, with two days remaining until Oct2010 options expiration (and with the four Domtar Corp.(UFS) Oct2010 $65.00 calls well in-the-money), the Covered Calls Advisor decided to roll-up-and-out to the Nov2010 expiration at the $70.00 strike price. The transactions history as well as possible return results are detailed below:

1. Domtar Corp.(UFS) -- Continuation Transaction
With Domtar Corp.(UFS) stock priced at $69.90, the four existing Oct2010 $65.00 calls were bought back for $5.00 (only $.10 of time value remaining in each call option) and then replaced by selling four at-the-money Nov2010 $70.00 strike options at $3.30 as follows:
10/13/2010 Buy-to-Close (BTC) 4 UFS Oct2010 $65.00 Call Options @ $5.00
10/13/2010 Sell-to-Open (STO) 4 UFS Nov2010 $70.00 Call Options @ $3.30
The price of UFS was $69.90 today when this roll-up-and-out debit spread transaction was made.

The transactions history is as follows:
06/23/2010 Bought 400 UFS @ $55.10
06/23/2010 Sold 4 UFS Jul2010 $60.00 Calls @ $1.10
07/17/2010 Jul2010 Options Expired
Note: The closing price of UFS was $47.77 on expiration Friday.
07/22/2010 Sold 4 UFS Aug2010 $55.00 Calls @ $1.20
Note: The price of UFS was $50.80 today when these options were sold.
08/13/2010 Buy-to-Close (BTC) 4 UFS Aug2010 $55.00 Call Options @ $5.70
08/12/2010 Sell-to-Open (STO) 4 UFS Sep2010 $65.00 Call Options @ $1.85
Note: The price of UFS was $61.38 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 4 UFS Oct2010 $65.00 Call Options @ $2.10
Note: The price of UFS was $63.70 today when these options were sold.
10/13/2010 Buy-to-Close (BTC) 4 UFS Oct2010 $65.00 Call Options @ $5.00
10/13/2010 Sell-to-Open (STO) 4 UFS Nov2010 $70.00 Call Options @ $3.30

Two possible overall performance results(including commissions) for Domtar Corp.(UFS) transactions would be as follows:
Stock Purchase Cost: $22,048.95
= ($55.10*400+$8.95 commission)

Net Profit:
(a) Options Income: -$543.65
= (400*($1.10+$1.20-$5.70+$1.85+$2.10-$5.00+$3.30) - 7*$11.95 commissions)
(b) Dividend Income: +$100.00 =($.25*400) Ex-dividend was on 9/13/2010
(c) Capital Appreciation (If UFS unchanged at $69.90): +$5,911.05
= ($69.90-$55.10)*400 - $8.95 commissions
(c) Capital Appreciation (If UFS assigned at $70.00): +$5,951.05
= ($70.00-$55.10)*400 - $8.95 commissions

Total Net Profit(If UFS price unchanged at $69.90): +$5,467.40
= (-$543.65 +$100.00 +$5,911.05)
Total Net Profit(If UFS assigned at $70.00): +$5,507.40
= (-$543.65 +$100.00 +$5,951.05)

Absolute Return (If UFS unchanged at $69.90): +60.3%
= +$5,467.40/$22,048.95
Annualized Return If Unchanged (ARIU): +53.1%
= (+$5,467.40/$22,048.95)*(365/150 days)

Absolute Return (If Assigned at $70.00): +25.0%
= +$5,507.40/$22,048.95
Annualized Return If Assigned (ARIA): +60.8%
= (+$5,507.40/$22,048.95)*(365/150 days)

Roll Up and Out -- Oshkosh Corp. Covered Calls

Today, with one week remaining until Oct2010 options expiration (and with the three Oshkosh Corp.(OSK) Oct2010 $27.00 calls well in-the-money), the Covered Calls Advisor decided to roll-up-and-out to the Nov2010 expiration at the $30.00 strike price. The original covered calls position was purchased only two weeks ago, and the stock has had a very bullish move since then, including a further spike higher today in response to a Goldman Sachs upgrade from Hold to Buy and an updated target price of $34.00. The transactions history as well as a possible return result is detailed below:

1. Oshkosh Corp.(OSK) -- Continuation Transaction
Today, with Oshkosh Corp.(OSK) stock priced at $30.00, the three existing Oct2010 $27.00 calls were bought back for $3.10 and replaced by selling three at-the-money Nov2010 $30.00 strike options at $1.70 as follows:
10/08/2010 Buy-to-Close (BTC) 3 OSK Oct2010 $27.00 Call Options @ $3.10
10/08/2010 Sell-to-Open (STO) 3 OSK Nov2010 $30.00 Call Options @ $1.70
The price of OSK was $30.00 today when this roll-up-and-out debit spread transaction was made. The Covered Calls Advisor strategy is to be fully invested but to retain about 5% cash in order to accomodate roll-up transactions at opportune times that would require some additional cash to be completed (Note: this OSK debit-spread transaction is a good example of just such an occurrence).

The transactions history to date for Oshkosh Corp.(OSK) is as follows:
09/27/2010 Bought 300 OSK @ $26.46
09/27/2010 Sold 3 OSK Oct2010 $27.00 Calls @ $.80
10/08/2010 Buy-to-Close (BTC) 3 OSK Oct2010 $27.00 Call Options @ $3.10
10/08/2010 Sell-to-Open (STO) 3 OSK Nov2010 $30.00 Call Options @ $1.70

A possible overall performance result(including commissions) for the Oshkosh Corp.(OSK) transactions would be as follows:
Stock Purchase Cost: $7,946.95
= ($26.46*300+$8.95 commission)

Net Profit:
(a) Options Income: -$213.60
= (300*($.80-$3.10+$1.70) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $30.00): +$1,053.05
= ($30.00-$26.46)*300 - $8.95 commissions

Total Net Profit(If stock price assigned at $30.00): +$839.45
= (-$213.60 +$0.00 +$1,053.05)

Absolute Return if Assigned at $30.00: +10.6%
= +$839.45/$7,946.95
Annualized Return If Assigned (ARIA): +71.4%
= (+$839.45/$7,946.95)*(365/54 days)