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)
