Returns -- Through November 2010

1. November 2010 Year-to-Date Results:

As shown in the table below, the Covered Calls Advisor Portfolio (CCAP) has underperformed the Russell 3000 benchmark by 8.00 percentage points [+7.86-(-.14%)] so far in 2010:

















CCAP Absolute Return (Jan 1st through November 30th, 2010) = -0.14%
($275,106.21-$275,491.90)/$275,491.90

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through November 30th, 2010) = +7.86%
($70.41-$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

Oshkosh Corp.(OSK) -- Continuation Transaction

The Covered Calls Advisor initially established an Oct2010 covered calls position in Oshkosh Corp.(OSK). This position was subsequently rolled-up-and-out to a Nov2010 covered calls position, and this position expired last Friday out-of-the-money. Today, a decision was made to retain the 300 shares of Oshkosh Corp.(OSK) and to establish a Dec2010 covered calls position. The transactions history for OSK as well as some possible results for this investment is as follows:

1. Oshkosh Corp.(OSK) -- Continuation
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
11/20/2010 Nov2010 Options Expired
Note: The closing price of OSK was $29.16 on expiration Friday.
11/26/2010 Sold 3 IP Dec2010 $30.00 Calls @ $.70
Note: The price of IP was $29.33 when the call options were sold.

Two possible overall performance results(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: -$44.80
= (300*($.80-$3.10+$1.70+$.70) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.33): +$852.05
= ($29.33-$26.46)*300 - $8.95 commissions
(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 unchanged at $29.33): +$807.25
= (-$44.80 +$0.00 +$852.05)
Total Net Profit(If stock price assigned at $30.00): +$1,008.25
= (-$44.80 +$0.00 +$1,053.05)

Absolute Return if Stock Price Unchanged at $29.33: +10.6%
= +$839.45/$7,946.95
Annualized Return If Unchanged (ARIU): +47.0%
= (+$839.45/$7,946.95)*(365/82 days)

Absolute Return if Assigned at $30.00: +12.7%
= +$1,008.25/$7,946.95
Annualized Return If Assigned (ARIA): +56.5%
= (+$1,008.25/$7,946.95)*(365/82 days)

Establish iShares MSCI South Korea ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI South Korea ETF (EWY) covered calls as follows:
Established iShares MSCI South Korea ETF (EWY) Covered Calls for Dec2010:
11/26/2010 Bought 300 EWY @ $53.67
11/26/2010 Sold 3 EWY Dec2010 $55.00 Calls @ $1.18

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $16,109.95
= ($53.67*300+$8.95 commission)

Net Profit:
(a) Options Income: +$342.80
= (300*$1.18 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY unchanged at $53.67): $-8.95
= ($53.67-$53.67)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $55.00): +$390.05
= ($55.00-$53.67)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $53.67): +$333.85
= (+$342.80 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $50.00): +$732.85
= (+$342.80 +$0.00 +$390.05)

Absolute Return (If EWY unchanged at $53.67): +2.1%
= +$333.85/$16,109.95
Annualized Return If Unchanged (ARIU): +34.4%
= (+$333.85/$16,109.95)*(365/22 days)

Absolute Return if Exercised at $55.00: +4.5%
= +$732.85/$16,109.95
Annualized Return If Exercised (ARIE): +75.5%
= (+$732.85/$16,109.95)*(365/22 days)

International Paper Co.(IP) -- Continuation Transaction

The Covered Calls Advisor initially established a Nov2010 covered calls position in International Paper Co.(IP), and this position expired last Friday out-of-the-money. Today, a decision was made to retain the 300 shares of International Paper Co.(IP) and to establish a Dec2010 covered calls position. The transactions history for IP as well as some possible results for this investment is as follows:

1. International Paper Co.(IP) -- Continuation
The transactions history to date for International Paper Co.(IP) is as follows:
11/09/2010 Bought 300 IP @ $25.82
11/09/2010 Sold 3 IP Nov2010 $25.00 Calls @ $1.05
11/19/2010 Ex-Dividend $38.25 = $.1275*300 shares
11/20/2010 Nov2010 Options Expired
Note: The closing price of IP was $24.80 on expiration Friday.
11/24/2010 Sold 3 IP Dec2010 $26.00 Calls @ $.53
Note: The price of IP was $25.40 when the call options were sold.

Two possible overall performance results(including commissions) for the International Paper Co.(IP) transactions would be as follows:
Stock Purchase Cost: $7,754.95
= ($25.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$451.60
= (300*($1.05_$.53) - 2*$11.20 commissions)
(b) Dividend Income): +$38.25 = ($.1275 * 300 shares) Note: Ex-Div was on 11/19/2010
(c) Capital Appreciation (If stock price unchanged at $25.40 upon Dec2010 expiration):
-$134.95 = ($25.40-$25.82)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $26.00): +$45.05
= ($26.00-$25.82)*300 - $8.95 commissions

Total Net Profit (If stock price unchanged at $25.40 at Dec2010 expiration): +$354.90
= (+$451.60 +$38.25 -$134.95)
Total Net Profit (If stock assigned at $26.00 at Dec2010 expiration): +$534.90
= (+$451.60 +$38.25 +$45.05)

1. Absolute Return (If stock price unchanged at $25.40 at Dec2010 expiration): +4.6%
= +$354.90/$7,754.95
Annualized Return If Unchanged (ARIU): +42.8%
= (+$354.90/$7,754.95)*(365/39 days)

2. Absolute Return (If stock assigned at $26.00 at Dec2010 expiration): +6.9%
= +$534.90/$7,754.95
Annualized Return If Assigned (ARIA): +64.6%
= (+$534.90/$7,754.95)*(365/39 days)

Establish Domtar Corp.(UFS) Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Domtar Corp.(UFS) covered calls as follows:
Established Domtar Corp.(UFS) Covered Calls for Dec2010:
11/22/2010 Bought 300 UFS @ $78.20
11/22/2010 Sold 3 UFS Dec2010 $80.00 Calls @ $2.35

A prior covered calls position in Domtar has been maintained monthly since Jul2010 options expiration. With the stock price in-the-money at Nov2010 expiration last Friday, the stock was assigned (called away) then. This was a very successful investment over the 5 month period as it achieved an annualized return-on-investment of 60.8%.

Domtar Corporation was formed on August 16, 2006, for the purpose of combining the fine paper assets of Weyerhaeuser with those of Domtar Inc. The company is now the largest integrated manufacturer of uncoated freesheet paper in North America and the second largest in the world with about global 34% market share. The company also makes papergrade, fluff and specialty pulp, lumber and wood products, and manages forestland. Approximately 81% of the company's revenues were generated from the sale of pulp and paper, 15% came from paper distribution, and 4% was from the sale of lumber and wood products. In uncoated freesheet, Domtar has 10 pulp and paper mills in operation (eight in the U.S. and two in Canada) with annual production capacity of
3.9 million tons of uncoated freesheet, 1.9 million tons of market pulp and 238,000 tons of coated groundwood.

Two possible overall performance results(including commissions) for the UFS transactions would be as follows:
Stock Purchase Cost: $23,468.95
= ($78.20*300+$8.95 commission)

Net Profit:
(a) Options Income: +$693.80
= (300*$2.35 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UFS unchanged at $78.20): $-8.95
= ($78.20-$78.20)*300 - $8.95 commissions
(c) Capital Appreciation (If UFS assigned at $80.00): +$531.05
= ($80.00-$78.20)*300 - $8.95 commissions

Total Net Profit(If UFS price unchanged at $78.20): +$684.85
= (+$693.80 +$0.00 -$8.95)
Total Net Profit(If UFS assigned at $80.00): +$1,224.85
= (+$693.80 +$0.00 +$531.05)

Absolute Return (If UFS unchanged at $78.20): +2.9%
= +$684.85/$23,468.95
Annualized Return If Unchanged (ARIU): +41.0%
= (+$684.85/$23,468.95)*(365/26 days)

Absolute Return if Stock Assigned at $80.00: +5.2%
= +$1,224.85/$23,468.95
Annualized Return If Assigned (ARIA): +73.3%
= (+$1,224.85/$23,468.95)*(365/26 days)

November 2010 Expiration Transactions

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

- Decisions were made earlier this week to roll-up-and-out from three existing in-the-money Nov2010 covered calls positions (Intel Corp., iShares MSCI Emerging Markets ETF, and Research in Motion Ltd.) into Dec2010 positions. Separate posts were made on this blog earlier this week for each of these transactions on the day they occurred.

- The Nov2010 iPath S&P 500 VIX Short-Term Futures ETN (VXX) covered calls were closed out earlier this week at a nice profit.

Of the remaining eight positions that were held until Nov2010 expiration this past Friday:

- Three positions (Domtar Corp, Guess? Inc, and one-half of the Microsoft Corp. position) finished in-the-money. The calls were exercised and the shares were called away.

The annualized return-on-investment results achieved on these three assigned positions were as follows:
1. Domtar Corp. -- +60.8 %
2. Guess? Inc. -- +66.3 %
3. Microsoft Corp. -- +41.5 %
Detailed results for each of these three covered calls positions that were assigned (called away) upon Nov2010 expiration are described below.
- The remaining six positions in the CCAP (Bank of America, iShares MSCI China ETF, International Paper, one-half of the Microsoft Corp position, Oshkosh Corp, 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 Dec2010 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 three assigned Nov2010 covered calls positions were as follows:

1. Domtar Corp.(UFS) -- Closed
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
11/20/2010 400 shares of UFS were in-the-money and the shares were called away (assigned) at $70.00. Note: The closing price of UFS was $77.40 on expiration this past Friday.

The overall performance results(including commissions) for the Domtar Corp.(UFS) transactions were 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 (UFS assigned at $70.00): +$5,951.05
= ($70.00-$55.10)*400 - $8.95 commissions

Total Net Profit(UFS assigned at $70.00): +$5,507.40
= (-$543.65 +$100.00 +$5,951.05)

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

2. Guess? Inc.(GES) -- Closed
The transactions history was as follows:
10/27/2010 Bought 300 GES @ $39.51
10/27/2010 Sold 3 GES Nov2010 $40.00 Calls @ $1.30
11/20/2010 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 $44.55 on expiration Friday.

The overall performance results(including commissions) for the Guess? Inc.(GES) transactions were 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 (GES stock assigned at $40.00): +$138.05
= ($40.00-$39.51)*300 - $8.95 commissions

Total Net Profit(GES stock assigned at $40.00): +$516.85
= (+$378.80 +$0.00 +$138.05)

Absolute Return (GES stock assigned at $40.00): +4.4%
= +$516.85/$11,861.95
Annualized Return: +66.3%
= (+$516.85/$11,861.95)*(365/24 days)

3. Microsoft Corp.(MSFT) -- Closed
The transactions history was as follows:
09/29/2010 Bought 500 MSFT @ $24.43
09/29/2010 Sold 5 MSFT Nov2010 $25.00 Calls @ $.76
11/16/2010 Ex-Dividend of $80.00 = $.16 * 500 shares
11/20/2010 500 shares of MSFT were in-the-money and the shares were called away (assigned) at $25.00. Note: The closing price of MSFT was $25.69 on expiration Friday.

The overall performance results(including commissions) for the Microsoft Corp.(MSFT) transactions were as follows:
Stock Purchase Cost: $12,223.95
= ($24.43*500+$8.95 commission)

Net Profit:
(a) Options Income: +$367.30
= (500*$.76 - $12.70 commissions)
(b) Dividend Income: +$80.00 =($.16 * 500 shares) Ex-div on 11/16/2010
(c) Capital Appreciation (MSFT stock assigned at $25.00): +$276.05
= ($25.00-$24.43)*500 - $8.95 commissions

Total Net Profit(MSFT stock assigned at $25.00): +$723.35
= (+$367.30 +$80.00 +$276.05)

Absolute Return (Stock Assigned at $25.00): +5.9%
= +$723.35/$12,223.95
Annualized Return: +41.5%
= (+$723.35/$12,223.95)*(365/52 days)

Roll Up and Out -- iShares MSCI Emerging Markets Fund ETF (EEM) Covered Calls

Today is options expiration Friday for Nov2010. This afternoon, with the three iShares MSCI Emerging Markets Fund ETF (EEM) Nov2010 $46.00 calls in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Dec2010 expiration at the $47.00 strike price. The transactions history as well as a potential return-on-investment results are detailed below:

1. iShares MSCI Emerging Markets Fund ETF (EEM) -- Continuation Transaction
With iShares MSCI Emerging Markets Fund ETF (EEM) trading at $46.36, the three existing Nov2010 $46.00 calls were bought back for $.38 (only $.02 of time value remaining in each call option) and subsequently replaced by selling three Dec2010 $47.00 strike options at $1.02 as follows:
11/19/2010 Buy-to-Close (BTC) 3 EEM Nov2010 $46.00 Call Options @ $.38
11/19/2010 Sell-to-Open (STO) 3 EEM Dec2010 $47.00 Call Options @ $1.02
The price of EEM was $46.54 today when these call options were sold.

The transactions history is as follows:
10/27/2010 Bought 300 EEM @ $45.55
10/27/2010 Sold 3 EEM Nov2010 $46.00 Calls @ $.99
11/19/2010 Buy-to-Close (BTC) 3 EEM Nov2010 $46.00 Call Options @ $.38
11/19/2010 Sell-to-Open (STO) 3 EEM Dec2010 $47.00 Call Options @ $1.02

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: +$580.60
= (300*($.99+$1.02) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM price unchanged at $46.54):
+$288.05 = ($46.54-$45.55)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): +$426.05
= ($47.00-$45.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $46.54): +$868.65
= (+$580.60 +$0.00 +$288.05)
Total Net Profit(If stock assigned at $47.00): +$1,006.65
= (+$580.60 +$0.00 +$426.05)

Absolute Return if Unchanged at $46.54: +6.4%
= +$868.65/$13,673.95
Annualized Return If Unchanged (ARIU): +44.6%
= (+$868.65/$13,673.95)*(365/52 days)

Absolute Return if Assigned at $47.00: +7.4%
= +$1,006.65/$13,673.95
Annualized Return If Assigned (ARIA): +51.7%
= (+$1,006.65/$13,673.95)*(365/52 days)

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

Today, with Research In Motion Ltd.(RIMM) stock priced at $56.05, the three existing Nov2010 $50.00 calls were bought back for $6.15 (only $.10 of time value remaining in each call option) and then replaced by selling three out-of-the-money Dec2010 $57.50 strike options at $3.05 as follows:
11/16/2010 Buy-to-Close (BTC) 3 RIMM Nov2010 $50.00 Call Options @ $6.15
11/16/2010 Sell-to-Open (STO) 3 RIMM Dec2010 $57.50 Call Options @ $3.05
The price of RIMM was $56.43 today when these call options were sold.

1. Research In Motion Ltd.(RIMM) -- Continuation Transaction
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
11/16/2010 Buy-to-Close (BTC) 3 RIMM Nov2010 $50.00 Call Options @ $6.15
11/16/2010 Sell-to-Open (STO) 3 RIMM Dec2010 $57.50 Call Options @ $3.05

Two possible overall performance results(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: -$542.00
= (300*($1.64-$2.60+$2.44-$6.15+$3.05) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $56.43): +$2,955.05
= ($56.43-$46.55)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $57.50): +$3,276.05
= ($57.50-$46.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $56.43): +$2,413.05
= (-$542.00 +$0.00 +$2,955.05)
Total Net Profit(If stock assigned at $57.50): +$2,734.05
= (-$542.00 +$0.00 +$3,276.05)

Absolute Return (If stock price unchanged at $56.43): +17.3%
= +$2,413.05/$13,973.95
Annualized Return If Unchanged (ARIU): +73.3%
= (+$2,413.05/$13,973.95)*(365/86 days)

Absolute Return if Assigned at $57.50: +19.6%
= +$2,734.05/$13,973.95
Annualized Return If Assigned (ARIA): +83.0%
= (+$2,734.05/$13,973.95)*(365/86 days)

Roll Up and Out -- Intel Corp.(INTC) Covered Calls

Today is four days prior to Nov2010 options expiration. With the three Intel Corp.(INTC) Nov2010 $20.00 calls well in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Dec2010 expiration at the $21.00 strike price. The transactions history as well as a potential return-on-investment result is detailed below:

1. Intel Corp.(INTC) -- Continuation Transaction
With Intel Corp.(INTC) trading at $20.98, the three existing Nov2010 $20.00 calls were bought back for $1.03 (only $.05 of time value remaining in each call option) and subsequently replaced by selling three Dec2010 $21.00 strike options at $.60 as follows:
11/16/2010 Buy-to-Close (BTC) 3 INTC Nov2010 $20.00 Call Options @ $1.03
11/16/2010 Sell-to-Open (STO) 3 INTC Dec2010 $21.00 Call Options @ $.60
The price of INTC was $21.05 today when these call options were sold.

The transactions history to date for Intel Corp.(INTC) is as follows:
10/20/2010 Bought 300 INTC @ $19.45
10/20/2010 Sold 3 INTC Nov2010 $20.00 Call Options @ $.21
11/03/2010 Ex-Dividend of $47.25 = ($.1575 * 300 shares)
11/16/2010 Buy-to-Close (BTC) 3 INTC Nov2010 $20.00 Call Options @ $1.03
11/16/2010 Sell-to-Open (STO) 3 INTC Dec2010 $21.00 Call Options @ $.60

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

Net Profit:
(a) Options Income: -$99.60
= 300*($.21-$1.03+$.60) - 3*$11.20 commissions
(b) Dividend Income: +$47.25 = ($.1575*300 shares) ex-div on 11/3/2010
(c) Capital Appreciation (If stock assigned at $21.00): +$456.05
= ($21.00-$19.45)*300 - $8.95 commissions

Total Net Profit(If stock price assigned at $21.00): +$403.70
= (-$99.60 +$47.25 +$456.05)

Absolute Return if Assigned at $21.00: +6.9%
= +$403.70/$5,843.95
Annualized Return If Assigned (ARIA) +42.7%
= (+$403.70/$5,843.95)*(365/59 days)

iPath S&P 500 VIX Short-Term Futures ETN (VXX) -- Closed

Today, with the stock market moving dramatically lower and thus with volatility (and this VXX holding) spiking higher, a decision was made to sell out of the 300 shares covered calls position in iPath S&P 500 VIX Short-Term Futures ETN (VXX). The results shown below are adjusted for the 4-for-1 reverse split for VXX that occurred on November 9th.

1. iPath S&P 500 VIX Short-Term Futures ETN (VXX) -- Closed
The transactions history was as follows:
10/25/2010 Bought 300 VXX @ $12.37
10/25/2010 Sold 3 VXX Nov2010 $13.00 Calls @ $.70
11/16/2010 Bought-to-Close 3 VXX Nov2010 $13.00 Calls @ $.15
11/16/2001 Sold 75 VXX @ $50.064

The overall performance result(including commissions) for the VXX transactions was as follows:
Stock Purchase Cost: $3,719.95
= ($12.37*300+$8.95 commission)

Net Profit:
(a) Options Income: +$142.60
= (300*($.70-$.15) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (75 VXX share sold at $50.064):
+$34.85 = ($50.064*75 shares - $12.37*300 shares) - $8.95 commissions

Total Net Profit: +$177.45
= (+$142.60 +$0.00 +$34.85)

Absolute Return: +4.8%
= +$177.45/$3,719.95
Annualized Return: +79.1%
= (+$177.45/$3,719.95)*(365/22 days)

Despite the success with this position, the Covered Calls Advisor does not intend to re-establish any covered calls positions using VXX in the future. When volatility spikes higher, VXX seems to participate at an average of only about one-half. Conversely, when volatility moves lower, the normal contango effect of VIX results in approximately one-for-one percentage move down in VXX. This is an undesirable risk-to-reward profile as related to a long position in VXX. Other covered calls positions will provide a better risk-to-reward opportunity whenever a future increase in volatility is expected.

If you have any comments or questions on this post, 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 International Paper Co.(IP) Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of International Paper Co.(IP) covered calls as follows:

Established International Paper Co.(IP) Covered Calls for Apr2010:
11/09/2010 Bought 300 IP @ $25.82
11/09/2010 Sold 3 IP Nov2010 $25.00 Calls @ $1.05

International Paper Company operates as a paper and packaging company with operations in North America, Europe, Latin America, the Russian Federation, Asia, and north Africa. Its Printing Papers segment produces uncoated printing and writing papers, including uncoated papers, market pulp, and uncoated bristols. The company's Industrial Packaging segment manufactures containerboards. Its products include linerboard, medium, whitetop, recycled linerboard, recycled medium, and saturated kraft. Its Consumer Packaging segment produces coated paperboard for various packaging and commercial printing end uses. The company's Distribution segment provides services and products to various customer markets, supplying commercial printers with printing papers and graphic pre-press, printing presses, and post-press equipment; the building services and away-from-home markets with facility supplies; and manufacturers with packaging supplies and equipment, as well as offers warehousing and delivery services. Its Forest Products segment owns and manages forest lands primarily in the United States.

Two possible overall performance results(including commissions) for the International Paper Co.(IP) transactions would be as follows:
Stock Purchase Cost: $7,754.95
= ($25.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$303.80
= (300*$1.05 - $11.20 commissions)
(b) Dividend Income (If stock assigned at $25.00 at expiration): +$38.25 = ($.1275 * 300 shares)
(b) Dividend Income (If stock assigned at $25.00 -- early exercise on 11/19/2010): $0.00
(c) Capital Appreciation (If stock assigned at $25.00 at expiration): -$254.95
= ($25.00-$25.82)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $25.00--early exercise on 11/19/2010): -$254.95 = ($25.00-$25.82)*300 - $8.95 commissions

Total Net Profit (If stock assigned at $25.00 at expiration): +$87.10
= (+$303.80 +$38.25 -$254.95)
Total Net Profit (If stock assigned at $25.00 -- early exercise on 11/19/2010): +$48.85
= (+$303.80 +$0.00 -$254.95)

1. Absolute Return (If stock assigned at $25.00 at expiration): +1.1%
= +$87.10/$7,754.95
Annualized Return (If stock assigned at $25.00 at expiration): +37.3%
= (+$87.10/$7,754.95)*(365/11 days)

2. Absolute Return (If stock assigned at $25.00 -- early exercise on 11/19/2010): +0.6%
= +$48.85/$7,754.95
Annualized Return (If stock assigned at $25.00 -- early exercise on 11/19/2010): +76.6%
= (+$48.85/$7,754.95)*(365/3 days)

The Covered Calls Advisor's Investing Process

Question: What is more important, Investing Process or Results?
Answer: Both, but our investing process is actually more important because a disciplined, well-defined process is critically important in order to achieve exceptional long-term investing results.

The greatest benefit of a well-defined, detailed investing process is that it enables us to be objective in our decision-making and to therefore counteract the negative impact that often occurs if we allow our emotions to influence our decisions. I am convinced that emotionally-driven decisions are the primary culprit that causes investors to often buy high (often accompanied by greed) and sell low (often accompanied by fear), the exact opposite of what they had intended to do.

This article presents the six-step investing process followed by the Covered Calls Advisor. The links embedded within the steps below will provide the interested reader with added detail from prior blog posts on this covered calls investing process.

1. Basic Principles: Remain fully invested in near-month covered calls.

2. Top-Down: Develop an Overall Market Outlook

3. Bottom-Up: Follow a Checklist for Stocks Selection.

4. Screen Selected Stocks further for Good Covered Calls characteristics:
(a) Good call option premiums -- Implied Volatility of stock options at least 20% higher than the VIX; and (b) Good options liquidity with call option open interest above 300 -- to achieve closer bid/ask spreads.

5. Establish covered calls positions at strike prices consistent with the Overall Market Outlook in #2 above.

6. Follow position management rules for timely adjusting of existing covered calls positions.

It is my sincere hope that the information presented here will be helpful with your thought processes as you develop and fine-tune your own covered calls investing process. Your comments or questions regarding any aspect of the investing process described in this article are certainly welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.


Regards and Godspeed,
Jeff

Bank of America (BAC) -- Continuation Transaction

Today, a decision was made to retain the 400 shares of Bank of America (BAC) and to establish a Nov2010 covered calls position. Bank of America stock performance has been very disappointing since it was purchased in June, but the Covered Calls Advisor maintains his conviction that over the next year, BAC will increase above its book value to a price above the $16.04 original purchase price. The transactions history for BAC as well as some possible results for this investment is as follows:

1. Bank of America (BAC) -- Continuation
The transactions history to date for Bank of America Corp.(BAC) is as follows:
06/21/2010 Bought 400 BAC @ $16.04
06/21/2010 Sold 4 BAC Jul2010 $16.00 Calls @ $.58
07/17/2010 Jul2010 Options Expired
Note: The closing price of BAC was $13.98 on expiration Friday.
07/22/2010 Sold 4 BAC Aug2010 $14.00 Calls @ $.50
Note: The price of BAC was $13.87 today when this option was sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of BAC was $12.86 on expiration Friday.
09/01/2010 Ex-Dividend $4.00 = $.01*400 shares
09/03/2010 Sold 4 BAC Oct2010 $14.00 Call Options @ $.38
Note: The price of BAC was $13.41 today when these options were sold.
10/16/2010 Oct2010 options expired.
Note: The closing price of BAC was $11.98 on expiration Friday.
11/04/2010 Sold 4 BAC Nov2010 $12.00 Call Options @ $.26
Note: The price of BAC was $11.84 today when these options were sold.

Two possible overall performance results(including commissions) for the Bank of America Corp.(BAC) transactions would be as follows:
Stock Purchase Cost: $6,424.95
= ($16.04*400+$8.95 commission)

Net Profit:
(a) Options Income: +$640.20
= (400*($.58+$.50+$.38+$.26) - 4*$11.95 commissions)
(b) Dividend Income: +$4.00 ($.01*400 shares)
(c) Capital Appreciation (If stock price unchanged at $11.84): -$1,671.05
= ($11.84-$16.04)*400 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $12.00): -$1,624.95
= ($12.00-$16.04)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $11.84): -$1,026.85
= (+$640.20 +$4.00 -$1,671.05)
Total Net Profit(If stock assigned at $12.00): -$980.75
= (+$640.20 +$4.00 -$1,624.95)

Absolute Return (If Stock unchanged at $11.84): -16.0%
= -$1,026.85/$6,424.95
Annualized Return If Unchanged (ARIU): -38.4%
= (-$1,026.85/$6,424.95)*(365/152 days)

Absolute Return if Assigned at $12.00: -15.3%
= -$980.75/$6,424.95
Annualized Return If Assigned (ARIA): -36.7%
= (-$980.75/$6,424.95)*(365/152 days)