Establish Intel Corp. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Intel Corp.(INTC) covered calls as follows:

Established Intel Corp.(INTC) Covered Calls for Jan2011 as follows:
12/27/2010 Bought 300 INTC @ $20.71
12/27/2010 Sell-to-Open(STO) 3 INTC Jan2011 $21.00 CallS @ $.40
Note: The price of INTC was $20.78 today when these options were sold.

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 25% 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 18.10 is well above the desired threshold of 16.0 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: $6,221.95
= ($20.71*300+$8.95 commission)

Net Profit:
(a) Options Income: +$108.80
= 300*$.40 - $11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price unchanged at $20.71):
-$8.95 = ($20.71-$20.71)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $21.00): +$78.05
= ($21.00-$20.71)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $20.71): +$99.85
= (+$108.80 +$0.00 -$8.95)
Total Net Profit(If stock price assigned at $21.00): +$186.85
= (+$108.80 +$0.00 +$78.05)

Absolute Return if Unchanged at $20.71: +1.6%
= +$99.85/$6,221.95
Annualized Return If Unchanged (ARIU): +22.5%
= (+$99.85/$6,221.95)*(365/26 days)

Absolute Return if Assigned at $21.00: +3.0%
= +$186.85/$6,221.95
Annualized Return If Assigned (ARIA): +42.2%
= (+$186.85/$6,221.95)*(365/26 days)

Establish UnitedHealth Group Inc. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of UnitedHealth Group Inc.(UNH) covered calls as follows:

Established UnitedHealth Group Inc.(UNH) Covered Calls for Jan2011 as follows:
12/22/2010 Bought 300 UNH @ $35.55
12/22/2010 Sell-to-Open(STO) 3 UNH Jan2011 $35.00 CallS @ $1.38

UNH is a very large U.S. managed healthcare company. It is rated a 'Buy' by each of the investment advisory services preferred by the Covered Calls Advisor, namely Schwab Equity Ratings and MarketGrader.com. Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for UNH. It scored well above the Buy threshold of 16.0 with a Total Points rating of 19.03. At its current price of $35.55, UNH provides a reasonable entry point for this value-oriented investor.





















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

A possible overall performance result(including commissions) for the UNH transactions would be as follows:
Stock Purchase Cost: $10,673.95
= ($35.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$402.80
= (300*$1.38 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock assigned at $35.00): -$173.95
= ($35.00-$35.55)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $35.00): +$228.85
= (+$402.80 +$0.00 -$173.95)

Absolute Return if Assigned at $35.00: +2.1%
= +$228.95/$10,673.95
Annualized Return If Assigned (ARIA): +25.2%
= (+$228.95/$10,673.95)*(365/31 days)

Research in Motion Ltd.(RIMM) -- Continuation Transaction

This past Friday was expiration Friday for December 2010 options. In the Covered Calls Advisor's Dec2010 options expiration blog post, it was noted that of the eleven covered calls positions with Dec2010 expirations, four positions ended out-of-the-money. Yesterday, a decision was made to retain three of these four positions [Domtar Corp.(UFS), iShares MSCI Emerging Markets ETF (EEM), and Petrobras(PBR)] and to establish Jan2011 covered calls positions. Today, a decision was made to retain the one remaining stock (Research in Motion) and to establish a Jan2011 covered calls position against the 300 shares. The detailed transactions history for this position since its inception as well as a possible result for this investment is as follows:

1. Research in Motion LTD.(RIMM) -- Continuation
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
12/06/2010 Buy-to-Close (BTC) 3 RIMM Dec2010 $57.50 Call Options @ $6.60
12/06/2010 Sell-to-Open (STO) 3 RIMM Dec2010 $62.50 Call Options @ $3.20
12/18/2010 Dec2010 Options Expired
Note: The price of RIMM was $60.20 upon Dec2010 options expiration.
12/21/2010 Sold 3 RIMM Jan2011 $57.50 Calls @ $2.60
Note: The price of RIMM was $58.44 when these options were sold.

A possible 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: -$804.40
= 300*($1.64-$2.60+$2.44-$6.15+$3.05-$6.60+$3.20+$2.60) - 7*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $57.50): +$3,276.05
= ($57.50-$46.55)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $62.50): +$2,471.65
= (-$804.40 +$0.00 +$3,276.05)

Absolute Return if Assigned at $57.50: +17.7%
= +$2,471.65/$13,973.95
Annualized Return If Assigned (ARIA): +53.4%
= (+$2,471.65/$13,973.95)*(365/121 days)

Domtar Corp.(UFS), iShares MSCI Emerging Markets ETF (EEM), and Petrobras (PBR) -- Continuation Transactions

This past Friday was expiration Friday for December 2010 options. In the Covered Calls Advisor's Dec2010 options expiration blog post, it was noted that of the eleven covered calls positions with Dec2010 expirations, four positions ended out-of-the-money. Today, a decision was made to retain the shares in three of these four positions [Domtar Corp.(UFS), iShares MSCI Emerging Markets ETF (EEM), and Petrobras(PBR)] and to establish Jan2011 covered calls positions. The detailed transactions history for each position as well as some possible results for each of these investments are as follows:

1. Domtar Corp.(UFS) -- Continuation
The transactions history is as follows:
11/22/2010 Bought 300 UFS @ $78.20
11/22/2010 Sold 3 UFS Dec2010 $80.00 Calls @ $2.35
12/18/2010 Dec2010 Options Expired
Note: The price of UFS was $76.16 upon Dec2010 options expiration.
12/21/2010 Sold 3 UFS Jan2011 $80.00 Calls @ $1.85
Note: The price of UFS was $77.94 when these options were sold.

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

Net Profit:
(a) Options Income: +$1,237.60
= (300*($2.35+$1.85) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UFS unchanged at $77.94): $-86.95
= ($77.94-$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 $77.94): +$1,150.65
= (+$1,237.60 +$0.00 -$86.95)
Total Net Profit(If UFS assigned at $80.00): +$1,768.65
= (+$1,237.60 +$0.00 +$531.05)

Absolute Return (If UFS unchanged at $77.94): +4.9%
= +$1,150.65/$23,468.95
Annualized Return If Unchanged (ARIU): +29.3%
= (+$684.85/$23,468.95)*(365/61 days)

Absolute Return if Stock Assigned at $80.00: +45.1%
= +$1,768.65/$23,468.95
Annualized Return If Assigned (ARIA): +73.3%
= (+$1,768.65/$23,468.95)*(365/61 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
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
12/18/2010 Dec2010 Options Expired
Note: The price of EEM was $46.40 upon Dec2010 options expiration.
12/21/2010 Sold 3 EEM Jan2011 $47.00 Calls @ $.77
Note: The price of EEM was $46.43 when these options were sold.
12/21/2010 Distribution Income $107.83 = $.35942 * 300 shares
12/29/2010 Distribution Income $7.54 = $.02512 * 300 shares

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: +$686.40
= (300*($.99-$.38+$1.02+$.77) - 3*$11.20 commissions)
(b) Distribution Income: +$115.37 = $107.83 + $7.54
(c) Capital Appreciation (If EEM price unchanged at $46.43):
+$255.05 = ($46.43-$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 $46.43): +$1,056.82
= (+$686.40 +$115.37 +$255.05)
Total Net Profit(If stock assigned at $47.00): +$1,227.81
= (+$686.40 +$115.37 +$426.05)

Absolute Return if Unchanged at $46.43: +7.7%
= +$1,056.82/$13,673.95
Annualized Return If Unchanged (ARIU): +32.4%
= (+$1,056.82/$13,673.95)*(365/87 days)

Absolute Return if Assigned at $47.00: +9.0%
= +$1,227.81/$13,673.95
Annualized Return If Assigned (ARIA): +37.7%
= (+$1,227.81/$13,673.95)*(365/87 days)


3. 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 Nov2010 $36.00 Call Options @ $.62
Note: The price of PBR was $34.20 today when these call options were sold.
11/03/2010 +$57.90 Ex-Dividend = ($.193 Net Dividend x 300 shares)
11/20/2010 Nov2010 Options Expired
Note: Price of PBR at expiration was $33.59
12/01/2010 Sell-to-Open (STO) 3 PBR Dec2010 $34.00 Call Options @ $.54
Note: The price of PBR was $33.05 today when these call options were sold.
12/07/2010 $41.42 Dividend = ($.138 Net Dividend x 300 shares)
12/18/2010 Dec2010 Options Expired
Note: The price of PBR was $34.08 upon Dec2010 options expiration.
12/21/2010 Sold 3 PBR Jan2011 $35.00 Calls @ $.59
Note: The price of PBR was $34.18 when these options were sold.
01/06/2011 $61.03 Dividend = ($.203 Net Dividend x 300 shares)



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: +$1,289.60
= (300*($1.05+$.55+$.58+$.63+$.62+$.54+$.590) - 7*$11.20 commissions)
(b) Dividend Income: +$186.60 (2*$.193 + $.236)*300 shares -- Three ex-Dividend dates
(c) Capital Appreciation (If PBR unchanged at $34.18): $-1,556.95
= ($34.18-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $35.00): -$1,310.95
= ($35.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR price unchanged at $34.18): -$80.75
= (+$1,289.60 +$186.60 -$1,556.95)
Total Net Profit(If PBR assigned at $35.00): +$165.25
= (+$1,289.60 +$186.60 -$1,310.95)

Absolute Return (If PBR unchanged at $33.05): -0.7%
= -$80.75/$11,810.95
Annualized Return If Unchanged (ARIU): -1.2%
= (-$80.75/$11,810.95)*(365/215 days)

Absolute Return (If Assigned at $35.00): +1.4%
= +$165.25/$11,810.95
Annualized Return If Assigned: +2.4%
= (+$165.25/$11,810.95)*(365/215 days)

Establish Apple Inc.(AAPL) Covered Call

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of an Apple Inc.(AAPL) covered call as follows:

Established Apple Inc.(AAPL) Covered Call for Jan2011:
12/20/2010 Bought 100 AAPL @ $321.10
12/21/2010 Sold 1 AAPL Jan2011 $330.00 Call @ $6.10
Note: The call option was sold today when the AAPL stock was trading at $324.10.

Apple Inc. designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, as well as sells various related software, services, peripherals, and networking solutions.
The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells various third-party Macintosh, iPhone, and iPod and now iPad compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.

Apple is hitting on all cylinders with its: (1) ongoing growth of Macs, iPods, and iTunes; (2) accelerating growth in iPads and iPad applications; and (3) exciting new initiative with Apple TV.

Some possible overall performance results(including commissions) for the AAPL transactions would be as follows:
Stock Purchase Cost: $32,118.95
= ($321.10*100+$8.95 commission)

Net Profit:
(a) Options Income: +$600.30
= (100*$6.10 - $9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $321.10):
-$8.95 = ($321.10-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If exercised at $330.00): +$881.05
= ($330.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $321.10): +$591.35
= (+$600.30 +$0.00 -$8.95)
Total Net Profit(If stock assigned at $330.00): +$1,481.35
= (+$600.30 +$0.00 +$881.05)

Absolute Return if Unchanged at $321.10: +20.4%
= +$591.35/$32,118.95
Annualized Return If Unchanged (ARIU) +10.6%
= (+$591.35/$32,118.95)*(365/33 days)

Absolute Return if Assigned at $330.00: +4.6%
= +$1,481.35/$32,118.95
Annualized Return If Assigned (ARIA): +51.0%
= (+$1,481.35/$32,118.95)*(365/33 days)

December 2010 Expiration Transactions

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

- Decisions were made earlier this month to roll out five covered calls positions (iShares MSCI South Korea ETF, Microsoft, International Paper, Bank of America, and iShares MSCI China ETF) into Jan2011 positions. Separate posts were made on this blog earlier this month for each of these transactions on the day they occurred.

Of the remaining six positions that were held until Dec2010 expiration this past Friday:

- Two positions (Intel Corp. and Oshkosh Corp.) finished in-the-money. The calls were exercised and the shares were called away. The annualized return-on-investment results achieved on these assigned positions were as follows:

1. Intel Corp. -- +42.7%

2. Oshkosh Corp. -- +56.5%

Detailed results for these two covered calls positions that were assigned (called away) upon Dec2010 expiration are described below.

- The remaining four positions in the CCAP (Domtar Corp., iShares MSCI Emerging Markets ETF, Petrobras, and Research in Motion) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish Jan2011 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 two assigned Dec2010 covered calls positions were as follows:

1. Intel Corp.(INTC) -- Closed
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
12/18/2010 Dec2010 Options Expired
Note: The closing price of INTC was $21.46 on expiration Friday.

The overall performance result(including commissions) for these INTC transactions was 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 (Stock assigned at $21.00): +$456.05
= ($21.00-$19.45)*300 - $8.95 commissions

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

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

2. Oshkosh Corp.(OSK) -- Closed
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.
12/18/2010 Dec2010 Options Expired
Note: The closing price of OSK was $34.42 on expiration Friday.

The overall performance result(including commissions) for the Oshkosh Corp.(OSK) transactions was 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 (Stock assigned at $30.00): +$1,053.05
= ($30.00-$26.46)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $30.00): +$1,008.25
= (-$44.80 +$0.00 +$1,053.05)

Absolute Return (Stock 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)

Roll Up and Out -- iShares MSCI South Korea ETF (EWY) Covered Calls

Today, with the three iShares MSCI South Korea ETF (EWY) Dec2010 $55.00 calls well in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Jan2011 expiration at the $59.00 strike price. The three Dec2010 $55.00 calls were bought back for $3.05 (only $.03 of time value remaining in each call option) and replaced by selling three out-of-the-money Jan2011 $59.00 strike options at $1.43 as follows:
12/15/2010 Buy-to-Close (BTC) 3 EWY Dec2010 $55.00 Call Options @ $3.05
12/15/2010 Sell-to-Open (STO) 3 EWY Jan2011 $59.00 Call Options @ $1.43
The price of EWY was $58.02 today when this debit-spread transaction was made.

The overall transactions history as well as two possible return-on-investment results are detailed below:

1. iShares MSCI South Korea ETF (EWY) -- Continuation Transaction
The transactions history to date for iShares MSCI South Korea ETF (EWY) is as follows:
11/26/2010 Bought 300 EWY @ $53.67
11/26/2010 Sold 3 EWY Dec2010 $55.00 Calls @ $1.18
12/15/2010 Buy-to-Close (BTC) 3 EWY Dec2010 $55.00 Call Options @ $3.05
12/15/2010 Sell-to-Open (STO) 3 EWY Jan2011 $59.00 Call Options @ $1.43
12/21/2010 Income Distribution $50.73 = $.16910 * 300 shares

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: -$154.40
= [300*($1.18-$3.05+$1.43) - 2*$11.20 commissions]
(b) Distribution Income: +$50.73 = $.16910 * 300 shares
(c) Capital Appreciation (If EWY unchanged at $58.02): +$1,296.05
= ($58.02-$53.67)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $59.00): +$1,590.05
= ($59.00-$53.67)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $58.02): +$1,192.38
= (-$154.40 +$50.73 +$1,296.05)
Total Net Profit(If EWY assigned at $59.00): +$1,486.38
= (-$154.40 +$50.73 +$1,590.05)

Absolute Return (If EWY unchanged at $58.02): +7.4%
= +$1,192.38/$16,109.95
Annualized Return If Unchanged (ARIU): +47.4%
= (+$1,192.38/$16,109.95)*(365/57 days)

Absolute Return if Exercised at $59.00: +9.2%
= +$1,486.38/$16,109.95
Annualized Return If Exercised (ARIE): +59.1%
= (+$1,486.38/$16,109.95)*(365/57 days)

Change from Slightly Bullish to Neutral

Each month during options 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. Today the indicator has changed from its prior Slightly Bullish rating to a current rating of Neutral.

The indicator has been Slightly Bullish for just over a year -- since Dec. 6th, 2009. During these past twelve months, the overall stock market has been very volatile with alternating short-term bearish and bullish price swings. But overall, the benchmark Russell 3000 Index has been in a moderate uptrend with an increase of +16.9% during this period.

As shown in the chart below, the new Overall Market Meter average rating (blue bar at the bottom of the chart) is now Neutral:
















The current Market Meter Average of 3.33 is lower than the 3.56 of last month, and as such changes from the Slightly Bullish range (between 3.5 and 4.5) to the Neutral range (2.5 to 3.5) for establishing covered calls investing positions for the next options expiration month of January 2011. Of the nine factors used, seven remained unchanged from last month. The two indicators that changed were:
(1) Earnings-to-Bond-Yield Spread -- from Bullish to Slightly Bullish; and
(2) P/E Ratios -- from Neutral to Slightly Bearish

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Neutral sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." Thus, new positions for Jan2011 options 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. These nine factors can be categorized into macroeconomic (the first 3 indicators in the chart above), momentum (next 2 indicators in the chart), value (next 3 indicators), and growth (the last indicator).

The Covered Calls Advisor is currently tracking two additional factors: (1) The Conference Board's Leading Economic Index; and (2) Estimated Future Inflation -- three sub-factors being tracked here are the money multiplier, the velocity of money, and capacity utilization. A decision on whether or not to add these two factors into the Overall Market Meter rating system will be made within the next several months.

Your comments or questions/clarifications regarding this post are welcomed.
Please click on the "comments" link below. If you prefer to remain anonymous, email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Roll Up and Out -- Microsoft Corp.(MSFT) Covered Calls

Today, with the five Microsoft Corp.(MSFT) Dec2010 $26.00 calls well in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Jan2011 expiration at the $27.50 strike price. The five Dec2010 $26.00 calls were bought back for $1.43 (only $.02 of time value remaining in each call option) and replaced by selling five slightly-out-of-the-money Jan2011 $27.50 strike options at $.70 as follows:
12/14/2010 Buy-to-Close (BTC) 5 MSFT Dec2010 $26.00 Call Options @ $1.43
12/14/2010 Sell-to-Open (STO) 5 MSFT Jan2011 $27.50 Call Options @ $.70
The price of MSFT was $27.41 today when this debit-spread transaction was made.

The overall transactions history as well as two possible return-on-investment results are detailed below:

1. Microsoft Corporation (MSFT) -- Continuation Transaction
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 Options 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
11/16/2010 Ex-Dividend $80.00 = $.16 * 500 shares
11/20/2010 Nov2010 Options Expired
Note: The closing price of MSFT was $25.69 on expiration Friday.
12/01/2010 Sell-to-Open (STO) 5 MSFT Dec2010 $26.00 Call Options @ $.44
Note: The price of MSFT was $25.95 today when these options were sold.
12/14/2010 Buy-to-Close (BTC) 5 MSFT Dec2010 $26.00 Call Options @ $1.43
12/14/2010 Sell-to-Open (STO) 5 MSFT Jan2011 $27.50 Call Options @ $.70
Note: The price of MSFT was $27.41 today when these options were sold.

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: +$318.80
= (500*($.44+$.49-$.32+$.47+$.44-$1.43+$.70) - 6*$12.70 commissions)
(b) Dividend Income: +$145.00 = ($.13 * 500 shares + $.16 * 500 shares)
(c) Capital Appreciation (If stock price unchanged at $27.41):
+$961.05 = ($27.41-$25.47)*500 - $8.95 commissions
(c) Capital Appreciation (If assigned at $27.50): +$1,006.05
= ($27.50-$25.47)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $27.41): +$1,424.85
= (+$318.80 +$145.00 +$961.05)
Total Net Profit(If stock assigned at $27.50): +$1,469.85
= (+$318.80 +$145.00 +$1,006.05)

Absolute Return if Unchanged at $27.41: +11.2%
= +$1,424.85/$12,743.95
Annualized Return If Unchanged (ARIU): +22.3%
= (+$1,424.85/$12,743.95)*(365/183 days)

Absolute Return if Assigned at $27.50: +11.5%
= +$1,469.85/$12,743.95
Annualized Return If Assigned (ARIA): +23.0%
= (+$1,469.85/$12,743.95)*(365/183 days)

Roll Up and Out -- International Paper Co.(IP) Covered Calls

Today is the beginning of options expiration week for Dec2010. With the three International Paper Co.(IP) Dec2010 $26.00 calls well in-the-money, the Covered Calls Advisor decided to roll-up-and-out to the Jan2011 expiration at the $27.00 strike price. The transactions history as well as a potential return-on-investment result are detailed below:

1. International Paper Co.(IP) -- Continuation Transaction
With International Paper Co.(IP) trading at $26.84, the three existing Dec2010 $26.00 calls were bought back for $.97 ($.13 of time value remaining in each call option) and subsequently replaced by selling three Jan2011 $27.00 strike options at $1.15 as follows:
12/13/2010 Buy-to-Close (BTC) 3 IP Dec2010 $26.00 Call Options @ $.97
12/13/2010 Sell-to-Open (STO) 3 IP Jan2011 $27.00 Call Options @ $1.15
The price of IP was $27.04 today when these call options were sold.

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.
12/13/2010 Buy-to-Close (BTC) 3 IP Dec2010 $26.00 Call Options @ $.97
12/13/2010 Sell-to-Open (STO) 3 IP Jan2011 $27.00 Call Options @ $1.15
Note: The price of IP was $27.04 when the call options were sold.

A possible overall performance result(including commissions) for the IP transactions would be as follows:
Stock Purchase Cost: $7,754.95
= ($25.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$483.20
= (300*($1.05+$.53-$.97+$1.15) - 4*$11.20 commissions)
(b) Dividend Income): +$38.25 = ($.1275 * 300 shares) Note: Ex-Div was on 11/19/2010
(c) Capital Appreciation (If stock assigned at $27.00): +$345.05
= ($27.00-$25.82)*300 - $8.95 commissions

Total Net Profit (If stock assigned at $27.00 at Jan2011 expiration): +$866.50
= (+$483.20 +$38.25 +$345.05)

Absolute Return (If stock assigned at $27.00 at Jan2011 expiration): +11.2%
= +$866.50/$7,754.95
Annualized Return If Assigned (ARIA): +55.1%
= (+$866.50/$7,754.95)*(365/74 days)

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

Today, with Research In Motion Ltd.(RIMM) stock priced at $63.38 and twelve days remaining until Dec2010 options expiration, the three existing Dec2010 $57.50 calls were bought back for $6.60 ($.72 of time value remaining in each call option) and then replaced by selling three in-the-money Dec2010 $62.50 strike options at $3.20 as follows:
12/06/2010 Buy-to-Close (BTC) 3 RIMM Dec2010 $57.50 Call Options @ $6.60
12/06/2010 Sell-to-Open (STO) 3 RIMM Dec2010 $62.50 Call Options @ $3.20
The price of RIMM was $63.38 today when these transactions were executed.

This roll-up decision was made since the following two criteria established by the Covered Calls Advisor for a roll-up were satisfied:
- Roll up when the current equity price is more than 10% above the current strike price; and
- Roll (within the same expiration month) if more than 1 week (7 calendar days) until expiration. Roll out to the next expiration month if 1 week or less from the current expiration.

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
12/06/2010 Buy-to-Close (BTC) 3 RIMM Dec2010 $57.50 Call Options @ $6.60
12/06/2010 Sell-to-Open (STO) 3 RIMM Dec2010 $62.50 Call Options @ $3.20

A possible 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: -$1,573.20
= 300*($1.64-$2.60+$2.44-$6.15+$3.05-$6.60+$3.20) - 6*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If assigned at $62.50): +$4,776.05
= ($62.50-$46.55)*300 - $8.95 commissions

Total Net Profit(If stock assigned at $62.50): +$3,202.85
= (-$1,573.20 +$0.00 +$4,776.05)

Absolute Return if Assigned at $62.50: +22.9%
= +$3,202.85/$13,973.95
Annualized Return If Assigned (ARIA): +97.3%
= (+$3,202.85/$13,973.95)*(365/86 days)

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 Jan2011 covered calls position. To say the least, 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.
BAC currently trades at about one-half of its historic price/book value ratio. Additionally, Bank of America stock price catalysts in 2011 should include: an improving U.S. outlook, stronger loan growth, continuing declines in credit losses, and a gradually steeper yield curve.

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.
11/20/2010 Nov2010 Options Expired
Note: The closing price of BAC was $11.65 on expiration Friday.
12/01/2010 Ex-Dividend $4.00 = $.01*400 shares
12/02/2010 Sell-to-Open (STO) 4 BAC Jan2011 $12.50 Call Options @ $.34
Note: The price of BAC was $11.59 and the implied volatility was about 39 today when these options were sold. The Jan2011 expiration was selected instead on the usual near-month (Dec2010 in this case) expiration since the option premium of $.17 was below the minimum of $.25 per contract required by the Covered Calls Advisor.

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: +$776.20
= (400*($.58+$.50+$.38+$.26+$.34) - 5*$11.95 commissions)
(b) Dividend Income: +$8.00 = 2x($.01*400 shares)
(c) Capital Appreciation (If stock price unchanged at $11.59): -$1,788.95
= ($11.59-$16.04)*400 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $12.50): -$1,424.95
= ($12.50-$16.04)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $11.59): -$1,004.75
= (+$776.20 +$8.00 -$1,788.95)
Total Net Profit(If stock assigned at $12.50): -$640.75
= (+$776.20 +$8.00 -$1,424.95)

Absolute Return (If Stock unchanged at $11.59): -15.6%
= -$1,004.75/$6,424.95
Annualized Return If Unchanged (ARIU): -26.5%
= (-$1,004.75/$6,424.95)*(365/215 days)

Absolute Return if Assigned at $12.50: -10.0%
= -$640.75/$6,424.95
Annualized Return If Assigned (ARIA): -16.9%
= (-$980.75/$6,424.95)*(365/215 days)

iShares MSCI China ETF (FXI) -- Continuation Transaction

Today, a decision was made to retain the 1,100 shares of iShares MSCI China ETF (FXI)and to establish a Jan2011 covered calls position. The transactions history for FXI as well as some possible results for this investment is as follows:

1. iShares MSCI China ETF (FXI) -- Continuation Transaction
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
11/20/2010 Nov2010 Options Expired
Note: The closing price of FXI was $44.66 on expiration Friday.
12/01/2010 Sell-to-Open (STO) 11 FXI Jan2011 $47.00 Call Options @ $.63
Note: The price of FXI was $44.41 today when these options were sold.
12/20/2010 Income Distribution $186.11 = ($.16919 * 1100 shares)

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: +$928.05
= (1,100*($.71+$.20+$.62-$2.69+$.85+$.63) + 700*$.73 + 400*$.40 - ($17.20*4 +$14.20 +$11.95) commissions)
(b) Distribution Income: +$186.11 = ($.16919 * 1100 shares)
(c) Capital Appreciation (If FXI unchanged at $44.66): +$3,082.05
= ($44.66-$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 $44.66): +$4,196.21
= (+$928.05 +$186.11 +$3,082.05)
Total Net Profit (If FXI assigned at $47.00): +$6,770.21
= (+$928.05 +$186.11 +$5,656.05)

Absolute Return (If FXI unchanged at $44.66): +9.1%
= +$4,196.21/$46,043.95
Annualized Return If Unchanged (ARIU): +15.5%
= (+$4,196.21/$46,043.95)*(365/215 days)

Absolute Return (If Assigned at $47.00): +14.7%
= +$6,770.21/$46,043.95
Annualized Return If Assigned (ARIA): +25.0%
= (+$6,770.21/$46,043.95)*(365/215 days)

Microsoft Corporation (MSFT) -- Continuation Transaction

Today, a decision was made to retain the 500 shares of Microsoft Corporation (MSFT) and to establish a Dec2010 covered calls position. The transactions history for MSFT as well as some possible results for this investment is as follows:

1. Microsoft Corporation (MSFT) -- Continuation Transaction
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 Options 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
11/16/2010 Ex-Dividend $80.00 = $.16 * 500 shares
11/20/2010 Nov2010 Options Expired
Note: The closing price of MSFT was $25.69 on expiration Friday.
12/01/2010 Sell-to-Open (STO) 5 MSFT Dec2010 $26.00 Call Options @ $.44
Note: The price of MSFT was $25.95 today when these options were sold.

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: +$696.50
= (500*($.44+$.49-$.32+$.47+$.44) - 5*$12.70 commissions)
(b) Dividend Income: +$145.00 = ($.13 * 500 shares + $.16 * 500 shares)
(c) Capital Appreciation (If stock price unchanged at $25.95):
+$231.05 = ($25.95-$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 $25.95): +$1,072.55
= (+$696.50 +$145.00 +$231.05)
Total Net Profit(If stock assigned at $26.00): +$1,097.55
= (+$696.50 +$145.00 +$256.05)

Absolute Return if Unchanged at $25.95: +8.4%
= +$1,072.55/$12,743.95
Annualized Return If Unchanged (ARIU): +20.8%
= (+$1,072.55/$12,743.95)*(365/148 days)

Absolute Return if Assigned at $26.00: +8.6%
= +$1,097.55/$12,743.95
Annualized Return If Assigned (ARIA): +21.2%
= (+$1,097.55/$12,743.95)*(365/148 days)

Petrobras (PBR) -- Continuation Transaction

Today, a decision was made to retain the 300 shares of Petrobras (PBR) and to establish a Dec2010 covered calls position. The transactions history for PBR as well as some possible results for this investment is 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 Nov2010 $36.00 Call Options @ $.62
Note: The price of PBR was $34.20 today when these call options were sold.
11/20/2010 Nov2010 Options Expired
Note: Price of PBR at expiration was $33.59
12/01/2010 Sell-to-Open (STO) 3 PBR Dec2010 $34.00 Call Options @ $.54
Note: The price of PBR was $33.05 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: +$1,123.80
= (300*($1.05+$.55+$.58+$.63+$.62+$.54) - 6*$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 $33.05): $-1,892.95
= ($33.06-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $34.00): -$1,610.95
= ($34.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR price unchanged at $33.05): -$711.25
= (+$1,123.80 +$57.90 -$1,892.95)
Total Net Profit(If PBR assigned at $34.00): -$429.25
= (+$1,123.80 +$57.90 -$1,610.95)

Absolute Return (If PBR unchanged at $33.05): -6.0%
= -$711.25/$11,810.95
Annualized Return If Unchanged (ARIU): -12.2%
= (-$711.25/$11,810.95)*(365/180 days)

Absolute Return (If Assigned at $34.00): -3.6%
= -$429.25/$11,810.95
Annualized Return If Assigned: -7.4%
= (-$429.25/$11,810.95)*(365/180 days)