Returns -- Through March 2011

1. March 2011 Year-to-Date Results:

As shown in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by +4.37% over the first three months of calendar year 2011. This performance compares with an increase of +5.75% for the benchmark Russell 3000 index for the same three-month period.










CCAP Absolute Return (Jan 1st through Mar 31st, 2011) = +4.37%
($300,014.98-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Mar 31st, 2011) = +5.75% ($79.26-$74.95)/$74.95


2. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) began in September, 2007. The annualized returns achieved each year for 2007 through 2010 compared with the Russell 3000 benchmark 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 equities in the CCAP are also held in this advisor's 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. As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating remains "SLIGHTLY BULLISH". The corresponding investing strategy is to, on-average, sell 2% out-of-the-money covered calls for the nearest expiration month.

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

China Mobile Ltd (CHL) -- Continuation Transaction

March 18, 2011 was options expiration Friday for March 2011. The short options in the China Mobile Ltd (CHL) Mar2011 covered calls position with a $47.50 strike price expired worthless since CHL closed on options expiration Friday at $45.02, below the $47.50 strike price. Today the Covered Calls Advisor decided to retain the 200 shares in CHL and to establish a covered calls position by selling 2 May2011 $47.50 calls. The detailed transactions history for this position as well as possible results for this investment are as follows:

1. China Mobile Ltd (CHL) -- Continuation Transaction
The transactions history to date for China Mobile Ltd (CHL) is as follows:
02/23/2011 Bought 200 CHL @ $46.479
02/23/2011 Sold 2 CHL Mar2011 $47.50 Calls @ $.60
03/19/2011 Mar2011 Options Expired
03/30/2011 Sold 2 CHL May2011 $47.50 Calls @ $.55
Note: price of CHL was $46.22 when these options were sold.
05/10/2011 Ex-dividend payment of approximately $.9128 per share expected.
05/21/2011 May2011 Options Expiration will occur.

Two possible overall performance results(including commissions) for the China Mobile Ltd ADR (CHL) transactions would be as follows:

Stock Purchase Cost: $9,304.75
= ($46.479*200+$8.95 commission)

Net Profit:
(a) Options Income: +$209.10
= ($.60 + $.55)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$182.56 = $.9128 * 200 shares
(c) Capital Appreciation (If stock price unchanged at $46.22): -$60.75
= ($46.22-$46.479)*200 - $8.95 commissions
(c) Capital Appreciation (If CHL above $47.50 at May2011 expiration): +$195.25
+($47.50-$46.479)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $46.22): +$330.91
= (+$209.10 +$182.56 -$60.75)
Total Net Profit(If stock price above $47.50 at May2011 options expiration): +$586.91= (+$209.10 +$182.56 +$195.25)

Absolute Return if Unchanged at $46.22: +3.6%
= +$330.91/$9,304.75
Annualized Return If Unchanged (ARIU): +14.9%
= (+$330.91/$9,304.75)*(365/87 days)

Absolute Return (If stock assigned at $47.50 upon May2011 options expiration): +6.3%
= +$586.91/$9,304.75
Annualized Return if stock assigned at expiration (ARIA): +26.5%
= (+$586.91/$9,304.75)*(365/87 days)

iShares MSCI Brazil ETF (EWZ) -- Continuation Transaction

Last Friday was options expiration Friday for March 2011. The short options in the iShares MSCI Brazil ETF (EWZ) Mar2011 covered calls position with a $74.00 strike price expired worthless since EWZ closed last Friday at $73.30, below the $74.00 strike price. Today the Covered Calls Advisor decided to retain the 200 shares in EWZ and to establish a covered calls position by selling 2 Apr2011 $75.00 calls. The detailed transactions history for this position as well as possible results for this investment are as follows:

1. iShares MSCI Brazil Fund ETF (EWZ) -- Continuation Transaction
The transactions history to date for iShares MSCI Brazil Fund ETF (EWZ) is as follows:
01/28/2011 Bought 200 EWZ @ $72.119
01/28/2011 Sold 2 EWZ Feb2011 $73.00 Calls @ $1.45
02/18/2011 Buy-to-Close (BTC) 2 PBR Feb2011 $73.00 Call Options @ $1.61
02/18/2011 Sell-to-Open (STO) 2 PBR Mar2011 $74.00 Call Options @ $2.32
03/19/2011 Mar2011 Options Expired
03/22/2011 Sold 2 EWZ Apr2011 $75.00 Calls @ $1.44
Note: price of EWZ was $74.38 when these options were sold.

Two possible overall performance results(including commissions) for the EWZ transactions would be as follows:
Stock Purchase Cost: $14,432.75
= ($72.119*200+$8.95 commission)

Net Profit:
(a) Options Income: +$688.65
= (200*($1.45-$1.61+$2.32+$1.44) - 3*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If price of EWZ unchanged at $74.38): +$443.25
= ($74.38-$72.119)*200 - $8.95 commissions
(c) Capital Appreciation (If assigned at $75.00): +$567.25
= ($75.00-$72.119)*200 - $8.95 commissions

Total Net Profit(If unchanged at $74.38): +$1,131.90
= (+$688.65 +$0.00 +$443.25)
Total Net Profit(If assigned at $75.00): +$1,255.90
= (+$688.65 +$0.00 +$567.25)

1. Absolute Return if Unchanged at $74.38: +7.8%
= +$1,131.90/$14,432.75
Annualized Return If Unchanged (ARIU): +36.7%
= (+$1,131.90/$14,432.75)*(365/78 days)

2. Absolute Return if Assigned at $75.00: +8.7%
= +$1,255.90/$14,432.75
Annualized Return If Assigned (ARIA): +40.7%
= (+$1,255.90/$14,432.75)*(365/78 days)

Best Buy Corp, International Paper Co, iShares MSCI Emerging Markets ETF, iShares MSCI South Korea ETF, and Microsoft Corp--Continuation Transactions

In the Covered Calls Advisor's March 2011 options expiration blog post, it was noted that of the six covered calls positions with Mar2011 expirations, five positions ended out-of-the-money. Today, a decision was made to retain these equity positions [Best Buy Corp.(BBY), International Paper Co.(IP), iShares MSCI Emerging Markets ETF (EEM), iShares MSCI South Korea ETF (EWY), and Microsoft Corp.(MSFT)] and to establish Apr2011 covered calls positions. The detailed transactions history for each of these five positions as well as some possible results for each of these investments are as follows:

1. Best Buy Corp.(BBY) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 300 BBY @ $35.13
01/24/2011 Sell-to-Open(STO) 3 BBY Feb2011 $36.00 Calls @ $.57
02/19/2011 Feb 2011 Options Expired
03/21/2011 Sell-to-Open(STO) 3 BBY Apr2011 $34.00 Calls @ $.49
Note: the price of BBY was $31.92 today when the options were sold.

Two possible overall performance results(including commissions) for the Best Buy Corp.(BBY) transactions would be as follows:
Stock Purchase Cost: $10,547.95
= ($35.13*300+$8.95 commission)

Net Profit:
(a) Options Income: +$295.60
= (300*($.57+$.49) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $31.92):
-$971.95 = ($31.92-$35.13)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $34.00): -$347.95
= ($34.00-$35.13)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $31.92): -$676.35
= (+$295.60 +$0.00 -$971.95)
Total Net Profit(If stock assigned at $34.00): -$52.35
= (+$295.60 +$0.00 -$347.95)

1. Absolute Return if Unchanged at $31.92: -6.4%
= -$676.35/$10,547.95
Annualized Return If Unchanged (ARIU): -28.5%
= (-$676.35/$10,547.95)*(365/82 days)

2. Absolute Return if Assigned at $34.00: -0.5%
= -$52.35/$10,547.95
Annualized Return If Assigned (ARIA): -2.2%
= (-$52.35/$10,547.95)*(365/82 days)


2. International Paper Co.(IP) -- Continuation
The transactions history is as follows:
03/03/2011 Bought 700 IP @ $26.97
03/03/2011 Sold 7 IP Mar2011 $28.00 Calls @ $.36
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 7 IP Apr2011 $28.00 Calls @ $.52
Note: price of IP stock was $26.97 when these options were sold.

Two possible overall performance results(including commissions) for the International Paper Co.(IP) transactions would be as follows:
Stock Purchase Cost: $18,887.95
= ($26.97*700+$8.95 commission)

Net Profit:
(a) Options Income: +$587.60
= (700*($.36+$.52) - 2*$14.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $26.97 at expiration): -$8.95
= ($26.97-$26.97)*700 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $28.00): +$712.05
= ($28.00-$26.97)*700 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$578.65
= (+$587.60 +$0.00 -$8.95)
Total Net Profit (If stock assigned at $28.00): +$1,299.65
= (+$587.60 +$0.00 +$712.05)

1. Absolute Return (If stock unchanged at $26.97 at expiration): +3.1%
= +$578.65/$18,887.95
Annualized Return (If stock unchanged at expiration): +25.4%
= (+$578.65/$18,887.95)*(365/44 days)

2. Absolute Return (If stock assigned at $28.00 at expiration): +6.9%
= +$1,299.65/$18,887.95
Annualized Return (If stock assigned at $28.00): +57.1%
= (+$1,299.65/$18,887.95)*(365/44 days)


3. 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
01/22/2011 Jan2011 EEM options expired
Note: The price of EEM was $46.49 at closing on expiration Friday.
01/24/2011 Sold 3 EEM Feb2011 $47.00 Calls @ $.92
Note: The price of EEM was $46.65 when these options were sold.
02/19/2011 Feb2011 EEM options expired
02/28/2011 Sold 3 EEM Mar2011 $46.00 Calls @ $.79
Note: The price of EEM was $45.86 when these Call options were sold.
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 3 EEM Apr2011 $47.00 Calls @ $.67
Note: price of EEM was $46.12 when these options were sold.

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: +$1,366.80
= (300*($.99-$.38+$1.02+$.77+$.92+$.79+$.67) - 6*$11.20 commissions)
(b) Distribution Income: +$115.37 = $107.83 + $7.54
(c) Capital Appreciation (If EEM price unchanged at $46.12):
+$162.05 = ($46.12-$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 $46.12): +$1,644.22
= (+$1,366.80 +$115.37 +$162.05)
Total Net Profit(If stock assigned at $47.00): +$1,908.22
= (+$1,366.80 +$115.37 +$426.05)

1. Absolute Return if Unchanged at $46.12: +12.0%
= +$1,644.22/$13,673.95
Annualized Return If Unchanged (ARIU): +25.7%
= (+$1,644.22/$13,673.95)*(365/171 days)

2. Absolute Return if Assigned at $47.00: +14.0%
= +$1,908.22/$13,673.95
Annualized Return If Assigned (ARIA): +29.8%
= (+$1,908.22/$13,673.95)*(365/171 days)


4. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
02/22/2011 Bought 300 EWY @ $58.03
02/22/2011 Sold 3 EWY Mar2011 $59.00 Calls @ $1.38
Note: these call options were sold with the price of EWY at $58.53
03/19/2011 Mar2011 Options Expired
03/21/2011 Sold 3 EWY Apr2011 $61.00 Calls @ $1.22
Note: price of EWY was $60.10 when these options were sold.

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $17,417.95
= ($58.03*300+$8.95 commission)

Net Profit:
(a) Options Income: +$757.60
= (300*($1.38+$1.22) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY unchanged at $60.10): $+612.05
= ($60.10-$58.03)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $61.00): +$882.05
= ($61.00-$58.03)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $60.10): +$1,369.65
= (+$757.60 +$0.00 +$612.05)
Total Net Profit(If EWY assigned at $61.00): +$1,639.65
= (+$757.60 +$0.00 +$882.05)

1. Absolute Return (If EWY unchanged at $60.10): +7.9%
= +$1,369.65/$17,417.95
Annualized Return If Unchanged (ARIU): +54.2%
= (+$1,369.65/$17,417.95)*(365/53 days)

2. Absolute Return if Assigned at $61.00: +9.4%
= +$1,639.65/$17,417.95
Annualized Return If Assigned (ARIA): +64.8%
= (+$1,639.65/$17,417.95)*(365/53 days)


5. Microsoft Corp.(MSFT) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 700 MSFT @ $28.15
01/24/2011 Sell-to-Open(STO) 7 MSFT Feb2011 $29.00 CallS @ $.40
02/19/2011 Feb 2011 Options Expired
03/21/2011 Sell-to-Open(STO) 7 MSFT Apr2011 $26.00 Calls @ $.31
Note: the price of MSFT was $25.47 today when the options were sold.

Two possible overall performance results(including commissions) for the Microsoft Corp.(MSFT) transactions would be as follows:
Stock Purchase Cost: $19,713.95
= ($28.15*700+$8.95 commission)

Net Profit:
(a) Options Income: +$468.60
= 700*($.40+$.31) - 2*$14.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $25.47):
-$1,884.95 = ($25.47-$28.15)*700 - $8.95 commissions
(c) Capital Appreciation (If assigned at $26.00): +$1,513.95
= ($26.00-$28.15)*700 - $8.95 commissions

Total Net Profit(If stock price unchanged at $25.47): -$1,416.35
= (+$468.60 +$0.00 -$1,884.95)
Total Net Profit(If stock assigned at $26.00): -$1,045.35
= (+$468.60 +$0.00 +$1,513.95)

1. Absolute Return if Unchanged at $25.47: -7.2%
= -$1,416.35/$19,713.95
Annualized Return If Unchanged (ARIU): -32.0%
= (-$1,416.35/$19,713.95)*(365/82 days)

2. Absolute Return if Assigned at $26.00: -5.3%
= -$1,045.35/$19,713.95
Annualized Return If Assigned (ARIA): -23.6%
= (-$1,045.35/$19,713.95)*(365/82 days)

March 2011 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of six covered calls positions with March 2011 expirations, with the following results:

- A decision was made on options expiration Friday this week to roll-up-and-out from an in-the-money Mar2011 covered calls position in Petrobras into an Apr2011 position. A post was made on this blog on Friday when these transactions occurred.

- The remaining five covered calls positions in the CCAP (China Mobile Ltd., International Paper, iShares MSCI Brazil ETF, iShares MSCI Emerging Markets ETF, and iShares MSCI South Korea ETF) ended out-of-the-money. Decisions will be made early this week to either sell the equities, or to keep them and sell calls to establish Apr2011 covered call positions. The related transactions will be made this week and the will be posted on this blog site on the same day they occur.

Roll Up and Out -- Petrobras (PBR)

Today is March 2011 options expiration Friday. With Petrobras (PBR) trading at $39.18, the three PBR Mar2011 $37.00 calls were in-the-money. The Covered Calls Advisor decided to retain the Petrobras position and roll-up-and-out to the Apr2011 expiration at the $40.00 strike price. The three Mar2011 $37.00 calls were bought back for $2.19 (only $.01 of time value remaining in each call option) and replaced by selling three out-of-the-money Apr2011 $40.00 strike options at $1.01 as follows:
03/18/2011 Buy-to-Close (BTC) 3 PBR Mar2011 $37.00 Call Options @ $2.19
03/18/2011 Sell-to-Open (STO) 3 PBR Apr2011 $40.00 Call Options @ $1.01

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

1. Petrobras (PBR) -- Continuation Transaction
The transactions history to date for Petrobras (PBR) 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)
01/21/2011 Buy-to-Close (BTC) 3 PBR Jan2011 $35.00 Call Options @ $1.35
01/21/2011 Sell-to-Open (STO) 3 PBR Feb2011 $37.00 Call Options @ $.89
02/18/2011 Buy-to-Close (BTC) 3 PBR Feb2011 $37.00 Call Options @ $.85
02/18/2011 Sell-to-Open (STO) 3 PBR Mar2011 $37.00 Call Options @ $1.67
03/18/2011 Buy-to-Close (BTC) 3 PBR Mar2011 $37.00 Call Options @ $2.19
03/18/2011 Sell-to-Open (STO) 3 PBR Apr2011 $40.00 Call Options @ $1.01
Note: The price of PBR was $39.23 when these 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: +$998.80
= (300*($1.05+$.55+$.58+$.63+$.62+$.54+$.590-$1.35+$.89-$.85+$1.67-$2.19+$1.01) - 11*$11.20 commissions)
(b) Dividend Income: +$186.60 (2*$.193 + $.236)*300 shares -- Three ex-Dividend dates
(c) Capital Appreciation (If PBR price unchanged at $39.23): -$41.95
= ($39.23-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $40.00): +189.05
= ($40.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR unchanged at $39.23): +$1,143.45
= (+$998.80 +$186.60 -$41.95)
Total Net Profit(If PBR assigned at $40.00): +$1,374.45
= (+$998.80 +$186.60 +$189.05)

Absolute Return (If Unchanged at $39.23): +9.7%
= +$1,143.45/$11,810.95
Annualized Return If Unchanged (ARIU): +11.8%
= (+$1,143.45/$11,810.95)*(365/299 days)

Absolute Return (If Assigned at $40.00): +11.6%
= +$1,374.45/$11,810.95)
Annualized Return If Assigned(ARIA): +14.2%
= (+$1,374.45/$11,810.95)*(365/299 days)

This covered calls history demonstrates that as a result of receiving monthly options income, covered calls can achieve a net profit even when the underlying equity declines somewhat from the original purchase price.

Overall Market Meter Rating Remains "Slightly Bullish"

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. 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 slightly more than the 3.78 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 April 2011.

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 March 2011 options expiration this week, newly established positions for Apr2011 expiration will be established in accordance with this guideline.

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

Freeport-McMoRan Copper and Gold Inc.(FCX) -- Continuation Transaction

Today the Covered Calls Advisor decided to establish a covered calls position against the 600 shares of Freeport-McMoRan Copper and Gold Inc. stock by selling 6 Apr2011 $55.00 calls. The detailed transactions history for this position as well as possible results for this investment are as follows:

Freeport-McMoRan Copper and Gold Inc.(FCX) -- Continuation
01/28/2011 Sold 3 Freeport-McMoRan Copper and Gold Inc.(FCX) Feb2011 $110.00 Puts @ $6.35
Note: the price of FCX stock was $106.10 when these puts were sold.
The 100% cash-secured put position in Freeport McMoRan (FCX) ended out-of-the-money and was assigned for purchase. The stock underwent a 2-for-1 split since original sale of the three FCX puts at $110.00 strike price. So the assignment was for the purchase of 600 shares of FCX stock at half of the the original $110 strike price value which is $55.00.
03/17/2011 Sold 6 FCX Apr2011 $55.00 Calls @ $1.43
Note: The price of FCX was $52.15 when these call options were sold.

Two possible overall performance results(including commissions) for the Freeport-McMoRan Copper and Gold Inc.(FCX) transactions would be as follows:
Stock Purchase Cost: $33,008.95
= ($110.00*300+$8.95 commission)

Net Profit:
(a) Options Income: +$2,648.70
= [300*$6.35 + 600*$1.43) - 3*$11.20 - 6*$13.45 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $52.15):
-$1,718.95 = ($52.15-$110.00/2)*600 - $8.95 commissions
(c) Capital Appreciation (If assigned at $55.00): -$8.95
= ($55.00-$110.00/2)*600 - $8.95 commissions

Total Net Profit(If stock price unchanged at $52.15): +$929.75
= (+$2,648.70 +$0.00 -$1,718.95)
Total Net Profit(If stock assigned at $55.00): +$2,639.75
= (+$2,648.70 +$0.00 -$8.95)

Absolute Return if Unchanged at $52.15: +2.8%
= +$929.75/$33,008.95
Annualized Return If Unchanged (ARIU): +13.2%
= (+$929.75/$33,008.95)*(365/78 days)

Absolute Return if Assigned at $55.00: +8.0%
= +$2,639.75/$33,008.95
Annualized Return If Assigned (ARIA): +37.4%
= (+$2,639.75/$33,008.95)*(365/78 days)

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 Mar2011:
03/03/2011 Bought 700 IP @ $26.97
03/03/2011 Sold 7 IP Mar2011 $28.00 Calls @ $.36

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: $18,887.95
= ($26.97*700+$8.95 commission)

Net Profit:
(a) Options Income: +$237.80
= (700*$.36 - $14.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $26.97 at expiration): -$8.95
= ($26.97-$26.97)*700 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $28.00): +$712.05
= ($28.00-$26.97)*700 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$228.85
= (+$237.80 +$0.00 -$8.95)
Total Net Profit (If stock assigned at $28.00): +$949.85
= (+$237.80 +$0.00 +$712.05)

1. Absolute Return (If stock unchanged at $26.97 at expiration): +1.2%
= +$228.85/$18,887.95
Annualized Return (If stock unchanged at expiration): +29.5%
= (+$228.85/$18,887.95)*(365/15 days)

2. Absolute Return (If stock assigned at $28.00 at expiration): +5.0%
= +$949.85/$18,887.95
Annualized Return (If stock assigned at $28.00): +122.4%
= (+$949.85/$18,887.95)*(365/15 days)

The downside breakeven price at expiration is at $26.61 ($26.97 - $.36).
Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Mar2011 options expiration) for this International Paper Co.(IP) covered calls position is 58.4%. This compares with a probability of profit of 50.6% for a buy-and-hold of International Paper Co.(IP) over the same time period.