Returns -- Through June 2011

1. June 2011 Year-to-Date Results:

As shown in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by +5.12% over the first six months of calendar year 2011. This performance compares with an increase of +5.79% for the benchmark Russell 3000 index for the comparable first half of calendar year 2011.












CCAP Absolute Return (Jan 1st through June 30th, 2011) = +5.12%
($302,171.32-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through June 30th, 2011) = +5.79%($79.29-$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

Covered Calls Continuation Transactions

Today, a decision was made to retain the shares held in the remaining four positions in the Covered Calls Advisor Portfolio(CCAP): Best Buy Corp.Inc.(BBY), iShares MSCI Emerging Markets ETF(EEM), Petrobras ADR (PBR), and ProShares UltraShort 20+ Year Treasury ETF (TBT). The detailed transactions for each holding as well as some possible results for these investment are as follows:

1. Best Buy Corp. Inc.(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.
04/16/2011 Apr2011 BBY options expired.
04/26/2011 Sold 3 BBY May2011 $31.00 Calls @ $.60
Note: The price of BBY was $30.59 when these call options were sold.
05/20/2011 Bought-to-Close(BTC) 3 BBY May3011 $31.00 Calls @ $.36
Note: The price of BBY was $31.31 when the options were bought back.
05/20/2011 Sell-to-Open(STO) 3 BBY Jun2011 $32.00 Calls @ $.94
Note: The price of BBY was $31.43 when these options were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of BBY was $31.01 upon options expiration.
06/28/2011 Sold 3 BBY Aug2011 $33.00 Calls @ $.83
Note: price of BBY stock was $31.90 when these 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: +$853.80
= (300*($.57+$.49+$.60-$.36+$.94+$.83) - 6*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $31.90):
-$977.95 = ($31.90-$35.13)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $33.00): -$647.95
= ($33.00-$35.13)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $31.90): -$124.15
= (+$853.80 +$0.00 -$977.95)
Total Net Profit(If stock assigned at $33.00): +$205.85
= (+$853.80 +$0.00 -$647.95)

1. Absolute Return if Unchanged at $31.90: -1.2%
= -$124.15/$10,547.95
Annualized Return If Unchanged (ARIU): -2.1%
= (-$124.15/$10,547.95)*(365/208 days)

2. Absolute Return if Assigned at $33.00: +2.0%
= +$205.85/$10,547.95
Annualized Return If Assigned (ARIA): +3.4%
= (+$205.85/$10,547.95)*(365/208 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 500 EEM @ $47.81
04/19/2011 Sold 5 EEM May2011 $49.00 Calls @ $.83
Note: the price of EEM was $48.32 when the calls were sold.
05/27/2011 Sold 5 EEM Jun2011 $49.00 Calls @ $.44
Note: the price of EEM was $47.83 when the calls were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of EEM was $45.34 upon options expiration.
06/28/2011 Sold 5 EEM Jul2011 $47.00 Calls @ $.62
Note: price of EEM was $46.42 when these options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI Emerging Markets ETF (EEM) transactions would be as follows:
Stock Purchase Cost: $23,913.95
= ($47.81*500+$8.95 commission)

Net Profit:
(a) Options Income: +$861.90
= [500*($.83 +$.35+$.62) - 3*$12.70 commissions]
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $46.42 at expiration): -$703.95
= ($46.42-$47.81)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): -$413.95
= ($47.00-$47.81)*500 - $8.95 commissions

Total Net Profit (If stock price unchanged at $46.42 at expiration): +$157.95
= (+$861.90 +$0.00 -$703.95)
Total Net Profit (If stock assigned at $47.00): +$447.95
= (+$861.90 +$0.00 -$413.95)

1. Absolute Return (If stock unchanged at $46.42 at expiration): +0.7%
= +$157.95/$23,913.95
Annualized Return (If stock unchanged at expiration): +2.7%
= (+$157.95/$23,913.95)*(365/89 days)

2. Absolute Return (If stock assigned at $47.00 at expiration): +1.9%
= +$447.95/$23,913.95
Annualized Return (If stock assigned at $49.00): +7.7%
= (+$447.95/$23,913.95)*(365/89 days)


3. Petrobras ADR (PBR) -- Continuation
The transactions history to date for Petrobras ADR (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.
04/16/2011 Apr2011 PBR Options Expired.
Note: the price of PBR was $37.81 upon options expiration.
04/20/2011 Sold 3 PBR May2011 $38.00 Calls @ $.87
Note: the price of PBR was $37.51 when these call options were sold.
05/21/2011 May2011 Options Expired
Note: the price of PBR was $33.87 upon options expiration.
06/28/2011 Sold 3 PBR Jul2011 $33.00 Calls @ $.59
Note: price of PBR was $32.82 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: +$1,414.40
= (300*($1.05+$.55+$.58+$.63+$.62+$.54+$.590-$1.35+$.89-$.85+$1.67-$2.19+$1.01+$.87+$.59) - 13*$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 $32.82): -$1,964.95
= ($32.82-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $33.00): -$1,910.95
= ($33.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR unchanged at $32.82): -$363.95
= (+$1,414.40 +$186.60 -$1,964.95)
Total Net Profit(If PBR assigned at $33.00): -$309.95
= (+$1,414.40 +$186.60 -$1,910.95)

Absolute Return (If Unchanged at $32.82): -3.1%
= -$363.95/$11,810.95
Annualized Return If Unchanged (ARIU): -2.9%
= (-$363.95/$11,810.95)*(365/390 days)

Absolute Return (If Assigned at $33.00): -2.6%
= -$309.95/$11,810.95
Annualized Return If Assigned(ARIA): -2.5%
= ($309.95/$11,810.95)*(365/390 days)


4. ProShares UltraShort 20+ Year Treasury ETF (TBT)-- Continuation
The transactions history is as follows:
05/02/2011 Bought 200 TBT @ $35.75
05/02/2011 Sold 2 TBT May2011 $37.00 Calls @ $.36
05/21/2011 May2011 Options Expired
Note: the price of TBT was $34.16 upon options expiration.
06/28/2011 Sold 2 TBT Jul2011 $35.00 Calls @ $.39
Note: price of TBT was $33.94 when these options were sold.

Two possible overall performance results(including commissions) for the TBT transactions would be as follows:
Stock Purchase Cost: $7,158.95
= ($35.75*200+$8.95 commission)

Net Profit:
(a) Options Income: +$204.10
= 200*($.36+$.39) - 2*$10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If TBT unchanged at $33.94):
-$548.95 = ($33.94-$35.75)*300 - $8.95 commissions
(c) Capital Appreciation (If TBT exercised at $35.00): -$233.95
= ($35.00-$35.75)*300 - $8.95 commissions

Total Net Profit(If TBT unchanged at $33.94): -$344.85
= (+$204.10 +$0.00 -$548.95)
Total Net Profit(If TBT exercised at $35.00): -$29.85
= (+$204.10 +$0.00 -$233.95)

Absolute Return if Unchanged at $33.94: -4.8%
= -$344.85/$7,158.95
Annualized Return If Unchanged (ARIU) -23.4%
= (-$344.85/$7,158.95)*(365/75 days)

Absolute Return if Assigned at $35.00: -0.4%
= -$29.85/$7,158.95
Annualized Return If Assigned (ARIA) -2.0%
= ($29.85/$7,158.95)*(365/75 days)

Covered Call Continuation Transaction -- Apple Inc.(AAPL)

The Jun2011 covered calls position in Apple Inc.(AAPL) expired. Today, a decision was made to retain the 100 shares in Apple Inc. in the Covered Calls Advisor Portfolio and to re-establish a covered calls position with a Jul2011 expiration and at the $345.00 strike price. The detailed transactions history for this Apple Inc. position as well as possible results for this investment are as follows:

1. Apple Inc.(AAPL) -- Continuation
The transactions history is as follows:
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.
01/22/2011 Jan2011 AAPL options expired
Note: The price of AAPL was $326.72 at closing on expiration Friday.
01/24/2011 Sold 1 AAPL Feb2011 $340.00 Call @ $5.50
Note: The price of AAPL was $333.72 when this Call option was sold.
02/19/2011 Feb2011 AAPL options expired
02/28/2011 Sold 1 AAPL Apr2011 $360.00 Call @ $10.80
Note: The price of AAPL was $354.32 when this Call option was sold.
04/16/2011 Apr2011 AAPL options expired.
04/26/2011 Sold 1 AAPL May2011 $350.00 Call @ $8.95
Note: The price of AAPL was $353.06 when this call option was sold.
05/31/2011 Sold 1 AAPL Jun2011 $360.00 Call @ $.90
Note: The price of AAPL was $343.63 when this call option was sold.
06/18/2011 Jun2011 Options Expired
Note: the price of AAPL was $320.26 upon options expiration.
06/28/2011 Sold 1 AAPL Jul2011 $345.00 Call Option @ $2.77
Note: price of AAPL stock was $335.75 when this option was sold.

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

Net Profit:
(a) Options Income: +$3,443.80
= [100*($6.10+$5.50+$10.80+$8.95+$.90+$2.77) - 6*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $335.75): +$1,451.05
= ($335.70-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If assigned at $345.00): +$2,381.05
= ($345.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $335.75): +$4,894.85
= (+$3,443.80 +$0.00 +$1,451.05)
Total Net Profit(If stock assigned at $345.00): +$5,824.85
= (+$3,443.80 +$0.00 +$2,381.05)

Absolute Return if Unchanged at $335.75: +15.2%
= +$4,894.85/$32,118.95
Annualized Return If Unchanged (ARIU): +26.7%
= (+$4,894.85/$32,118.95)*(365/208 days)

Absolute Return if Assigned at $345.00: +18.1%
= +$5,824.85/$32,118.95
Annualized Return If Assigned (ARIA): +31.8%
= (+$5,824.85/$32,118.95)*(365/208 days)

Covered Calls Continuation Transactions

Upon Jun2011 options expiration, six covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions for three equities (International Paper Co., Freeport McMoRan Copper and Gold Inc., and iShares MSCI South Korea ETF) with Jul2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. International Paper Co.(IP) -- Continuation
The transactions history is as follows:
05/17/2011 Bought 500 IP @ $31.26
05/17/2011 Sold 5 IP Jun2011 $32.00 Calls @ $.82
06/18/2011 Jun2011 Options Expired
Note: the price of IP was $26.57 upon options expiration.
06/21/2011 Sold 5 IP Jul2011 $30.00 Calls @ $.38
Note: price of IP stock was $28.56 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: $15,638.95
= ($31.26*500+$8.95 commission)

Net Profit:
(a) Options Income: +$574.60
= (500*($.82+$.38) - 2*$12.70 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $28.56 at expiration): -$1,358.95
= ($28.56-$31.26)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $30.00): -$638.95
= ($30.00-$31.26)*500 - $8.95 commissions

Total Net Profit (If stock price unchanged at $28.56 at expiration): -$784.35
= (+$574.60 +$0.00 -$1,358.95)
Total Net Profit (If stock assigned at $30.00): -$64.35
= (+$574.60 +$0.00 -$638.95)

1. Absolute Return (If stock unchanged at $28.56 at expiration): -5.0%
= -$784.35/$15,638.95
Annualized Return (If stock unchanged at expiration): -30.5%
= (-$784.35/$15,638.95)*(365/60 days)

2. Absolute Return (If stock assigned at $30.00 at expiration): -0.4%
= -$64.35/$15,638.95
Annualized Return (If stock assigned at $30.00): -2.5%
= (-$64.35/$15,638.95)*(365/60 days)


2. Freeport McMoRan Copper and Gold Inc.(FCX) -- Continuation
The transactions history is as follows:
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.
04/16/2011 Apr2011 FCX Options Expired.
Note: the price of FCX was $51.17 upon options expiration.
04/20/2011 Sold 6 FCX May2011 $55.00 Calls @ $1.95
Note: the price of FCX was $54.73 when these call options were sold.
05/11/2011 $150.00 Ex-Dividend ($.250 per share * 600 shares)
05/15/2011 Supplementary Dividend ($.50 per share) for shares of record on 5/15/2011.
05/21/2011 May2011 Options Expiration Date
05/27/2011 Sold 6 FCX Jun2011 $55.00 Calls @ $.44
Note: the price of FCX was $51.60 when the calls were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of FCX was $47.93 upon options expiration.
06/21/2011 Sold 6 FCX Jul2011 $52.50 Calls @ $.52
Note: price of FCX stock was $49.16 when these 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: +$4,219.85
= [300*$6.35 + 600*($1.43+$1.95+$.44+$.52) - 3*$11.20 - 4*$13.45 commissions]
(b) Dividend Income: +$450.00 [($.50 + $.25) * 600 shares]
(c) Capital Appreciation (If stock price unchanged at $49.16):
-$3,512.95 = ($49.16-$55.00)*600 - $8.95 commissions
(c) Capital Appreciation (If assigned at $52.50): -$1,508.95
= ($52.50-$55.00)*600 - $8.95 commissions

Total Net Profit(If stock price unchanged at $49.16): +$1,156.90
= (+$4,219.85 +$450.00 -$3,512.95)
Total Net Profit(If stock assigned at $52.50): +$3,160.90
= (+$4,219.85 +$450.00 -$1,508.95)

Absolute Return if Unchanged at $49.16: +3.5%
= +$1,156.90/$33,008.95
Annualized Return If Unchanged (ARIU): +7.7%
= (+$1,156.90/$33,008.95)*(365/169 days)

Absolute Return if Assigned at $52.50: +9.6%
= +$3,160.90/$33,008.95
Annualized Return If Assigned (ARIA): +20.7%
= (+$3,160.90/$33,008.95)*(365/169 days)


3. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 600 EWY @ $64.17
04/19/2011 Sold 6 EWY May2011 $66.00 Calls @ $1.39
Note: the price of EWY was $65.20 when the calls were sold.
05/27/2011 Sold 6 EWY Jun2011 $67.00 Calls @ $.59
Note: the price of EWY was $64.84 when the calls were sold.
06/18/2011 Jun2011 Options Expired
Note: the price of EWY was $61.91 upon options expiration.
06/21/2011 Sold 6 EWY Jul2011 $65.00 Calls @ $.59
Note: price of EWY stock was $63.00 when these options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI South Korea ETF (EWY) transactions would be as follows:
Stock Purchase Cost: $38,510.95
= ($64.17*600+$8.95 commission)

Net Profit:
(a) Options Income: +$1,501.65
= [600*($1.39+$.59+$.59) - 3*$13.45 commissions]
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $63.00 at expiration): -$710.95
= ($63.00-$64.17)*600 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $65.00): +$87.05
= ($65.00-$64.84)*600 - $8.95 commissions

Total Net Profit (If stock price unchanged AT $63.00 at expiration): +$790.70
= (+$1,501.65 +$0.00 -$710.95)
Total Net Profit (If stock assigned at $65.00): +$1,588.70
= (+$1,501.65 +$0.00 +$87.05)

1. Absolute Return (If stock unchanged at $63.00 at expiration): +2.1%
= +$790.70/$38,510.95
Annualized Return (If stock unchanged at expiration): +8.4%
= (+$790.70/$38,510.95)*(365/89 days)

2. Absolute Return (If stock assigned at $65.00 at expiration): +4.1%
= +$1,588.70/$38,510.95
Annualized Return (If stock assigned at $65.00): +16.9%
= (+$1,588.70/$38,510.95)*(365/89 days)

June 2011 Expiration Results

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

- Six covered calls positions in the CCAP (Apple Inc., Best Buy Corp., Freeport McMoRan Copper and Gold Inc., International Paper, iShares MSCI Emerging Markets ETF, and iShares MSCI South Korea ETF) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish July 2011 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 three options in the covered calls position in UnitedHealth Group Inc.(UNH) were called away upon option expiration last Friday. Three Jun2011 $50.00 options were exercised despite the fact that UNH closed on Friday at $49.96, slightly below the $50.00 strike price. The detailed results for this position is as follows:

1. UnitedHealth Group Inc.(UNH) -- Closed
The transactions history is as follows:
04/18/2011 Bought 300 UNH @ $43.97
04/20/2011 Sell-to-Open(STO) 3 UNH May2011 $45.00 CallS @ $1.03
Note: the price of UNH was $44.60 when the call options were sold.
05/20/2011 Bought-to-Close(BTC) 3 UNH May3011 $45.00 Calls @ $5.05
Note: The price of UNH was $50.08 when the options were bought back.
05/20/2011 Sell-to-Open(STO) 3 UNH Jun2011 $50.00 Calls @ $1.43
Note: The price of UNH was $50.28 when these options were sold.
06/18/2011 Jun2011 UNH Options Expired.
Note: the price of UNH was $49.96 upon options expiration.

A resulting overall performance (including commissions) for these UnitedHealth Group Inc.(UNH) transactions was as follows:
Stock Purchase Cost: $13,199.95
= ($43.97*300+$8.95 commission)

Net Profit:
(a) Options Income: -$810.60
= (300*($1.03-$5.05+$1.43) - 3*$11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (Stock assigned at $50.00): +$1,800.05
= ($50.00-$43.97)*300 - $8.95 commissions

Total Net Profit (Stock assigned at $50.00): +$989.45
= (-$810.60 +$0.00 +$1,800.05)

Absolute Return (Stock assigned at $50.00 at expiration): +7.5%
= +$989.45/$13,199.95
Annualized Return: +44.9%
= (+$989.45/$13,199.95)*(365/61 days)

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. These nine factors can be categorized into macroeconomic (the first 3 indicators in the chart below), momentum (next 2 indicators in the chart), value (next 3 indicators), and growth (the last indicator). 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 4.11 is identical to the 4.11 of last month and as such remains solidly in Slightly Bullish territory (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 July 2011. All nine of the factors used to determine the Overall Market Meter rating remained unchanged from the prior analysis last month.

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

In the field of behavioral finance, there is substantial academic research on cognitive biases. As investors, our emotional feelings about the current state of the stock market tends to fluctuate daily with the ups and downs of the market and also with the bullish and bearish investing-related information we read. A prior blog post describing my investing process states: "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." So, the Covered Calls Advisor attempts to replace emotional decision-making with objective decision-making wherevever possible. The 9-factor Overall Market Meter accomplishes this very nicely. Plug in the current numbers for each factor and the current resulting Overall Market Meter rating is automatically calculated. The specific factors that make up the model are occasionally updated (tweaked if you will) as new and better forecasting information is obtained. The Overall Market Meter model itself is, of course, not perfect. But generally speaking, I am pleased with it, and I love the fact that it removes the emotional roller coaster effect that each of us investors are prone to be adversely affected by.

Your comments or questions regarding this post (or the details related to any of the nine factors used in this model) 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

Establish Morgan Stanley Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Morgan Stanley (MS) covered calls as follows:

Established Morgan Stanley (MS) Covered Calls for Jul2011:
06/03/2011 Bought 300 MS @ $22.988
06/03/2011 Sold 3 MS Jul2011 $25.00 Calls @ $.26
Note: the price of MS was $23.14 when the call options were sold.

Today, Morgan Stanley is trading at less than 80% of this year's expected tangible book value. The prior 10-year chart below shows that it is now priced at about 62% of book value per share versus a historical norm well above 100%.

With Morgan Stanley's primary financial metrics now improving, the stock's downside risk seems minimal and its upside potential for the next year is estimated to be 50% above its current price ($34.50 target price).

Two possible overall performance results(including commissions) for the Morgan Stanley transactions would be as follows:
Stock Purchase Cost: $6,905.35
= ($22.988*300+$8.95 commission)

Net Profit:
(a) Options Income: +$66.80
= 300*$.26 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MS unchanged at $22.988):
-$8.95 = ($22.988-$22.988)*300 - $8.95 commissions
(c) Capital Appreciation (If MS exercised at $25.00): +$594.65
= ($25.00-$22.988)*300 - $8.95 commissions

Total Net Profit(If MS unchanged at $22.988): +$57.85
= (+$66.80 +$0.00 -$8.95)
Total Net Profit(If MS exercised at $25.00): +$661.45
= (+$66.80 +$0.00 +$594.65)

Absolute Return if Unchanged at $22.988: +0.8%
= +$57.85/$6,905.35
Annualized Return If Unchanged (ARIU) +7.1%
= (+$57.85/$6,905.35)*(365/43 days)

Absolute Return if Assigned at $37.00: +9.6%
= +$661.45/$6,905.35
Annualized Return If Assigned (ARIA) +81.3%
= (+$661.45/$6,905.35)*(365/43 days)

The downside breakeven price at expiration is at $22.73 ($22.988 - $.26).
Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until July2011 options expiration) for this Morgan Stanley (MS) covered calls position is 56.3%. This compares with a probability of profit of 51.3% for a buy-and-hold of Morgan Stanley (MS) over the same time period.