Returns -- Through August 2011

1. August 2011 Year-to-Date Results:

As shown in the chart below, the Covered Calls Advisor Portfolio (CCAP) has slightly underperformed the benchmark Russell 3000 index by 0.28 percentage points (-3.60% minus -3.32%) over the first eight months of calendar year 2011.














CCAP Absolute Return (Jan 1st through August 31st, 2011) = -3.60%
($277,105.13-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through August 31st, 2011) = -3.32% = ($72.46-$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

Continuation Transactions -- iShares MSCI Emerging Markets ETF and iShares MSCI Taiwan ETF

Today, a decision was made to re-establish covered calls positions for two covered calls positions (iShares MSCI Emerging Markets ETF and iShares MSCI Taiwan ETF) that expired upon Aug2011 expirations. The new positions are being established with Sep2011 expirations and the detailed transactions history for these positions as well as possible results for these investments are as follows:

1. 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.
6/22/2011 Distribution Income $.46092 per share.
06/28/2011 Sold 5 EEM Jul2011 $47.00 Calls @ $.62
Note: price of EEM was $46.42 when these options were sold.
07/16/2011 Jul2011 EEM options expired.
07/18/2011 Sold 5 EEM Aug2011 $47.00 Calls @$.99
Note: The price of EEM was $46.55 when these call options were sold.
08/20/2011 Aug2011 Options Expired.
08/31/2011 Sold 5 EEM Sep2011 $43.00 Calls @$1.13
Note: The price of EEM was $42.89 when these call 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: +$1,896.50
= [500*($.83 +$.35+$.62+$.99+$1.13) - 5*$12.70 commissions]
(b) Distribution Income: $230.46 = $.46092 * 500 shares
(c) Capital Appreciation (If EEM unchanged at $42.89 at expiration): -$2,468.95
= ($42.89-$47.81)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $47.00): -$2,413.95
= ($43.00-$47.81)*500 - $8.95 commissions

Total Net Profit (If EEM price unchanged at $42.89 at expiration): -$341.99
= (+$1,896.50 +$230.46 -$2,468.95)
Total Net Profit (If EEM assigned at $43.00): -$286.99
= (+$1,896.50 +$230.46 -$2,413.95)

1. Absolute Return (If stock unchanged at $42.89 at expiration): -1.4%
= -$341.99/$23,913.95
Annualized Return (If stock unchanged at expiration): -3.4%
= (-$341.99/$23,913.95)*(365/152 days)

2. Absolute Return (If stock assigned at $43.00 at expiration): -1.2%
= -$286.99/$23,913.95
Annualized Return (If stock assigned at $49.00): -2.4%
= (-$286.99/$23,913.95)*(365/152 days)


2. iShares MSCI Taiwan ETF (EWT) -- Continuation
The transactions history is as follows:
07/18/2011 Bought 1,000 EWT @ $14.65
07/19/2011 Sold 10 EWT Aug2011 $15.00 Calls @ $.31
Note: The price of EWT was $14.85 today when the options were sold.
08/20/2011 Aug2011 Options Expired.
08/31/2011 Sold 10 EWT Sep2011 $14.00 Calls @$.29
Note: The price of EWT was $13.89 when these call options were sold.

Two possible overall performance results(including commissions) for the EWT transactions would be as follows:
Stock Purchase Cost: $14,650.95
= ($14.65*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$567.10
= (1,000*($.31+$.29) - 2*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If unchanged at $13.89): -$768.95
= ($13.89-$14.65)*1,000 - $8.95 commissions
(c) Capital Appreciation (If assigned at $14.00): -$658.95
= ($14.00-$14.65)*1,000 - $8.95 commissions

Total Net Profit(If EWT price unchanged at $13.89): -$201.85
= (+$567.10 +$0.00 -$768.95)
Total Net Profit(If EWT price assigned at $14.00): -$91.85
= (+$567.10 +$0.00 -$658.95)

Absolute Return if Unchanged at $13.89: -1.4%
= -$201.85/$14,650.95
Annualized Return If Unchanged (ARIU) -8.2%
= ($201.85/$14,650.95)*(365/61 days)

Absolute Return if Assigned at $14.00: -0.6%
= -$91.85/$14,650.95
Annualized Return If Assigned (ARIA) -3.8%
= (-$91.85/$14,650.95)*(365/61 days)

Continuation Transactions -- General Motors Co., iShares MSCI China ETF, and iShares MSCI South Korea ETF

Upon Aug2011 options expiration, twelve 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 (General Motors Co., iShares MSCI China ETF, and iShares MSCI South Korea ETF) with Sep2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. General Motors Co.(GM) -- Continuation
The transactions history is as follows:
07/20/2011 Bought 300 GM @ $29.32
07/20/2011 Sold 3 GM Aug2011 $30.00 Calls @ $.79
Note: the price of GM was $29.45 when the call options were sold.
08/20/2011 Aug2011 GM options expired.
08/29/2011 Sold 3 GM Sept02,2011 $24.00 Calls @$.25
Note: The price of GM was $23.43 when these call options were sold.

Two possible overall performance results(including commissions) for the General Motors transactions are as follows:

Stock Purchase Cost: $8,804.95
= ($29.32*300+$8.95 commission)

Net Profit:
(a) Options Income: +$289.60
= ($.79+$.25)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $23.43): -$1,775.95
= ($23.43-$29.32)*300 - $8.95 commissions
(c) Capital Appreciation (If GM above $24.00 at Sept02,2011 expiration): -$1,596.95
+($24.00-$29.32)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $23.43): -$1,486.35
= (+$289.60 +$0.00 -$1,775.95)
Total Net Profit(If stock price above $24.00 at Sept02,2011 options expiration): -$1,307.35 = (+$289.60 +$0.00 -$1,596.95)

Absolute Return if Unchanged at $23.43: -16.9%
= -$1,486.35/$8,804.95
Annualized Return If Unchanged (ARIU): -140.0%
= (-$1,486.35/$8,804.95)*(365/44 days)

Absolute Return (If stock price above $24.00 at Sept02,2011 options expiration):
-14.8% = -$1,307.35/$8,804.95
Annualized Return (If stock price above $24.00 at expiration): -123.2%
= (-$1,307.35/$8,804.95)*(365/44 days)


2. iShares MSCI China ETF (FXI) -- Continuation
The transactions history is as follows:
04/18/2011 Bought 1,000 FXI @ $44.80
04/20/2011 Sold 10 FXI May2011 $47.00 Calls @ $.49
Note: the price of FXI was $45.88 when the calls were sold.
05/31/2011 Sold 10 FXI Jul2011 $47.00 Calls @ $.37
Note: The price of FXI was $45.18 when these call options were sold.
06/21/2011 FXI ETF distribution of $.68555 per share
07/16/2011 Jul2011 FXI options expired.
07/18/2011 Sold 10 FXI Aug2011 $42.00 Calls @$.71
08/20/2011 Aug2011 FXI options expired.
08/29/2011 Sold 10 FXI Sep2011 $39.00 Calls @$.51
Note: The price of FXI was $37.73 when these call options were sold.

Two possible overall performance results(including commissions) for these iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $44,808.95
= ($44.80*1,000+$16.45 commission)

Net Profit:
(a) Options Income: +$2,029.20
= (1,000*($.49+$.37+$.71+$.51) - 4*$12.70 commissions)
(b) Distribution Income: $685.55 = $.68555 * 1,000 shares
(c) Capital Appreciation (If FXI price unchanged at $37.73 at expiration): -$7,078.95
= ($37.73-$44.80)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $39.00 at expiration): -$5,808.95
= ($39.00-$44.80)*1,000 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $37.73 at expiration): -$4,364.20
= (+$2,029.20 +$685.55 -$7,078.95)
Total Net Profit (If FXI assigned at $39.00): -$3,094.20
= (+$2,029.20 +$685.55 -$5,808.95)

1. Absolute Return (If FXI unchanged at $37.73 at expiration): -9.7%
= -$4,364.20/$44,808.95
Annualized Return (If FXI unchanged at expiration): -23.4%
= (-$4,364.20/$44,808.95)*(365/152 days)

2. Absolute Return (If FXI assigned at $39.00 at expiration): -6.9%
= -$3,094.20/$44,808.95
Annualized Return If Assigned (ARIA): -16.6%
= (-$3,094.20/$44,808.95)*(365/152 days)


3. iShares MSCI South Korea ETF (EWY) -- Continuation
The transactions history is as follows:
07/18/2011 Bought 500 EWY @ $64.76
07/18/2011 Sold 5 EWY Aug2011 $66.00 Calls @ $1.45
Note: The price of EWY was $64.80 when the options were sold.
08/20/2011 Aug2011 EWY options expired.
08/29/2011 Sold 5 EWY Sep2011 $56.00 Calls @$1.36
Note: The price of EWY was $54.72 when these call options were sold.

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $32,388.95
= ($64.76*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,379.60
= (500*($1.45+$1.36) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If equity price unchanged at $54.72):
-$5,028.95 = ($54.72-$64.76)*500 - $8.95 commissions
(c) Capital Appreciation (If assigned at $56.00): -$4,388.95
= ($56.00-$64.76)*500 - $8.95 commissions

Total Net Profit(If equity price unchanged at $54.72): -$3,649.35
= (+$1,379.60 +$0.00 -$5,028.95)
Total Net Profit(If ETF price assigned at $56.00): -$3,009.35
= (+$1,379.60 +$0.00 -$4,388.95)

Absolute Return if Unchanged at $54.72: -11.3%
= -$3,649.35/$32,388.95
Annualized Return If Unchanged (ARIU) -67.4%
= (-$3,649.35/$32,388.95)*(365/61 days)

Absolute Return if Assigned at $56.00: -9.3%
= -$3,009.35/$32,388.95
Annualized Return If Assigned (ARIA) -55.6%
= (-$3,009.35/$32,388.95)*(365/61 days)

Continuation Transaction -- Mylan Inc.

Today, a decision was made to retain the shares held in Mylan Inc.(MYL) and to establish a Sep2011 covered calls position. The detailed transactions as well as some possible results for this investment are as follows:

1. Mylan Inc.(MYL) -- Continuation
The transactions history is as follows:
07/18/2011 Sold 5 Mylan Inc. (MYL) Aug2011 $23.00 Put Options @ $1.06
Note: the price of MYL stock was $22.98 today when these puts were sold.
08/20/2011 Options assigned and 500 shares purchased at $23.00 each.
08/26/2011 Sold 5 MYL Sep2011 $20.00 Calls @$.55
Note: The price of MYL was $19.32 when these call options were sold.


Two possible overall performance results(including commissions) for the Mylan Inc.(MYL) transactions would be as follows:
100% Cash-Secured Cost Basis: $11,500.00
= $23.00*500

Net Profit:
(a) Options Income: +$779.60
= ($1.06+$.55)*500 shares - 2*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $19.32 at expiration):
-$1,848.95 = ($19.32-$23.00)*500 - $8.95 commissions
(c) Capital Appreciation (If MYL stock above $20.00 at Sep2011 expiration):
-$1,508.95 = ($20.00-$23.00)*500 -$8.95 commissions

Total Net Profit(If stock price unchanged at $19.32: -$1,069.35
= (+$779.60 +$0.00 -$1,848.95)
Total Net Profit(If stock price above $23.00 at Sep2011 options expiration): -$729.35
= (+$779.60 +$0.00 -$1,508.95)

1. Absolute Return if Unchanged at $19.32: -9.3%
= -$1,069.35/$11,500.00
Annualized Return If Unchanged (ARIU): -55.6%
= (-$1,069.35/$11,500.00)*(365/61 days)

1. Absolute Return if stock price above $23.00 and hence is assigned at Sep2011 options expiration: -6.3%
= -$729.35/$11,500.00
Annualized Return if Assigned (ARIA): -37.9%
= (-$729.35/$11,500.00)*(365/61 days)

Establish Alcoa Inc. Covered Calls

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

Established Alcoa Inc.(AA) Covered Calls for Sep2011:
08/26/2011 Bought 500 AA @ $11.49
08/26/2011 Sold 5 AA Sep2011 $12.00 Calls @ $.42
Note: the price of AA was $11.60 when the call options were sold.

Two possible overall performance results(including commissions) for the Alcoa transactions are as follows:
Stock Purchase Cost: $5,753.95
= ($11.49*500+$8.95 commission)

Net Profit:
(a) Options Income: +$197.30
= ($.42*500 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $11.49): -$8.95
= ($11.49-$11.49)*500 - $8.95 commissions
(c) Capital Appreciation (If AA above $12.00 at Sep2011 expiration): +$246.05
+($12.00-$11.49)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $11.49): +$188.35
= (+$197.30 +$0.00 -$8.95)
Total Net Profit(If stock price above $12.00 at Sep2011 options expiration): +$443.35= (+$197.30 +$0.00 +$246.05)

1. Absolute Return if Unchanged at $11.49: +3.3%
= +$188.35/$5,753.95
Annualized Return If Unchanged (ARIU): +54.3%
= (+$188.35/$5,753.95)*(365/22 days)

2. Absolute Return (If stock price above $12.00 at Sep2011 options expiration): +7.7%
= +$443.35/$5,753.95
Annualized Return (If stock price above $12.00 at expiration): +127.8%
= (+$443.35/$5,753.95)*(365/22 days)

The downside breakeven price at expiration is at $11.07 ($11.49 - $.42).
Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Sep2011 options expiration) for this Alcoa covered calls position is 63.8%. This compares with a probability of profit of 52.3% for a buy-and-hold of Alcoa over the same time period.

Continuation Transaction -- Microsoft Corp.

Today, a decision was made to retain the shares held in Microsoft Corp.(MSFT) and to establish an Oct2011 covered calls position. The detailed transactions as well as some possible results for these investment are as follows:

1. Microsoft Corp.(MSFT) -- Continuation
The transactions history is as follows:
01/24/2011 Bought 700 MSFT @ $28.15
02/17/2011 Ex-Dividend Date $112.00 = $.16 per share x 700 shares
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.
04/16/2011 Apr2011 MSFT options expired.
04/26/2011 Sold 7 MSFT May2011 $26.00 Calls @ $.66
Note: The price of MSFT was $26.06 when these call options were sold.
05/17/2011 Ex-Dividend Date $112.00 = $.16 per share x 700 shares
05/31/2011 Sold 7 MSFT Jul2011 $26.00 Calls @ $.29
Note: The price of MSFT was $25.05 when these call options were sold.
07/14/2011 Buy-to-Close (BTC) 7 MSFT Jul2011 $26.00 Call Options @ $.50
07/14/2011 Sell-to-Open (STO) 7 MSFT Aug2011 $27.00 Call Options @ $.56
Note: The price of MSFT was $26.52 when these call options were sold.
08/17/2011 Ex-Dividend Date $112.00 = $.16 per share x 700 shares
08/20/2011 Aug2011 MSFT options expired.
08/25/2011 Sold 7 MSFT Oct2011 $26.00 Calls @$.74
Note: The price of MSFT was $25.07 when these call 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: +$1,636.80
= 700*($.40+$.31+$.66+$.29-$.50+$.56+$.74) - 6*$14.20 commissions)
(b) Dividend Income: +$336.00 ($.16/share * 700 shares * 3 payments)
(c) Capital Appreciation (If stock price unchanged at $25.07): -$2,164.95
= ($25.07-$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 $25.07): -$192.15
= (+$1,636.80 +$336.00 -$2,164.95)
Total Net Profit(If stock assigned at $26.00): +$458.85
= (+$1,636.80 +$336.00 -$1,513.95)

1. Absolute Return if Stock Unchanged at $25.07: -1.0%
= -$192.15/$19,713.95
An-ualized Return If Unchanged (ARIU): -1.3%
= (-$192.15/$19,713.95)*(365/271 days)

2. Absolute Return if Assigned at $26.00: +2.3%
= +$458.85/$19,713.95
Annualized Return If Assigned (ARIA): +3.1%
= (+$458.85/$19,713.95)*(365/271 days)

Continuation Transaction -- Best Buy Corp.

Today, a decision was made to retain the shares held in Best Buy Corp.Inc.(BBY) and to establish a Sep2011 covered calls position. The detailed transactions 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.
08/20/2011 Aug2011 BBY options expired.
08/24/2011 Sold 3 BBY Sep2011 $25.00 Calls @$1.32
Note: The price of BBY was $24.73 when these call 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: +$1,238.60
= (300*($.57+$.49+$.60-$.36+$.94+$.83+$1.32) - 7*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $24.73):
-$3,128.95 = ($24.73-$35.13)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $25.00): -$3,047.95
= ($25.00-$35.13)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $24.73): -$1,890.35
= (+$1,238.60 +$0.00 -$3,128.95)
Total Net Profit(If stock assigned at $25.00): -$1,809.35
= (+$1,238.60 +$0.00 -$3,047.95)

1. Absolute Return if Unchanged at $24.73: -17.9%
= -$1,890.35/$10,547.95
Annualized Return If Unchanged (ARIU): -27.7%
= (-$1,890.35/$10,547.95)*(365/236 days)

2. Absolute Return if Assigned at $25.00: -17.2%
= -$1,809.35/$10,547.95
Annualized Return If Assigned (ARIA): -26.5%
= (-$1,809.35/$10,547.95)*(365/236 days)

Covered Calls Continuation Transactions -- International Paper Co. and Valero Energy Corp.

Upon Aug2011 options expiration, twelve covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions for two stocks (International Paper Co. and Valero Energy Corp.) with Sep2011 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.
07/16/2011 Jul2011 IP options expired.
07/18/2011 Sold 5 IP Aug2011 $30.00 Calls @$.90
Note: The price of IP was $29.79 when these call options were sold.
08/11/2011 Ex-Dividend of $.2625 per share
08/20/2011 Aug2011 IP options expired.
08/24/2011 Sold 5 IP Sep2011 $26.00 Calls @$.78
Note: The price of IP was $25.16 when these call options were sold.

Two possible overall performance results(including commissions) for the International Paper Co.(IP) transactions would be as follows:
Stock Purchase Cost: $15,638.95
= ($31.26*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,389.20
= (500*($.82+$.38+$.90+$.78) - 4*$12.70 commissions)
(b) Dividend Income: $131.25 = $.2625 * 500 shares
(c) Capital Appreciation (If stock unchanged at $25.16 at expiration): -$3,058.95
= ($25.16-$31.26)*500 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $26.00): -$2,638.95
= ($26.00-$31.26)*500 - $8.95 commissions

Total Net Profit (If stock price unchanged at $25.16 at expiration): -$1,538.50
= (+$1,389.20 +$131.25 -$3,058.95)
Total Net Profit (If stock assigned at $26.00): -$1,118.50
= (+$1,389.20 +$131.25 -$2,638.95)

1. Absolute Return (If stock unchanged at $25.16 at expiration): -9.8%
= -$1,538.50/$15,638.95
Annualized Return (If stock unchanged at expiration): -29.2%
= (-$1,538.50/$15,638.95)*(365/123 days)

2. Absolute Return (If stock assigned at $26.00 at expiration): -7.2%
= -$1,118.50/$15,638.95
Annualized Return (If stock assigned at $26.00): -21.2%
= (-$1,118.50/$15,638.95)*(365/123 days)


2. Valero Energy Corp.(VLO) -- Continuation
The transactions history is as follows:
07/20/2011 Bought 300 VLO @ $25.72
07/20/2011 Sold 3 VLO Aug2011 $26.00 Calls @ $.97
Note: the price of VLO was $25.81 when the call options were sold.
08/15/2011 Ex-dividend payment of $.05 per share.
08/20/2011 Aug2011 VLO options expired.
08/24/2011 Sold 3 VLO Sep2011 $22.00 Calls @$.56
Note: The price of VLO was $20.40 when these call options were sold.

Two possible overall performance results(including commissions) for the Valero Energy Corp.(VLO) transactions would be as follows:
Stock Purchase Cost: $7,724.95
= ($25.72*300+$8.95 commission)

Net Profit:
(a) Options Income: +$442.60
= ($.97+$.58)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$15.00 = $.05*300 shares (ex-dividend on 8/15/2011)
(c) Capital Appreciation (If stock price unchanged at $20.40): -$1,604.95
= ($20.40-$25.72)*300 - $8.95 commissions
(c) Capital Appreciation (If VLO above $22.00 at Sep2011 expiration): -$1,124.95
+($22.00-$25.72)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $20.40): -$1,147.35
= (+$442.60 +$15.00 -$1,604.95)
Total Net Profit(If stock price above $22.00 at Sep2011 options expiration): -$667.35= (+$442.60 +$15.00 -$1,124.95)

Absolute Return if Unchanged at $20.40: -14.6%
= -$1,124.95/$7,724.95
Annualized Return If Unchanged (ARIU): -90.1%
= (-$1,124.95/$7,724.95)*(365/59 days)

Absolute Return (If stock price above $22.00 at Sep2011 options expiration): -8.6%
= -$667.35/$7,724.95
Annualized Return (If stock price above $26.00 at expiration): -53.4%
= (-$667.35/$7,724.95)*(365/59 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 Sep2011:
  08/22/2011 Bought 100 AAPL @ $359.986
  08/22/2011 Sold 1 AAPL Sep2011 $375.00 Call @ $8.45
  Note: The call option was sold today when the AAPL stock was trading at $361.52.
  
  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. It sells to consumers, small and mid-sized businesses, 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, iPhones, and iPads:
  
  
  
  
  
  
  
  
  (2) accelerating growth in iPads and iPad applications; and
  (3) exciting new initiatives with:


• iCloud beginning later this year; and


• A potential iPhone deal to begin distribution via China Mobile in 2012 (who currently has over 600 million existing customers in China); and


• Possibility of iTV as early as 2012.

Apple Inc. rates as a strong buy on the Covered Calls Advisor's Buy Alerts spreadsheet (see below) with an overall rating of 18.94, well above the Buy Alert threshold of 16.0. In terms of valuation, the current P/E Ratio is only 13 based on FY11 (which ends in Sept 2011)estimated earnings per share of $27.50. FY12 earnings are likely to grow another 27% to approximately $35.00 per share. Based on this expectation, a one-year target price of $500 is reasonable, which would be a 39% increase above the $360 purchase price today.





















Note: Click on chart above for larger image.

Some possible overall performance results(including commissions) for the AAPL transactions would be as follows:
Stock Purchase Cost: $36,007.55
= ($359.986*100+$8.95 commission)

Net Profit:
(a) Options Income: +$835.30
= (100*$8.45 - $9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $359.986):
-$8.95 = ($359.986-$359.986)*100 - $8.95 commissions
(c) Capital Appreciation (If exercised at $375.00): +$1,492.45
= ($375.00-$359.986)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $359.986): +$826.35
= (+$835.30 +$0.00 -$8.95)
Total Net Profit(If stock assigned at $375.00): +$2,327.75
= (+$835.30 +$0.00 +$1,492.45)

Absolute Return if Unchanged at $359.986: +2.3%
= +$826.35/$36,007.55
Annualized Return If Unchanged (ARIU) +32.2%
= (+$826.35/$36,007.55)*(365/26 days)

Absolute Return if Assigned at $375.00: +6.5%
= +$2,327.75/$36,007.55
Annualized Return If Assigned (ARIA): +90.8%
= (+$2,327.75/$36,007.55)*(365/26 days)

Closed -- Petrobras ADR

The Aug2011 covered calls position in Petrobras ADR expired last Friday. Today, a decision was made to sell the 300 shares in the Covered Calls Advisor Portfolio. The detailed transactions history for this PBR position and the result for this PBR investment are as follows:

The transactions history for the Petrobras ADR (PBR) position:
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.
07/16/2011 Jul2011 PBR options expired.
07/18/2011 Sold 3 PBR Aug2011 $33.00 Calls @$.60
08/20/2011 Aug2011 Options Expired.
08/22/2011 Sold 300 PBR at $27.74

The overall performance result (including commissions) for the Petrobras (PBR) transactions was as follows:
Stock Purchase Cost: $11,810.95
= ($39.34*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,583.20
= (300*($1.05+$.55+$.58+$.63+$.62+$.54+$.590-$1.35+$.89-$.85+$1.67-$2.19+$1.01+$.87+$.59+$.60) - 14*$11.20 commissions)
(b) Dividend Income: +$186.60 (2*$.193 + $.236)*300 shares -- Three ex-Dividend dates
(c) Capital Appreciation (PBR sold at $27.74): -$3,488.95
= ($27.74-$39.34)*300 - $8.95 commissions

Total Net Profit(PBR sold at $27.74): -$1,719.15
= (+$1,583.20 +$186.60 -$3,488.95)

Absolute Return (PBR sold at $27.74): -14.6%
= -$1,719.15/$11,810.95
Annualized Return: -12.5%
= (-$1,719.15/$11,810.95)*(365/425 days)

August 2011 Expiration Results

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

- Twelve covered calls positions in the CCAP (Best Buy Corp., General Motors Co., International Paper Co., iShares MSCI China ETF, iShares MSCI Emerging Markets ETF, iShares MSCI South Korea ETF, iShares MSCI Taiwan ETF, Microsoft Corp., Mylan Inc., Petrobras ADR, ProShares UltraShort 20+ Year Treasury ETF, and Valero Energy Corp.) ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish September 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.

- One covered calls position (China Mobile Ltd ADR) was in-the-money and was assigned (i.e. stock called away) upon option expiration last Friday. The detailed history for this position is provided below.

1. China Mobile Ltd ADR (CHL) -- Closed
The transactions history 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 $.9237 per share.
05/21/2011 May2011 Options Expiration will occur.
05/31/2011 Sold 2 CHL Jul2011 $47.50 Calls @ $.35
Note: The price of CHL was $45.59 when these call options were sold.
07/16/2011 Jul2011 CHL options expired.
07/18/2011 Sold 2 CHL Aug2011 $47.50 Calls @$.55
Note: The price of CHL was $46.45 when these call options were sold.

The result(including commissions) for the China Mobile Ltd ADR (CHL) transactions was as follows:

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

Net Profit:
(a) Options Income: +$368.20
= ($.60 + $.55 + $.35 + $.55)*200 shares - 4*$10.45 commissions
(b) Dividend Income: +$184.74 = $.9237 * 200 shares
(c) Capital Appreciation (CHL assigned at $47.50): +$195.25
+($47.50 -$46.479)*200 - $8.95 commissions

Total Net Profit(Stock assigned at $47.50 at Aug2011 options expiration): +$748.19
= (+$368.20 +$184.74 +$195.25)

Absolute Return (CHL assigned at $47.50): +8.0%
= +$748.19/$9,304.75
Annualized Return: +16.5%
= (+$748.19/$9,304.75)*(365/178 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 each of the factors used to determine the "Overall Market Meter" rating. Prior to this month, there have been nine factors used in compiling the Overall Market Meter sentiment each month. Beginning this month, the Conference Board's Leading Economic Index has been removed. The Covered Calls Advisor's research on this indicator has concluded that it is not as useful as a macroeconomic stock market indicator as was originally believed. The remaining eight factors now used can be categorized into macroeconomic (the first two indicators in the chart below), momentum (next two indicators in the chart), value (next three indicators), and growth (the last indicator) factors.















The current Market Meter Average of 3.50 is below the 4.11 of last month. The 3.50 is exactly on the inflection point between Neutral (range of 2.5 to 3.5) and Slightly Bullish (range from 3.5 to 4.5). Since the most recent rating has been Slightly Bullish, this rating will be retained unless the Overall Market Meter average falls below 3.50, in which case the overall sentiment would change to Neutral. Of the eight factors used to determine the Overall Market Meter rating: (1) Three (Business Cycle and Unemployment Claims, P/E Ratios, and Future Earnings Growth) remain unchanged from the prior analysis last month; (2) Two factors improved from last month (Earnings-to-Bond Yield Spread went from Slightly Bullish to Bullish and Total Market Index Divided by GDP improved from Slightly Bearish to Neutral); and (3) Three factors declined (Bank Lending changed from Bullish to Slightly Bullish; Price Trend switched from Bullish to Bearish; and Interest Rates changed from Slightly Bullish to Neutral.

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

Your comments or questions regarding this post (or the details related to any of the eight 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

Country Value Rankings

About once a quarter, the Covered Calls Advisor calculates the seven factors used to determine the current "Country Value Rankings". Today's results (shown in the table below), provides a value-oriented and objective framework that assists this advisor to make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's portfolio.

A comprehensive approach to asset allocation goes beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.); it should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leader in advocating for developing a global-oriented value investing perspective to achieve investing outperformance.







Note: For expanded view, left click on this spreadsheet







The Country Value Rankings table above is based on a weighted-average ranking system. You will notice that there are seven categories (and one factor for each category) used in the analysis of each country as follows:








The next-to-last column on the Country Value Rankings spreadsheet shows the Weighted Average Summation Total for each country. It is interesting that the Top 4 countries are Asian -- China, Hong Kong, Taiwan, and South Korea. Thus, investments in the Covered Calls Advisor Portfolio (shown in the right sidebar of this blog) will be substantially overweighted in these higher rated countries. It should also be noted that the U.S. is ranked 16th of the 21 countries rated, so U.S.-based companies selected for investment will be those with significant exposure to sales in countries/regions with relatively high expected GDP Growth in 2012.

This Country Value Rankings spreadsheet is detailed in terms of both the methodolgy used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please share your comments and questions in writing. They are always welcomed. Click the 'comments' link below to post your feedback. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,

Jeff