Returns -- Through October 2011

1. October 2011 Year-to-Date Results:

As shown in the "Year-to-Date 2011" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has underperformed the benchmark Russell 3000 index by 1.70 percentage points (-2.73% minus -1.03%) over the first ten months of calendar year 2011.
















CCAP Absolute Return (Jan 1st through October 31st, 2011) = -2.73%
($279,606.21-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through October 31st, 2011) = -1.03% = ($74.18-$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

Sold 100% Cash-Secured Puts -- Citigroup

Today, the Covered Calls Advisor established new 100% Cash-Secured Puts positions in Bunge Ltd, Citigroup, Halliburton, and Morgan Stanley; each with Nov2011 expirations. The Covered Calls Advisor does not use margin, so the detailed information on these positions and some potential results shown below reflect the fact that these positions were established using 100% cash securitization for all four of these short put option positions.

1. Bunge Ltd.(BG) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Bunge Ltd.(BG) Nov2011 $60.00 Put Options @ $3.10
Note: the price of BG stock was $58.62 today when these puts were sold.

Two possible overall performance results(including commissions) for this Bunge Ltd.(BG)transaction would be as follows:
100% Cash-Secured Cost Basis: $18,000.00
= $60.00*300

Net Profit:
(a) Options Income: +$918.80
= ($3.10*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $58.62 and thus stock assigned at $60.00 at expiration): -$422.95
= ($58.62-$60.00)*300 - $8.95 commissions
(c) Capital Appreciation (If BG stock above $60.00 at Nov2011 expiration): +$0.00
= ($60.00-$60.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $58.62): +$495.85
= (+$918.80 +$0.00 -$422.95)
Total Net Profit(If stock price above $60.00 at Nov2011 options expiration): +$918.80
= (+$918.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $58.62: +2.8%
= +$495.85/$18,000.00
Annualized Return If Unchanged (ARIU): +41.9%
= (+$495.85/$18,000.00)*(365/24 days)

2. Absolute Return (If stock price above $60.00 at Nov2011 options expiration and put options thus expire worthless): +5.1%
= +$918.80/$18,000.00
Annualized Return (If stock price above $60.00 at expiration): +77.6%
= (+$918.80/$18,000.00)*(365/24 days)


2. Citigroup, Inc.(C) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Citigroup, Inc.(C) Nov2011 $31.00 Put Options @ $1.96
Note: the price of Citi stock was $30.42 today when these puts were sold.

Two possible overall performance results(including commissions) for this Citigroup, Inc.(C) transaction would be as follows:
100% Cash-Secured Cost Basis: $9,300.00
= $31.00*300

Net Profit:
(a) Options Income: +$576.80
= ($1.96*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $30.42 and thus stock assigned at $31.00 at expiration): -$182.95
= ($30.42-$31.00)*300 - $8.95 commissions
(c) Capital Appreciation (If Citigroup stock above $31.00 at Nov2011 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $30.42): +$393.85
= (+$576.80 +$0.00 -$182.95)
Total Net Profit(If stock price above $31.00 at Nov2011 options expiration): +$576.80
= (+$576.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $30.42: +4.2%
= +$393.85/$9,300.00
Annualized Return If Unchanged (ARIU): +64.4%
= (+$393.85/$9,300.00)*(365/24 days)

2. Absolute Return (If stock price above $31.00 at Nov2011 options expiration and put options thus expire worthless): +6.2%
= +$576.80/$9,300.00
Annualized Return (If stock price above $31.00 at expiration): +94.3%
= (+$576.80/$9,300.00)*(365/24 days)


3. Halliburton Co.(HAL) -- New Position
The transaction was as follows:
10/26/2011 Sold 3 Halliburton Co.(HAL) Nov2011 $36.00 Put Options @ $2.06
Note: the price of HAL stock was $35.56 today when these puts were sold.

Two possible overall performance results(including commissions) for this Halliburton Co.(HAL) transaction would be as follows:
100% Cash-Secured Cost Basis: $10,800.00
= $36.00*300

Net Profit:
(a) Options Income: +$606.80
= ($2.06*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $35.56 and thus stock assigned at $36.00 at expiration): -$140.95
= ($35.56-$36.00)*300 - $8.95 commissions
(c) Capital Appreciation (If HAL stock above $36.00 at Nov2011 expiration): +$0.00
= ($36.00-$36.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $35.56): +$465.85
= (+$606.80 +$0.00 -$140.95)
Total Net Profit(If stock price above $36.00 at Nov2011 options expiration): +$606.80
= (+$606.80 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $35.56: +4.3%
= +$465.85/$10,800.00
Annualized Return If Unchanged (ARIU): +65.6%
= (+$465.85/$10,800.00)*(365/24 days)

2. Absolute Return (If stock price above $36.00 at Nov2011 options expiration and put options thus expire worthless): +5.6%
= +$606.80/$10,800.00
Annualized Return (If stock price above $36.00 at expiration): +85.4%
= (+$606.80/$10,800.00)*(365/24 days)


4. Morgan Stanley (MS) -- New Position
The transaction was as follows:
10/26/2011 Sold 6 Morgan Stanley (MS) Nov2011 $17.00 Put Options @ $1.16
Note: the price of MS stock was $16.82 today when these puts were sold.

Two possible overall performance results(including commissions) for this Morgan Stanley (MS) transaction would be as follows:
100% Cash-Secured Cost Basis: $10,200.00
= $17.00*600

Net Profit:
(a) Options Income: +$682.55
= ($1.16*600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $16.82 and thus stock assigned at $17.00 at expiration): -$116.95
= ($16.82-$17.00)*600 - $8.95 commissions
(c) Capital Appreciation (If MS stock above $17.00 at Nov2011 expiration): +$0.00
= ($17.00-$17.00) -$0.00 commissions

Total Net Profit(If stock price unchanged at $16.82): +$565.60
= (+$682.55 +$0.00 -$116.95)
Total Net Profit(If stock price above $17.00 at Nov2011 options expiration): +$682.55
= (+$682.55 +$0.00 +$0.00)

1. Absolute Return if Unchanged at $16.82: +5.5%
= +$565.60/$10,200.00
Annualized Return If Unchanged (ARIU): +84.3%
= (+$565.60/$10,200.00)*(365/24 days)

2. Absolute Return (If stock price above $17.00 at Nov2011 options expiration and put options thus expire worthless): +6.7%
= +$682.55/$10,200.00
Annualized Return (If stock price above $17.00 at expiration): +101.8%
= (+$682.55/$10,200.00)*(365/24 days)

Establish iShares MSCI South Korea ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI South Korea ETF (EWY) covered calls as follows:

Established iShares MSCI South Korea ETF (EWY) Covered Calls for Nov2011:
10/25/2011 Bought 800 EWY @ $54.62
10/25/2011 Sold 8 EWY Nov2011 $54.00 Calls @ $2.59
Note: these call options were sold with the price of EWY at $54.62

A possible overall performance result(including commissions) for the EWY transaction would be as follows:
Stock Purchase Cost: $43,704.95
= ($54.62*800+$8.95 commission)

Net Profit:
(a) Options Income: +$2,057.05
= (800*$2.59 - $14.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $54.00): -$504.95
= ($54.00-$54.62)*800 - $8.95 commissions

Total Net Profit(If EWY assigned at $54.00): +$1,552.10
= (+$2,057.05 +$0.00 -$504.95)

Absolute Return if Assigned at $54.00: +3.6%
= +$1,552.10/$43,704.95
Annualized Return If Assigned (ARIA): +51.8%
= (+$1,552.10/$43,704.95)*(365/25 days)

Sold 100% Cash-Secured Puts -- Valero Energy Corp.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Valero Energy Corp.(VLO) with a Nov2011 expiration.

With total capacity of approximately 3.0 million barrels per day, Valero Energy Corp. is the largest petroleum refiner and marketer in the U.S. The company has the industry's most complex and sophisticated refining system. Most of its 16 refineries throughout the U.S., Canada and Aruba are able to process heavy, low-quality crude oil. The company has a growing network of retail outlets in the Great Plains, Southwest and Northeast.

VLO rates well above the minimum total points necessary for purchase on the CCAP 'Buy Alerts' spreadsheet (See below that Total Points of 18.24 is above this advisor's required threshold of 16.0), so it was decided to establish a position in VLO with a Nov2011 expiration.














Note: Click on chart above for larger image.


Valero Energy Corp. (VLO) -- New Position
The transaction was as follows:
10/25/2011 Sold 4 Valero Energy Corp.(VLO) Nov2011 $22.00 Put Options @ $1.75
Note: the price of VLO stock was $21.26 today when these puts were sold.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the four put options sold.

Two possible overall performance results(including commissions) for this Valero Energy Corp.(VLO) transaction would be as follows:
100% Cash-Secured Cost Basis: $8,800.00
= $22.00*400

Net Profit:
(a) Options Income: +$688.05
= ($1.75*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $21.26 and thus stock assigned at $22.00 at expiration): -$304.95
= ($21.26-$22.00)*500 - $8.95 commissions
(c) Capital Appreciation (If VLO stock above $22.00 at Nov2011 expiration): -$8.95
= ($22.00-$22.00) -$8.95 commissions

Total Net Profit(If stock price unchanged at $21.26): +$383.10
= (+$688.05 +$0.00 -$304.95)
Total Net Profit(If stock price above $22.00 at Nov2011 options expiration): +$679.10
= (+$688.05 +$0.00 -$8.95)

1. Absolute Return if Unchanged at $21.26: +4.4%
= +$383.10/$8,800.00
Annualized Return If Unchanged (ARIU): +63.6%
= (+$383.10/$8,800.00)*(365/25 days)

2. Absolute Return (If stock price above $22.00 at Nov2011 options expiration and put options thus expire worthless): +7.7%
= +$679.10/$8,800.00
Annualized Return (If stock price above $22.00 at expiration): +112.7%
= (+$679.10/$8,800.00)*(365/25 days)

Continuation Transactions -- Apple Inc., International Paper, Mylan Inc., and Peabody Energy

Upon Oct2011 options expiration last Friday, seven of the thirteen total covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. Today, a decision was made to re-establish covered calls positions for four of these seven equities (Apple Inc., International Paper, Mylan Inc., and Peabody Energy) with Nov2011 expirations. The detailed transactions history for these positions as well as possible results for these investments are as follows:

1. Apple Inc.(AAPL) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 100 shares AAPL at $396.544
09/19/2011 Sold 1 AAPL Oct2011 $410 Call Option @ $10.15
10/22/2011 Oct2011 option expired.
Note: the AAPL price was $392.87 at option expiration.
10/24/2011 Sold 1 AAPL Nov2011 $410 Call Option @ $7.20
Note: the price of AAPL was $399.10 when the option was sold.

Some possible performance results(including commissions) for these AAPL transactions are as follows:
Stock Purchase Cost: $39,663.35
= ($396.544*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,715.60
= (100*($10.15+$7.20) - 2*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $399.10): +$246.65
= ($399.10-$396.544)*100 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $410.00 at expiration): +$1,336.65
= ($410.00-$396.544)*100 - $8.95 commissions

Total Net Profit (If stock price unchanged at $399.10): +$1,962.25
= (+$1,715.60 +$0.00 +$246.65)
Total Net Profit (If stock assigned at $410.00): +$3,052.25
= (+$1,715.60 +$0.00 +$1,336.65)

1. Absolute Return (If stock price unchanged at $399.10): +4.9%
= +$1,962.25/$39,663.35
Annualized Return If Unchanged (ARIU) +29.6%
= (+$1,962.25/$39,663.35)*(365/61 days)

2. Absolute Return (If stock assigned at $410.00 strike price): +7.7%
= +$3,052.25/$39,663.35
Annualized Return If Assigned (ARIA): +46.0%
= (+$3,052.25/$39,663.35)*(365/61 days)


2. International Paper Co.(IP) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 400 shares IP at $26.978
09/19/2011 Sold 4 IP Oct2011 $28 Calls @ $1.18
10/22/2011 Oct2011 options expired.
Note: the IP price was $25.93 at option expiration.
10/24/2011 Sold 4 IP Nov2011 $27.00 Call Options @ $.73
Note: the price of IP was $26.25 when the options were sold.
11/14/2011 Ex-Div $105.00 = $.2625 * 400 shares

Two possible overall performance results(including commissions) for this International Paper Co.(IP) transaction would be as follows:
Stock Purchase Cost: $10,800.15
= ($26.978*400+$8.95 commission)

Net Profit:
(a) Options Income: +$740.10
= (400*($1.18+$.73) - 2*$11.95 commissions)
(b) Dividend Income: +$105.00 = $.2625 * 400 shares
(c) Capital Appreciation (If stock unchanged at $26.25 at expiration): -$300.15
= ($26.25-$26.978)*400 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $27.00): -$.15
= ($27.00-$26.978)*400 - $8.95 commissions

Total Net Profit (If stock price unchanged at expiration): +$544.95
= (+$740.10 +$105.00 -$300.15)
Total Net Profit (If stock assigned at $28.00): +$844.95
= (+$740.10 +$105.00 -$.15)

1. Absolute Return (If stock unchanged at $26.25 at expiration): +5.0%
= +$544.95/$10,800.15
Annualized Return (If stock unchanged at expiration): +30.2%
= (+$544.95/$10,800.15)*(365/61 days)

2. Absolute Return (If stock assigned at $27.00 at expiration): +7.8%
= +$844.95/$10,800.15
Annualized Return (If stock assigned at $27.00): +46.8%
= (+$844.95/$10,800.15)*(365/61 days)


3. Mylan Inc. -- 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 Aug2011 MYL options exercised and stock purchased at $23.00 per share.
08/22/2011 Sold 5 MYL Sep2011 $22.00 Calls @ $.46
09/17/2011 Sep2011 MYL options expired.
09/20/2011 Sold 5 MYL Oct2011 $22.00 Calls @ $.63
Note: The price of MYL was $20.48 when these call options were sold.
10/22/2011 Oct2011 options expired.
Note: the MYL price was $18.04 at option expiration.
10/24/2011 Sold 4 IP Nov2011 $19.00 Call Options @ $.56
Note: the price of MYL was $18.08 when the options were sold.

Two possible overall performance results(including commissions) for the Mylan Inc. transactions would be as follows:
Stock Purchase Cost: $11,508.95
= ($23.00*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,304.20
= 500*($1.06+$.46+$.63+$.56) - 4*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MYL unchanged at $18.08):
-$2,468.95 = ($18.08-$23.00)*500 - $8.95 commissions
(c) Capital Appreciation (If MYL exercised at $19.00): -$2,008.95
= ($19.00-$23.00)*500 - $8.95 commissions

Total Net Profit(If MYL unchanged at $18.08): -$1,164.75
= (+$1,304.20 +$0.00 -$2,468.95)
Total Net Profit(If MYL exercised at $19.00): -$704.75
= (+$1,304.20 +$0.00 -$2,008.95)

1. Absolute Return if Unchanged at $18.08: -10.1%
= -$1,164.75/$11,508.95
Annualized Return If Unchanged (ARIU): -29.8%
= (-$1,164.75/$11,508.95)*(365/124 days)

2. Absolute Return if Assigned at $19.00: -6.1%
= -$704.75/$11,508.95
Annualized Return If Assigned (ARIA): -18.0%
= (-$704.75/$11,508.95)*(365/124 days)


4. Peabody Energy Corp.(BTU) -- Continuation
The transactions history is as follows:
09/19/2011 Bought 300 shares BTU at $44.208
09/19/2011 Sold 3 BTU Oct2011 $47 Calls @ $1.67
10/22/2011 Oct2011 options expired.
Note: the BTU price was $38.89 at option expiration.
10/24/2011 Sold 3 BTU Nov2011 $41.00 Call Options @ $1.85
Note: the price of BTU was $40.40 when the options were sold.

Two possible overall performance results(including commissions) for this Peabody Energy Corp.(BTU) transaction would be as follows:
Stock Purchase Cost: $13,271.35
= ($44.208*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,033.60
= (300*($1.67+$1.85) - 2*$11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock unchanged at $40.40 at expiration): -$1,151.35
= ($40.40-$44.208)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $41.00): -$971.35
= ($41.00-$44.208)*300 - $8.95 commissions

Total Net Profit (If stock price unchanged at $40.40 at expiration): -$117.75
= (+$1,033.60 +$0.00 -$1,151.35)
Total Net Profit (If stock assigned at $41.00): +$62.25
= (+$1,033.60 +$0.00 -$971.35)

1. Absolute Return (If stock unchanged at $40.40 at expiration): -0.9%
= -$117.75/$13,271.35
Annualized Return (If stock unchanged at expiration): -5.3%
= (-$117.75/$13,271.35)*(365/61 days)

2. Absolute Return (If stock assigned at $41.00 at expiration): +0.5%
= +$62.25/$13,271.35
Annualized Return (If stock assigned at $41.00): +2.8%
= (+$62.25/$13,271.35)*(365/61 days)

Closed -- Alcoa Inc.

The Oct2011 covered calls position in Alcoa Inc.(AA) expired last Friday. Today, a decision was made to sell the 500 shares in the Covered Calls Advisor Portfolio. The detailed transactions history and associated results for this AA position are as follows:

The transactions history for the Alcoa Inc.(AA) position:
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.
09/17/2011 Sep2011 options expired.
09/20/2011 Sold 5 AA Oct2011 $11.00 Calls @ $.82
Note: the price of AA was $11.48 when the call options were sold.
10/22/2011 Oct2011 options expired.
Note: the price of AA was $10.23 at options expiration.
10/24/2011 Sold 500 AA @ $10.49

The overall performance result (including commissions) for the Alcoa Inc.(AA) transactions was as follows:
Stock Purchase Cost: $5,753.95
= ($11.49*500+$8.95 commission)

Net Profit:
(a) Options Income: +$594.60
= (500*($.42+$.82) - 2*$12.70 commissions)
(b) Dividend Income: +$15.00 = $.03 * 500 shares
(c) Capital Appreciation (AA sold at $10.49): -$508.95
= ($10.49-$11.49)*500 - $8.95 commissions

Total Net Profit (AA sold at $10.49): +$100.65
= (+$594.60 +$15.00 -$508.95)

Absolute Return (AA sold at $10.49): +1.7%
= +$100.65/$5,753.95
Annualized Return: +10.8%
= (+$100.65/$5,753.95)*(365/59 days)

October 2011 Expiration Results

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

- Seven covered calls positions in the CCAP (Alcoa Inc., Apple Inc., International Paper, iShares MSCI Emerging Markets ETF, iShares MSCI China ETF, Mylan Inc., and Peabody Energy Corp.) expired out-of-the-money. Decisions will be made to either sell these equities, or to keep them and sell calls to establish November 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.

- Six covered calls positions (General Motors Co., iShares MSCI South Korea ETF, Microsoft Corp., Morgan Stanley, ProShares UltraShort Barclays 20+ Year Treasury ETF, and Valero Energy Co.) were in-the-money and the stocks were assigned (i.e. stock called away) upon option expiration last Friday. The detailed history for these closed positions is as follows:

1. General Motors Co.(GM) -- Closed
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.
08/22/2011 Sold 3 GM Sep2011 $24.00 Calls @ $.65
09/17/2011 Sep2011 GM options expired.
09/20/2011 Sold 3 GM Oct2011 $24.00 Calls @ $.57
Note: The price of GM was $22.80 when the options were sold.
10/22/2011 Sold 300 GM shares at $24.00 at Oct2011 expiration.
Note: The price of GM was $24.35 when the call options were assigned.

The performance results(including commissions) for these GM transactions are as follows:
Stock Purchase Cost: $8,804.95
= ($29.32*300+$8.95 commission)

Net Profit:
(a) Options Income: +$537.90
= (300*($.70+$.65+$.57) - 3*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $24.00 at expiration): -$1,604.95
= ($24.00-$29.32)*300 - $8.95 commissions

Total Net Profit (Stock assigned at $24.00): -$1,067.05
= (+$537.90 +$0.00 -$1,604.95)

Absolute Return (Stock assigned at $24.00 strike price): -12.1%
= -$1,067.05/$8,804.95
Annualized Return: -71.3%
= (-$1,067.05/$8,804.95)*(365/62 days)


2. iShares MSCI South Korea ETF (EWY) -- Closed
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 options expired.
08/29/2011 Sold 5 EWY Sep2011 $56.00 Calls @ $1.36
09/17/2011 Sep2011 EWY options expired.
09/20/2011 Sold 5 EWY Oct2011 $50.00 Calls @ $3.74
10/22/2011 Sold 500 EWY shares at $50.00 at Oct2011 expiration.
Note: The price of EWT was $52.98 when the call options were assigned.

The performance results(including commissions) for these EWY transactions are as follows:
Stock Purchase Cost: $32,388.95
= ($64.76*500+$8.95 commission)

Net Profit:
(a) Options Income: +$3,236.90
= (500*($1.45+$1.36+$3.74) - 3*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $50.00 at expiration): -$7,388.95
= ($50.00-$64.76)*500 - $8.95 commissions

Total Net Profit (Stock assigned at $50.00): -$4,152.05
= (+$3,236.90 +$0.00 -$7,388.95)

Absolute Return (Stock assigned at $50.00 strike price): -12.8%
= -$4,152.05/$32,388.95
Annualized Return: -48.7%
= (-$4,152.05/$32,388.95)*(365/96 days)


3. Microsoft Corp.(MSFT) -- Closed
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 options expired.
08/29/2011 Sold 7 MSFT Sep2011 $26.00 Calls @ $.58
09/17/2011 Sep2011 MSFT options expired.
09/20/2011 Sold 7 MSFT Oct2011 $26.00 Calls @ $.41
10/22/2011 10/22/2011 Sold 700 MSFT shares at $26.00 at Oct2011 expiration.
Note: The price of MSFT was $27.16 when the call options were assigned.

The performance results(including commissions) for these MSFT transactions are as follows:
Stock Purchase Cost: $19,713.95
= ($28.15*700+$8.95 commission)

Net Profit:
(a) Options Income: +$2,483.40
= (700*($.40+$.31+$.66+$.29+$.50+$56+$.58+$.41) - 8*$14.20 commissions)
(b) Dividend Income: +$336.00 ($.16*700 shares * 3 dividend payouts)
(c) Capital Appreciation (Stock assigned at $26.00 at expiration): -$1,513.95
= ($26.00-$28.15)*700 - $8.95 commissions

Total Net Profit (Stock assigned at $26.00): +$1,305.45
= (+$2,483.40 +$336.00 -$1,513.95)

Absolute Return (Stock assigned at $26.00 strike price): +6.6%
= +$1,305.45/$19,713.95
Annualized Return: +8.9%
= (-$4,152.05/$32,388.95)*(365/271 days)


4. Morgan Stanley (MS) -- Closed
The transactions history is as follows:
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.
07/16/2011 Jul2011 MS options expired.
07/18/2011 Sold 3 MS Sep2011 $22.00 Calls @$.66
Note: The price of MS was $20.82 when these call options were sold.
07/27/2011 Ex-Dividend of $.05 per share
09/17/2011 Sep2011 MS options expired.
09/20/2011 Sold 3 MS Oct2011 $17.00 Calls @ $.42
Note: The price of MS was $15.41 when these call options were sold.
10/22/2011 Sold 300 MS shares at $17.00 at Oct2011 expiration.
Note: The price of MS was $17.02 when the call options were assigned.

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: +$276.40
= 300*($.26+$.66+$.42) - 3*$11.20 commissions
(b) Dividend Income: +$15.00 = $.05 * 300 shares
(c) Capital Appreciation (If MS exercised at $17.00): -$1,805.35
= ($17.00-$22.988)*300 - $8.95 commissions

Total Net Profit(MS assigned at $17.00): -$1,513.95
= (+$276.40 +$15.00 -$1,805.35)

Absolute Return (Stock Assigned at $17.00): -21.9%
= -$1,513.95/$6,905.35
Annualized Return: -56.8%
= (-$1,513.95/$6,905.35)*(365/141 days)


5. ProShares UltraShort Barclays 20+ Year Treasury ETF (TBT) -- Closed
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.
07/16/2011 Jul2011 TBT options expired.
07/21/2011 Sold 2 TBT Aug2011 $34.00 Calls @$.77
Note: The price of TBT was $33.28 when these call options were sold.
08/20/2011 Aug2011 options expired.
08/29/2011 Sold 2 TBT Sep2011 $25.00 Calls @ $1.58
09/17/2011 Sep2011 TBT options expired.
09/20/2011 Sold 2 TBT Oct2011 $21.00 Calls @ $1.67
10/22/2011 10/22/2011 Sold 200 TBT shares at $21.00 at Oct2011 expiration.
Note: The price of TBT was $21.83 when the call options were assigned.

The performance results(including commissions) for these TBT transactions are as follows:
Stock Purchase Cost: $7,158.95
= ($35.75*200+$8.95 commission)

Net Profit:
(a) Options Income: +$933.10
= (200*($.36+$.39+$.77+$1.58+$1.67) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $21.00 at expiration): -$2,958.95
= ($21.00-$35.75)*200 - $8.95 commissions

Total Net Profit (Stock assigned at $21.00): -$2,025.85
= (+$933.10 +$0.00 -$2,958.95)

Absolute Return (Stock assigned at $21.00 strike price): -59.7%
= -$2,025.85/$7,158.95
Annualized Return: +8.9%
= (-$2,025.85/$7,158.95)*(365/173 days)


6. Valero Energy Corp.(VLO) -- Closed
The transactions history is as follows:
09/20/2011 Bought 300 VLO @ $21.30
09/20/2011 Sold 3 VLO Oct2011 $23.00 Calls @ $.62
10/22/2011 Sold 300 VLO shares at $23.00 at Oct2011 expiration.
Note: The price of VLO was $23.68 when the call options were assigned.

The performance results(including commissions) for these VLO transactions are as follows:
Stock Purchase Cost: $6,398.95
= ($21.30*300+$8.95 commission)

Net Profit:
(a) Options Income: +$174.80
= ($.62*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (VLO assigned $23.00 at Oct2011 expiration): +$501.05
+($23.00-$21.30)*300 - $8.95 commissions

Total Net Profit(VLO stock assigned at $23.00 at Oct2011 options expiration): +$675.85
= (+$174.80 +$0.00 +$501.05)

Absolute Return (Stock assigned at $23.00 at Oct2011 options expiration):
+10.6% = +$675.85/$6,398.95
Annualized Return: +120.5%
= (+$675.85/$6,398.95)*(365/32 days)

Overall Market Meter Rating Remains "Slightly Bullish"

Each month during options expiration week, the Covered Calls Advisor re-calculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. The eight factors used can be categorized as:
- 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).















The current Market Meter Average of 3.63 (see blue line in chart above) is slightly greater than the 3.50 of last month. The 3.63 is a Slightly Bullish rating(range from 3.5 to 4.5). Seven of the eight factors used to determine the Overall Market Meter rating remained unchanged from the prior analysis last month. The only factor that changed was the Interest Rates factor, which changed from Neutral to Slightly Bullish.

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 October 2011 options expiration this week, newly established positions for November 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

Returns -- Through September 2011

1. September 2011 Year-to-Date Results:

As shown in the chart below, the Covered Calls Advisor Portfolio (CCAP) has underperformed the benchmark Russell 3000 index by 3.42 percentage points (-14.39% minus -10.97%) over the first nine months of calendar year 2011.















CCAP Absolute Return (Jan 1st through September 30th, 2011) = -14.39%
($246,089.10-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through September 30th, 2011) = -10.97% = ($66.73-$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