Monday, May 21, 2012
May 2012 Expiration Results
The Covered Calls Advisor Portfolio (CCAP) contained ten positions with May 2012 expirations. All ten positions (Apple Inc., Goldcorp, Halliburton, The Hartford, Hess Corporation, iShares MSCI China ETF, iShares MSCI Emerging Markets ETF, Market Vectors Russia Index ETF, Morgan Stanley, and Mylan Inc.) expired out-of-the-money. Decisions will be made to either sell these equities, or to keep them and sell calls to establish June 2012 covered call positions. The related transactions will be made over the next several days and the actual transactions will be posted on this blog site on the same day they occur.
Monday, May 14, 2012
Overall Market Meter Rating Remains "Slightly Bullish"
Each month during options expiration week, the Covered Calls Advisor recalculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. This month, the Overall Market Meter rating is unchanged at Slightly Bullish.
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 4.00 (see blue line in chart above) is slightly above the 3.88 of last month. The 4.00 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 were unchanged from the prior analysis last month. The one factor that changed was Bank Lending which changed from Slightly Bullish to 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 May 2012 options expiration at the end of this week, newly established positions for June 2012 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
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 4.00 (see blue line in chart above) is slightly above the 3.88 of last month. The 4.00 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 were unchanged from the prior analysis last month. The one factor that changed was Bank Lending which changed from Slightly Bullish to 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 May 2012 options expiration at the end of this week, newly established positions for June 2012 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
Tuesday, May 1, 2012
Continuation Transactions -- Hess Corp. and Morgan Stanley
Upon Apr2012 options expiration, eleven covered calls positions in the Covered Calls Advisor Portfolio (CCAP) expired. As of today, there were only two remaining positions (Hess Corp. and Morgan Stanley) in which decisions remained to either sell the stocks or to re-establish covered calls positions. This morning, a decision was made to re-establish covered calls positions in both Hess (symbol HES) and Morgan Stanley (symbol MS) with May2012 expirations. The detailed transactions history for these positions as well as some possible overall performance results are as follows:
1. Hess Corp.(HES) -- Continuation
The transactions history is as follows:
03/19/2012 Bought 200 HES shares @ $62.572
03/19/2012 Sold 2 HES Apr2012 $65.00 Call Options @ $1.24
Note: the price of HES was $63.24 when these calls were sold.
04/22/2012 Apr2012 HES options expired.
05/01/2012 Sold 2 HES May2012 $55.00 Call Options @ $.74
Note: the price of HES was $53.35 when these options were sold.
Two possible overall performance results(including commissions) for the Hess Corp.(HES) transactions would be as follows:
Stock Purchase Cost: $12,523.35 = ($62.572*200+$8.95 commission)
Net Profit:
(a) Options Income: +$375.10 = ($1.24+$.74)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $53.35): -$1,853.35
+($53.35-$62.572)*200 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $55.00): -$1,523.35
+($55.00-$62.572)*200 - $8.95 commissions
Total Net Profit(If stock price unchanged at $53.35 upon May2012 expiration): -$1,478.25
= (+$375.10 +$0.00 -$1,853.35)
Total Net Profit(If stock assigned at $55.00 at May2012 expiration): -$1,148.25
=(+$375.10 +$0.00 -$1,523.35)
1. Absolute Return (If stock price unchanged upon May2012 expiration): -11.8%
= -$1,478.25/$12,523.35
Annualized Return (If stock price unchanged at May2012 expiration): -69.5%
= (-$1,478.25/$12,523.35)*(365/62 days)
2. Absolute Return (If stock assigned at $55.00 upon May2012 expiration): -9.2%
= -$1,148.25/$12,523.35
Annualized Return (If stock assigned): -54.0%
= (-$1,148.25/$12,523.35)*(365/62 days)
2. Morgan Stanley(MS) -- Continuation
The transactions history is as follows:
04/04/2012 Bought 300 MS @ $18.82
04/04/2012 Sold 3 MS Apr2012 $19.00 Calls @ $.66
Note: the price of MS was $18.87 today when the call options were sold.
04/22/2012 Apr2012 MS options expired.
04/26/2012 Ex-dividend of $15.00 ($.05 per share * 300 shares)
05/01/2012 Sold 3 MS May2012 $18.00 Call Options @ $.32
Note: the price of MS was $17.42 when these options were sold.
Two possible overall performance results(including commissions) for the Morgan Stanley (MS) transactions would be as follows:
Stock Purchase Cost: $5,654.95
= ($18.82*300+$8.95 commission)
Net Profit:
(a) Options Income: +$271.60
= ($.66+$.32)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$15.00 ($.05 per share * 300 shares)
(c) Capital Appreciation (If stock price unchanged at $17.42): -$428.95
+($17.42 - $18.82)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $18.00): -$254.95
+($18.00-$18.82)*300 - $8.95 commissions
Total Net Profit(If stock price unchanged at $17.42 upon May2012 expiration): -$142.35
= (+$271.60 +$15.00 -$428.95)
Total Net Profit(If stock assigned at $18.00 at May2012 expiration): +$31.65
= (+$271.60 +$15.00 -$254.95)
1. Absolute Return (If stock price unchanged at May2012 expiration): -2.5%
= -$142.35/$5,654.95
Annualized Return (If stock price unchanged at May2012 expiration): -20.0%
= (-$142.35/$5,654.95)*(365/46 days)
2. Absolute Return (If stock assigned at $18.00 at May2012 expiration): +0.6%
= +$31.65/$5,654.95
Annualized Return (If stock assigned): +4.4%
= (+$31.65/$5,654.95)*(365/46 days)
1. Hess Corp.(HES) -- Continuation
The transactions history is as follows:
03/19/2012 Bought 200 HES shares @ $62.572
03/19/2012 Sold 2 HES Apr2012 $65.00 Call Options @ $1.24
Note: the price of HES was $63.24 when these calls were sold.
04/22/2012 Apr2012 HES options expired.
05/01/2012 Sold 2 HES May2012 $55.00 Call Options @ $.74
Note: the price of HES was $53.35 when these options were sold.
Two possible overall performance results(including commissions) for the Hess Corp.(HES) transactions would be as follows:
Stock Purchase Cost: $12,523.35 = ($62.572*200+$8.95 commission)
Net Profit:
(a) Options Income: +$375.10 = ($1.24+$.74)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $53.35): -$1,853.35
+($53.35-$62.572)*200 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $55.00): -$1,523.35
+($55.00-$62.572)*200 - $8.95 commissions
Total Net Profit(If stock price unchanged at $53.35 upon May2012 expiration): -$1,478.25
= (+$375.10 +$0.00 -$1,853.35)
Total Net Profit(If stock assigned at $55.00 at May2012 expiration): -$1,148.25
=(+$375.10 +$0.00 -$1,523.35)
1. Absolute Return (If stock price unchanged upon May2012 expiration): -11.8%
= -$1,478.25/$12,523.35
Annualized Return (If stock price unchanged at May2012 expiration): -69.5%
= (-$1,478.25/$12,523.35)*(365/62 days)
2. Absolute Return (If stock assigned at $55.00 upon May2012 expiration): -9.2%
= -$1,148.25/$12,523.35
Annualized Return (If stock assigned): -54.0%
= (-$1,148.25/$12,523.35)*(365/62 days)
2. Morgan Stanley(MS) -- Continuation
The transactions history is as follows:
04/04/2012 Bought 300 MS @ $18.82
04/04/2012 Sold 3 MS Apr2012 $19.00 Calls @ $.66
Note: the price of MS was $18.87 today when the call options were sold.
04/22/2012 Apr2012 MS options expired.
04/26/2012 Ex-dividend of $15.00 ($.05 per share * 300 shares)
05/01/2012 Sold 3 MS May2012 $18.00 Call Options @ $.32
Note: the price of MS was $17.42 when these options were sold.
Two possible overall performance results(including commissions) for the Morgan Stanley (MS) transactions would be as follows:
Stock Purchase Cost: $5,654.95
= ($18.82*300+$8.95 commission)
Net Profit:
(a) Options Income: +$271.60
= ($.66+$.32)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$15.00 ($.05 per share * 300 shares)
(c) Capital Appreciation (If stock price unchanged at $17.42): -$428.95
+($17.42 - $18.82)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $18.00): -$254.95
+($18.00-$18.82)*300 - $8.95 commissions
Total Net Profit(If stock price unchanged at $17.42 upon May2012 expiration): -$142.35
= (+$271.60 +$15.00 -$428.95)
Total Net Profit(If stock assigned at $18.00 at May2012 expiration): +$31.65
= (+$271.60 +$15.00 -$254.95)
1. Absolute Return (If stock price unchanged at May2012 expiration): -2.5%
= -$142.35/$5,654.95
Annualized Return (If stock price unchanged at May2012 expiration): -20.0%
= (-$142.35/$5,654.95)*(365/46 days)
2. Absolute Return (If stock assigned at $18.00 at May2012 expiration): +0.6%
= +$31.65/$5,654.95
Annualized Return (If stock assigned): +4.4%
= (+$31.65/$5,654.95)*(365/46 days)
Returns -- Through April 2012
1. 2012 Year-to-Date Results:
As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 10.38% so far in 2012. This is 1.27 percentage points (+10.38% minus 11.65%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.
The financial results were as follows:
CCAP Absolute Return (Jan 1st through Apr 30th, 2012) = +10.38%
($324,113.25-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Apr 30th, 2012) = +11.65%
($82.82-$74.18)/$74.18
As a reminder, 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.
2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:
This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.
Also 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.
As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "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
As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 10.38% so far in 2012. This is 1.27 percentage points (+10.38% minus 11.65%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.
The financial results were as follows:
CCAP Absolute Return (Jan 1st through Apr 30th, 2012) = +10.38%
($324,113.25-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Apr 30th, 2012) = +11.65%
($82.82-$74.18)/$74.18
As a reminder, 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.
2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:
This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.
Also 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.
As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "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,
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