Sold 100% Cash-Secured Puts -- United Continental Holdings Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in United Continental Holdings Inc.(Symbol UAL) with a Sep2012 expiration.

The transaction was as follows:
08/28/2012 Sold 7 United Continental Holdings Inc.(UAL) Sep2012 $18.00 Put Options @ $.52
Note: the price of UAL was $18.75 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 seven Put options sold.

A possible overall performance results(including commissions) for this UAL transaction would be as follows:
100% Cash-Secured Cost Basis: $12,600.00 = $18.00*700

Net Profit:
(a) Options Income: +$349.80
= ($.52*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL above $18.00 at Sep2012 expiration): +$0.00
= ($18.00-$18.00)*700

Total Net Profit (If UAL remains above $18.00 at Sep2012 options expiration): +$349.80  = (+$349.80 +$0.00 +$0.00)

Absolute Return (If UAL above $18.00 at Sep2012 options expiration and Put options thus expire worthless): +2.8%
= +$349.80/$12,600.00
Annualized Return (If stock price above $18.00 at expiration): +40.5%
= (+$349.80/$12,600.00)*(365/25 days)

The downside 'breakeven price' at expiration is at $17.48 ($18.00 - $.52). Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Sep2012 options expiration) for this United Continental (UAL) cash-secured Puts position is 74.8%. This compares with a probability of profit of 50.2% for a buy-and-hold of UAL over the same time period.

The 'crossover price' at expiration is $19.27 ($18.75 + $.52). This is the price above which it would have been more profitable to simply buy-and-hold GM until Sept 21st (the Sep2012 options expiration date) rather than holding the short Put options. The probability of exceeding this crossover price at expiration is 43.0%.

Continuation -- iShares MSCI China ETF Covered Calls

After the August 24th, 2012 weekly options expiration last Friday, a long uncovered equity position of 1,000 shares of iShares MSCI China ETF (FXI) remained in the Covered Calls Advisor Portfolio (CCAP).  This morning, a decision was made to retain these shares and to re-establish a covered call positions with Sep2012 expirations. The detailed transactions history for this position as well as a possible overall performance result is:

07/30/2012 Bought 1,000 FXI shares @ $34.09
07/30/2012 Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.
08/24/2012 10 FXI Aug 24th $34.50 call options expired.
Note: the price of FXI was $34.01 today when these options expired.
08/28/2012 Sold-to-Open 10 FXI Sep2012 $34.00 Calls @ $.56
Note: the price of FXI wa $33.62 today when this transaction was made.

Two possible overall performance results (including commissions) for this iShares MSCI China ETF (FXI) covered calls position are as follows:
Stock Purchase Cost: $34,098.95
= ($34.09*1,000+$8.95 commission)
Net Profit:
(a) Options Income: +$1,300.65
=($.80-$.42+$.31+$.56)*1,000 shares - 3*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI price unchanged at $33.62 upon Sep2012 expiration):
-$478.95
=($33.62-$34.09)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $34.00 upon expiration): -$98.95
=($34.00-$34.09)*1,000 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $33.62 at Sep2012 expiration): +$821.70
= (+$1,300.65 +$0.00 -$478.95)
Total Net Profit (If FXI assigned at $34.00 at Sep2012 expiration): +$1,201.70
= (+$1,300.65 +$0.00 -$98.95)

Absolute Return (If FXI price unchanged at $33.62 at Sep2012 expiration): +2.4%
= +$821.70/$34,098.95
Annualized Return (If price unchanged at $34.41 at 8/24/2012 expiration): +16.3%
= (+$821.70/$34,098.95)*(365/54 days)

Absolute Return (If FXI assigned at $34.00 at Sep2012 options expiration): +3.5%
= +$1,201.70/$34,098.95
Annualized Return (If stock assigned): +23.8%
= (+$1,201.70/$34,098.95)*(365/54 days)

August 24th Weekly Expiration Results

Last Friday was the options expiration date for weekly options.  The Covered Calls Advisor normally trades monthly options, but established two positions in the Weeklys that expired this past Friday as follows:
- The covered calls position in iShares MSCI China ETF expired out-of-the-money.  A decision will be made today to either sell these shares or to re-establish a covered calls position in FXI by selling call options. A post will be made on this blog later today when this decision occurs and the transaction is made.  For now, the Covered Calls Advisor Portfolio (CCAP) is long 1,000 shares of FXI.
- The 100% cash-secured Puts position in UnitedHealth Group Inc. expired with the stock price closing above the strike price, so the short Put options expired worthless.  The annualized return-on-investment result for this position was +31.5%.

1. iShares MSCI China ETF (FXI)
The transactions history for this iShares MSCI China ETF (FXI) covered calls position is as follows:
07/30/2012 Bought 1,000 FXI shares @ $34.09
07/30/2012 Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.
08/24/2012 10 FXI Aug 24th $34.50 call options expired.
Note: the price of FXI was $34.01 today when these options expired.

2. UnitedHealth Group Inc. (UNH)
The transactions history is as follows:
08/17/2012 Sold 3 UnitedHealth Group Inc.(UNH) Aug 24th, 2012 $52.50 Put Options @ $.40
Note: the price of UNH was $52.89 today when these Puts were sold.
08/24/2012 3 UNH Put options expired.
Note: the price of UNH was $54.16 when these Put options expired.

The overall performance result (including commissions) for this UnitedHealth Group Inc. transaction was as follows:
100% Cash-Secured Cost Basis: $15,750.00
= $52.50*300

Net Profit:
(a) Options Income: +$108.80
= ($.40*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (UNH above $52.50 at Aug 24th expiration): +$0.00
= ($52.50-$52.50)*300

Total Net Profit (UNH above $52.50 at Aug 24th options expiration): +$108.80 = (+$108.80 +$0.00 +$0.00)

Absolute Return (UNH above $52.50 at Aug 24th options expiration and Put options thus expire worthless): +0.69%
= +$108.80/$15,750.00
Annualized Return (Stock price above $52.50 at expiration): +31.5%
= (+$108.80/$15,750.00)*(365/8 days)

Established Dow Chemical Company Covered Calls -- Example of Early Assignment or Dividend Capture Strategy

Today, a new covered call position was established in Occidental Petroleum Corp. (Ticker Symbol OXY) with a Sep2012 expiration and at the $85.00 strike price. The transactions are as follows:

08/23/2012 Bought 200 OXY shares @ $87.80
08/23/2012 Sold 2 OXY Sep2012 $85.00 Call Options @ $3.95
09/06/2012 Ex-dividend of $.54 per share

This covered calls investment is a strategic one that explicitly considers the upcoming quarterly dividend of $.54 with an ex-dividend date of Sep 6th. If the current time value (i.e. extrinsic value) remaining in the short call option decays to less than $.54 by Sep 5th (the day prior to the ex-div date), then there is a reasonably good possibility that the call options owner will exercise early and will call the stock away to capture the dividend. As shown below, two potential returns for this position are:

+21.4% annualized return if the stock is assigned at Sep2012 expiration on Sep 21st
+31.3% annualized return if the stock is assigned early (day prior to Sep 6th ex-div date)

As is often the case, early assignment provides a higher annualized return, so this is the Covered Calls Advisor's preferred outcome; but either outcome would provide a very good return. These returns will be achieved as long as the stock stays above the $85.00 strike price at assignment -- a nice 3.2% of downside protection.

The Covered Calls Advisor has established a set of criteria to identify situations that are advantageous for establishing covered calls positions that might achieve good returns from either an early assignment or from assignment upon options expiration.  As shown below, this OXY position satisfies all these criteria:

Two possible overall performance results (including commissions) for this Occidental Petroleum Corp. (OXY) covered calls position are as follows:

Stock Purchase Cost: $17,568.95
= ($87.80*200+$8.95 commission)

Net Profit:
(a) Options Income: +$779.55
= ($3.95*200 shares) - $10.45 commissions
(b) Dividend Income (If stock assigned at Sep2012 expiration): +$108.00
= ($.54 dividend per share x 200 shares); or
b) Dividend Income (If option exercised early on day prior to Sep 6th ex-div date): +$0.00

(c) Capital Appreciation (If stock assigned at $85.00): -$568.95
+($85.00-$87.80)*200 - $8.95 commissions

Total Net Profit (If stock assigned at $85.00 at Sep2012 expiration): +$318.60

= (+$779.55 +$108.00 -$568.95); or
Total Net Profit (If option exercised on day prior to Sep 6th ex-div date): +$210.60

= (+$779.55 +$0.00 -$568.95)

1. Absolute Return (If stock assigned at $85.00 at Sep2012 expiration): +1.8% = +$318.60/$17,568.95
Annualized Return (If stock assigned): +21.4%

= (+$318.60/$17,568.95)*(365/31 days);
OR
2. Absolute Return (If option exercised on day prior to Sep 6th ex-div date): +1.2%

= +$210.60/$17,568.95
Annualized Return (If option exercised early): +31.3%

= (+$210.60/$17,568.95)*(365/14 days)

Established Vale SA ADR Covered Calls

Today, a new covered calls position was established in Vale SA ADR (Symbol VALE) with a Sep2012 expiration and at the $17.00 strike price. The transactions are as follows:
08/20/2012 Bought 700 VALE shares @ $17.66
08/20/2012 Sold 7 VALE Sep2012 $17.00 Call Options @ $1.09
Note: the price of Vale shares was $17.71 today when these options were sold.

A possible overall performance result (including commissions) for this Vale SA ADR (VALE) covered calls position is as follows:
Stock Purchase Cost: $12,370.95
= ($17.66*700+$8.95 commission)

Net Profit:
(a) Options Income: +$748.80 = ($1.09 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If VALE assigned at $17.00 upon expiration): -$470.95
=+($17.00-$17.66)*700 - $8.95 commissions

Total Net Profit (If VALE assigned at $17.00 at Sep2012 expiration): +$277.85
= (+$748.80 +$0.00 -$470.95)

Absolute Return (If VALE assigned at $17.00 at Sep2012 expiration): +2.2%
= +$277.85/$12,370.95
Annualized Return (If stock assigned): +24.8%
= (+$277.85/$12,370.95)*(365/33 days)

The downside 'breakeven price' at expiration is at $16.57 ($17.66 - $1.09).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 33 days until Sep2012 options expiration) for this Vale SA ADR covered calls position is 72.2%. This compares with a probability of profit of 50.0% for a buy-and-hold of Vale over the same time period.

The 'crossover price' at expiration is $18.09 ($17.00 + $1.09).  This is the price above which it would have been more profitable to simply buy-and-hold VALE stock until September 22, 2012 (the Sep2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 41.1%.

Continuation Transactions -- Bank of America Corp. and McDermott International Inc.

After Aug2012 options expiration last Friday, two long uncovered stock positions remained in the Covered Calls Advisor Portfolio (CCAP) for which decisions remained to either sell the stocks or to re-establish covered calls positions. This morning, a decision was made to retain both Bank of America Corp. (symbol BAC) and McDermott International Inc. (symbol MDR) and to re-establish covered call positions with Sep2012 expirations. The detailed transactions history for these positions as well as some possible overall performance results are as follows:

1. Bank of America Corp. (BAC) -- Continuation
This past Friday, the Aug2012 covered calls position in Bank of America Corp. was closed out. With Bank of America (BAC) trading at $8.01 with less than 15 minutes remaining in the trading day on options expiration Friday, the Aug2012 $7.00 calls were well in-the-money and there was no time value remaining in the options.

The transactions history for this BAC position is as follows: 07/30/2012 Bought 1,000 BAC shares @ $7.29
08/01/2012 Sold 10 BAC Aug2012 $7.00 Call Options @ $.44
Note: the price of BAC was $7.34 today when these options were sold.
08/17/2012 Bought-to-Close 10 BAC Aug2012 $7.00 call options @ $1.01
Note: BAC was trading at $8.01 when this transaction occurred.
08/20/2012 Sold 10 BAC Sep2012 $8.00 Call Options @ $.30
Note: BAC was trading at $8.05 when this transaction occurred.

A possible overall performance result (including commissions) for these Bank of America (BAC) transactions would be as follows:
Stock Purchase Cost: $7,281.05
= ($7.29*1,000+$8.95 commission)

Net Profit:
(a) Options Income: -$272.90
= ($.44-$1.01+$.30)*1,000 shares - 2*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BAC assigned at $8.00 upon expiration): +$701.05
=+($8.00-$7.29)*1,000 - $8.95 commissions

Total Net Profit (If BAC assigned at $8.00 at Sep2012 expiration): +$428.15
= (-$272.90 +$0.00 +$701.05)

Absolute Return (If BAC assigned at $7.00 at Aug2012 expiration): +5.9%
= +$428.15/$7,281.05
Annualized Return (If stock assigned): +39.7%
= (+$428.15/$7,281.05)*(365/54 days)


2. McDermott International Inc. (MDR) -- Continuation
Last Friday, the Aug2012 covered calls position in McDermott closed out-of-the-money upon Aug2012 options expiration.  Today, a covered calls position was established by selling ten Sep2012 $12.00 call options.

The transactions history for this MDR position is as follows:
08/01/2012 Bought 600 MDR @ $11.56
08/01/2012 Sold 6 MDR Aug2012 $12.00 Calls @ $.55
08/17/2012 MDR Aug2012 $12.00 Call Options expired.
Note: the price of MDR stock was $11.75 upon options expiration.

08/20/2012 Sold 6 MDR Sep2012 $12.00 Calls @ $.45
Note: the price of MDR was $11.76 when these options were sold.

Two possible overall performance results (including commissions) for this McDermott position is as follows:
Stock Purchase Cost: $9,256.95
= ($11.56*600+$8.95 commission)

Net Profit:
(a) Options Income: +$573.10
= 600 shares*($.55+$.45) - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MDR price unchanged at $11.76 upon Sep2012 expiration): +$111.05 = ($11.76-$11.56)*600 - $8.95 commissions
(c) Capital Appreciation (If MDR assigned at $12.00): +$255.05 = ($12.00-$11.56)*600 - $8.95 commissions

Total Net Profit (If MDR price unchanged at $11.76 upon Sep2012 expiration): +$684.15 = (+$573.10 +$0.00 +$111.05)
Total Net Profit(If MDR assigned at $12.00 upon Sep2012 expiration): +$828.15 = (+$573.10 +$0.00 +$255.05)

1. Absolute Return (If MDR price unchanged at $11.76 upon Sep2012 expiration): +7.4% = +$684.15/$9,256.95
Annualized Return  (If MDR price unchanged upon Sep2012 expiration): +51.9%
= (+$684.15/$9,256.95)*(365/52 days)

2. Absolute Return if Assigned at $12.00: +8.9% = +$828.15/$9,256.95
Annualized Return If Assigned (ARIA): +62.8%
= (+$828.15/$9,256.95)*(365/52 days)

Overall Market Meter 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 remains 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 3.75 (see blue line in chart above) is unchanged from the 3.75 average of last month. The 3.75 is a Slightly Bullish rating (range from 3.51 to 4.50).  In fact, the ratings for each of the eight factors used to determine the Overall Market Meter rating were identical to those of 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 August 2012 options expiration, newly established positions for September 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 to All and Godspeed,
Jeff

Sold 100% Cash-Secured Puts -- UnitedHealth Group Inc.

On Aug2012 options expiration Friday, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in UnitedHealth Group Inc. (Ticker Symbol UNH) with an Aug 24th, 2012 expiration. This position is a weekly option and was established when the stock was about 1% out-of-the money relative to the Put's strike price.

The transaction was as follows:
08/17/2012 Sold 3 UnitedHealth Group Inc.(UNH) Aug 24th, 2012 $52.50 Put Options @ $.40
Note: the price of UNH was $52.89 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 three Put options sold.

A possible overall performance results(including commissions) for this UnitedHealth Group Inc. transaction would be as follows:
100% Cash-Secured Cost Basis: $15,750.00
= $52.50*300

Net Profit:
(a) Options Income: +$108.80
= ($.40*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UNH above $52.50 at Aug 24th expiration): +$0.00
= ($19.00-$19.00)*700

Total Net Profit (If UNH remains above $52.50 at Aug 24th options expiration): +$108.80  = (+$108.80 +$0.00 +$0.00)

Absolute Return (If UNH above $52.50 at Aug 24th options expiration and Put options thus expire worthless): +0.69%
= +$108.80/$15,750.00
Annualized Return (If stock price above $21.00 at expiration): +31.5%
= (+$108.80/$15,750.00)*(365/8 days)

August 2012 Expiration Results

Yesterday was options expiration Friday for August 2012. The following transactions were made in the Covered Calls Advisor Portfolio:

A. ROLLED-UP-AND-OUT
Three existing positions were rolled 'up' to a higher strike price and 'out' to a new expiration date as follows:

1. iShares MSCI China ETF (Ticker Symbol FXI)
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
Note: this was done with the price of FXI at $34.41, so the remaining time value in the Aug2012 option was only $.01
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: this is a one-week option

The transactions history for this iShares MSCI China ETF (FXI) covered calls position is as follows:
07/30/2012 Bought 1,000 FXI shares @ $34.09 07/30/2012
Sold 10 FXI Aug2012 $34.00 Call Options @ $.80
08/17/2012 Bought-to-Close 10 FXI Aug2012 $34.00 Calls at $.42
08/17/2012 Sold-to-Open 10 FXI August 24th, 2012 $34.50 call options at $.31
Note: the price of FXI was $34.41 today when this roll-up-and-out transaction occurred.

Two possible overall performance results(including commissions) for this iShares MSCI China ETF (FXI) covered calls position is as follows:
Stock Purchase Cost: $34,098.95
= ($34.09*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$657.10
=($.80-$.42+$.31)*1,000 shares - 2*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI price unchanged at $34.41 upon 8/24/2012 expiration): +$311.05
=($34.41-$34.09)*1,000 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $34.50 upon expiration): +$401.05
=($34.50-$34.09)*1,000 - $8.95 commissions

Total Net Profit(If FXI price unchanged at $34.41 at 8/24/2012 expiration): +$968.15
= (+$657.10 +$0.00 +$311.05)
Total Net Profit(If FXI assigned at $34.50 at 8/24/2012 expiration): +$1,058.15
= (+$657.10 +$0.00 +$401.05)

Absolute Return (If FXI price unchanged at $34.41 at 8/24/2012 expiration): +2.8%
= +$968.15/$34,098.95
Annualized Return (If price unchanged at $34.41 at 8/24/2012 expiration): +41.5%
= (+$968.15/$34,098.95)*(365/25 days)

Absolute Return (If FXI assigned at $34.50 at 8/24/2012 options expiration): +3.1%
= +$1,058.15/$34,098.95
Annualized Return (If stock assigned): +45.3%
= (+$1,058.15/$34,098.95)*(365/25 days)

2. iShares MSCI South Korea ETF (Ticker Symbol EWY)
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67, so the remaining time value in the Aug2012 option was only $.01
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03

The transactions history for this iShares MSCI South Korea ETF (EWY) covered calls position is as follows:
07/30/2012 Bought 500 EWY shares @ $54.51 08/01/2012
Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.
08/17/2012 Bought-to-Close 5 EWY Aug2012 $56.00 Calls at $1.68
Note: this was done with the price of EWY at $57.67
08/17/2012 Sold-to-Open 5 EWY Sep2012 $57.00 call options at $2.03

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$849.60
= ($1.40+$1.68-$2.03)*500 shares - 2*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $57.00): +$1,236.05
= ($57.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY assigned at $57.00): +$2,085.65
= (+$849.60 +$0.00 +$1,236.05)

Absolute Return if Assigned at $57.00: +7.6%
= +$2,085.65/$27,263.95
Annualized Return If Assigned (ARIA): +51.7%
= (+$2,085.65/$27,263.95)*(365/54 days)

3. Mylan Inc.(Ticker Symbol MYL)
08/17/2012 Bought-to-Close 5 MYL Aug2012 $22.00 Calls at $1.53
Note: this was done with the price of EWY at $23.52, so the remaining time value in the Aug2012 option was only $.01
08/17/2012 Sold-to-Open 5 MYL Sep2012 $23.00 call options at $.88

The transactions history for this Mylan Inc.(MYL) covered calls position is as follows: 03/08/2012 Bought 500 Mylan Inc. Shares @ $22.51
03/08/2012 Sold 5 MYL Mar2012 $23.00 Calls @ $.26
Note: the price of Mylan was $22.75 today when the calls were sold.
03/18/2012 Mar2012 options expired.
03/19/2012 Sold 5 MYL Apr2012 $23.00 Calls @ $.47
Note: the price of MYL was $22.73 when these options were sold.
04/22/2012 MYL May2012 Call options expired.
04/25/2012 Sold 5 MYL May2012 $23.00 Calls at $.30
Note: the price of MYL was $22.20 when these call options were sold.
05/19/2012 MYL Jun2012 Call options expired.
06/04/2012 Sold 5 MYL Jun2012 $21.00 Calls at $.28
06/15/2012 Bought-to-Close 5 Jun2012 $21.00 call options at $.20
06/15/2012 Sold 5 MYL Jul2012 $22.00 call options at $.31
07/18/2012 Bought-to-Close 5 MYL Jul2012 $22.00 call options at $.60
07/18/2012 Sell-to-Open 5 MYL Aug2012 $22.00 call options at $.96
Note: the price of MYL was $22.57 when this credit spread roll-out transaction was made.
08/17/2012 Bought-to-Close 5 MYL Aug2012 $22.00 Calls at $1.53
Note: this was done with the price of EWY at $23.52
08/17/2012 Sold-to-Open 5 MYL Sep2012 $23.00 call options at $.88

A possible result from this position is as follows:
Stock Purchase Cost: $11,263.95
= ($22.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$486.60
= ($.26+$.47+$.30+$.28-$.20+$.31-$.60+$.96-$1.53+$.88)*500 shares) - 7*$11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price above $23.00 at Sep2012 options expiration): +$236.05
= ($23.00-$22.51)*500 - $8.95 commissions

Total Net Profit(If stock assigned at $23.00 at Sep2012 options expiration): +$722.65 = (+$486.60 +$0.00 +$236.05)

Absolute Return (If Mylan stock assigned at $23.00 at Sep2012 options expiration): +6.4%
= +$722.65/$11,263.95
Annualized Return (If stock assigned at $23.00 at Sep2012 expiration): +11.8%
= (+$722.65/$11,263.95)*(365/198 days)


B. ROLLED-OUT
Two existing positions were rolled 'out' to the Sep2012 options expiration date as follows:

1. Market Vectors Russia ETF (Ticker Symbol RSX)
08/17/2012 Bought-to-Close 6 RSX Aug2012 $27.00 Calls at $.85
Note: this was done with the price of RSX at $27.84, so the remaining time value in the Aug2012 option was only $.01
08/17/2012 Sold-to-Open 6 RSX Sep2012 $27.00 call options at $1.45

The transactions history for this Market Vectors Russia ETF (RSX) covered calls position is as follows:
07/30/2012 Bought 600 RSX shares @ $26.59
08/01/2012 Sold 6 RSX Aug2012 $27.00 Call Options @ $.55
Note: the price of RSX was $26.70 today when these options were sold.
08/17/2012 Bought-to-Close 6 RSX Aug2012 $27.00 Calls at $.85
Note: this was done with the price of RSX at $27.84
08/17/2012 Sold-to-Open 6 RSX Sep2012 $27.00 call options at $1.45
Note: the price of RSX was $27.88 when these Sep2012 call options were sold.

A possible overall performance result (including commissions) for this Market Vectors Russia ETF (RSX) covered calls position is as follows:
Stock Purchase Cost: $15,962.95
= ($26.59*600+$8.95 commission)

Net Profit:
(a) Options Income: +$663.10
= ($.55-$.85+$1.45)*600 shares - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If RSX assigned at $27.00): +$237.05
= ($27.00-$26.59)*600 - $8.95 commissions

Total Net Profit(If RSX assigned at $27.00): +$900.15
= (+$663.10 +$0.00 +$237.05)

Absolute Return if Assigned at $27.00: +5.6%
= +$900.15/$15,962.95
Annualized Return If Assigned (ARIA): +38.1%
= (+$900.15/$15,962.95)*(365/54 days)

2. Morgan Stanley (Ticker Symbol MS)
08/17/2012 Bought-to-Close 6 MS Aug2012 $14.00 Calls at $.58
Note: this was done with the price of MS at $14.57, so the remaining time value in the Aug2012 option was only $.01
08/17/2012 Sold-to-Open 6 MS Sep2012 $14.00 call options at $.96

The transactions history for this Morgan Stanley (MS) covered calls position is as follows:
07/31/2012 Bought 600 MS @ $13.63 07/31/2012
Sold 6 MS Aug2012 $14.00 Calls @ $.35
08/17/2012 Bought-to-Close 6 MS Aug2012 $14.00 Calls at $.58
Note: this was done with the price of MS at $14.57
08/17/2012 Sold-to-Open 6 MS Sep2012 $14.00 call options at $.96

A possible overall performance result (including commissions) for this Morgan Stanley covered calls position is as follows:
Stock Purchase Cost: $8,186.95
= ($13.63*600+$8.95 commission)

Net Profit:
(a) Options Income: +$411.10
= ($.35-$.58+$.96)*600 shares - 2*$13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MS assigned at $14.00): +$213.05
= ($14.00-$13.63)*600 - $8.95 commissions

Total Net Profit(If MS assigned at $14.00 at Sep2012 options expiration): +$624.15
= (+$411.10 +$0.00 +$213.05)

Absolute Return if Assigned at $14.00: +7.6%
= +$624.15/$8,186.95
Annualized Return If Assigned (ARIA): +52.5%
= (+$624.15/$8,186.95)*(365/53 days)


C. SHORT OPTIONS CLOSED OUT

The Aug2012 covered calls position in Bank of America Corp. was closed out. With Bank of America (Ticker Symbol BAC) trading at $8.01 with less than 15 minutes remaining in the trading day on options expiration Friday, the Aug2012 $7.00 calls were well in-the-money and there was no time value remaining in the options.

The transaction was as follows:
08/17/2012 Bought-to-Close 10 BAC Aug2012 $7.00 call options @ $1.01
Note: BAC was trading at $8.01 when this transaction occurred.

So currently, the Covered Calls Advisor Portfolio is long 1,000 shares of BAC stock. The Covered Calls Advisor intends to continue with this covered calls position and will most likely sell 10 Sep2012 $8.00 call options on Monday to re-establish a covered calls position. When this occurs, an update of this BAC position and potential return-on-investment results will be posted to this blog.


D. CLOSED POSITIONS

There are two positions in which the Aug2012 options expired. They were as follows:

1. General Motors Co. (Ticker Symbol GM)
The transaction history is as follows:
08/02/2012 Sold 7 General Motors Co.(GM) Aug2012 $19.00 Put Options @ $.32 Note: the price of GM was $19.50 today when these Puts were sold.
08/17/2012 GM Aug2012 Put Options expired.
Note: the price of GM was $22.01 upon options expiration.

The overall performance result(including commissions) for this General Motors Co. transaction was as follows:
100% Cash-Secured Cost Basis: $13,300.00
= $19.00*700

Net Profit:
(a) Options Income: +$209.80
= ($.32*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Since GM above $19.00 at Aug2012 expiration): +$0.00
= ($19.00-$19.00)*700

Total Net Profit (GM above $19.00 at Aug2012 options expiration): +$209.80
= (+$209.80 +$0.00 +$0.00)

Absolute Return (GM stock price remained above $19.00 at Aug2012 options expiration and Put options expired worthless): +1.6%
= +$209.80/$13,300.00
Annualized Return-on-Investment: +33.9%
= (+$209.80/$13,300.00)*(365/17 days)

2. Valero Energy Corp. (Ticker Symbol VLO)
The covered calls position in Valero was in-the-money and the Covered Calls Advisor decided to let the shares get called away at the $28.00 strike price. The transaction history for this Valero (VLO) position was as follows:
06/21/2012 Bought 300 VLO @ $22.82
06/21/2012 Sold 3 VLO Jul2012 $24.00 Calls @ $.46
07/17/2012 Bought-to-Close 3 VLO Jul2012 $24.00 Calls @ $1.50
07/17/2012 Sold-to-Open 3 VLO Aug2012 $24.00 Calls @ $1.95
08/03/2012 Bought-to-Close 3 VLO Aug2012 $24.00 Calls @ $4.00
08/03/2012 Sold-to-Open 3 VLO Aug2012 $28.00 Calls @ $.70
08/13/2012 Ex-dividend date at $.175 per share
08/17/2012 Aug2012 $28.00 options expired and 300 VLO shares assigned (called away)at $28.00
Note: the price of VLO stock was $28.80 upon options expiration.

The results from this position are as follows:
Stock Purchase Cost: $6,854.95
= ($22.82*300+$8.95 commission)

Net Profit:
(a) Options Income: -$761.80
= ($.46-$1.50+$1.95-$4.00+$.70)*300 shares) - 4*$11.20 commissions
(b) Dividend Income: $52.50
= $.175 * 300 shares
(c) Capital Appreciation (VLO stock price was above $28.00 at Aug2012 options expiration): +$1,545.05
=($28.00-$22.82)*300 - $8.95 commissions

Total Net Profit: +$835.75
= (-$761.80 +$52.50 +$1,545.05)

Absolute Return: +12.2%
= +$835.75/$6,854.95
Annualized Return: +76.7%
= (+$835.75/$6,854.95)*(365/58 days)


E. OPTIONS EXPIRED
The covered calls position in McDermott International Inc. (Ticker Symbol MDR) closed out-of-the-money upon Aug2012 options expiration. The transaction history is as follows:
08/01/2012 Bought 600 MDR @ $11.56
08/01/2012 Sold 6 MDR Aug2012 $12.00 Calls @ $.55
08/17/2012 MDR Aug2012 $12.00 Call Options expired.
Note: the price of MDR stock was $11.75 upon options expiration.

A decision will be made to either sell this MDR stock or to retain it and sell calls to establish a September 2012 covered call position. 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.

Early Assignment -- Apple Inc.

Overnight, the Covered Calls Advisor received email notification from my broker that the call option in Apple Inc.(Ticker Symbol AAPL) was exercised early and therefore the 100 shares owned in Apple stock assigned (sold). This early exercise by the call options owner was done yesterday (Wednesday), which was the final trading day prior to today's ex-dividend date (with a $2.65 dividend from Apple). With AAPL well in the money ($619.86 price versus a $605.00 strike price) and with $.64 [$619.86-($605.00+15.50)] extrinsic value (aka time value) remaining in the option, it was expected that the options owner would exercise on the day prior to the ex-div date in order to obtain the stock shares and to therefore capture the dividend payment.

The transactions history was as follows:
07/30/2012 Bought 100 AAPL shares @ $595.04
07/30/2012 Sold 1 AAPL Aug2012 $585.00 Call Option @ $15.55
08/06/2012 Bought-to-Close 1 AAPL Aug2012 $585.00 Call Option @ $37.35 08/06/2012 Sold-to-Open 1 AAPL Aug2012 $605.00 Call Option @ $18.80
08/08/2012 Aug2012 $605.00 option exercised early and 100 shares of AAPL stock assigned at $605.00 per share.

The overall performance result (including commissions) for this Apple Inc.(AAPL) transaction is as follows:
Stock Purchase Cost: $59,512.95 = ($595.04*100+$8.95 commission)


Net Profit:
(a) Options Income: -$319.40
= ($15.55-$37.35+$18.80)*100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $605.00): +$987.05
=($605.00-$595.04)*100 - $8.95 commissions

Total Net Profit(Stock assigned at $605.00): +$667.65
= (-$319.40 +$0.00 +$987.05)

Absolute Return: +1.1%
= +$667.65/$59,512.95
Annualized Return: +40.9%
= (+$667.65/$59,512.95)*(365/10 days)

This early exercise was an advantageous outcome for this covered calls position since the +40.9% annualized return-on-investment achieved was greater than the +30.1% that would have resulted if the option had not been exercised by the option owner, but instead if the stock would have been assigned at the monthly options expiration on Friday, August 17th.

Roll-Ups -- Apple Inc. and Valero Energy Corp.

1. Apple Inc.(AAPL)
Today, with 12 days remaining until Aug2012 options expiration and with Apple Inc. trading at $622.01, the Aug2012 $585.00 options were well in-the-money. There was only $.34 [$622.01-($585.00+$37.35)] time value remaining in the $585.00 options, so a decision was made to roll-up the covered calls position to the Aug2012 $605.00 strike price. These options were sold at $18.80 which increases the options income prior to this month's expiration while simultaneously increasing the likelihood of retaining the Apple shares and capturing the $2.65 dividend on the Aug 9th ex-dividend date.

The transaction history so far in this Apple Inc.(AAPL) position is as follows:
07/30/2012 Bought 100 AAPL shares @ $595.04
07/30/2012 Sold 1 AAPL Aug2012 $585.00 Call Option @ $15.55
08/06/2012 Bought-to-Close 1 AAPL Aug2012 $585.00 Call Option @ $37.35 08/06/2012 Sold-to-Open 1 AAPL Aug2012 $605.00 Call Option @ $18.80
08/09/2012 Ex-dividend of $2.65 per share

A possible result from this position is as follows:
Stock Purchase Cost: $59,512.95 = ($595.04*100+$8.95 commission)

Net Profit:
(a) Options Income: -$319.40
= ($15.55-$37.35+$18.80)*100 shares - 2*$9.70 commissions
(b) Dividend Income (If stock assigned at Feb2012 expiration): +$265.00
= ($2.65 dividend per share x 100 shares)
(c) Capital Appreciation (If stock assigned at $605.00): +$987.05
=($605.00-$595.04)*100 - $8.95 commissions

Total Net Profit(If stock assigned at $605.00 at Aug2012 expiration): +$932.65
= (-$319.40 +$265.00 +$987.05)

Absolute Return (If stock assigned at $605.00 at Aug2012 expiration): +1.6%
= +$932.65/$59,512.95
Annualized Return (If stock assigned): +30.1%
= (+$932.65/$59,512.95)*(365/19 days)

This roll-up transaction increases the maximum annualized return-on-investment from +25.7% prior to the roll-up to +30.1% now (if AAPL is above $605.00 upon market close on the Aug 17th options expiration date).


2. Valero Energy Corp.(VLO)
This past Friday, with 15 days remaining until Aug2012 options expiration and with Valero trading at $28.00, the Aug2012 $24.00 options were well in-the-money. There was no time value remaining in the $24.00 options, so a decision was made to roll-up the covered calls position to the Aug2012 $28.00 strike price. These options were sold at $.70 which increases the options income prior to this month's expiration while simultaneously increasing the likelihood of retaining the Valero shares and capturing the $.175 dividend on the Aug 13th ex-dividend date.

The transaction history so far in this Valero (VLO) position is as follows:
06/21/2012 Bought 300 VLO @ $22.82 06/21/2012
Sold 3 VLO Jul2012 $24.00 Calls @ $.46
07/17/2012 Bought-to-Close 3 VLO Jul2012 $24.00 Calls @ $1.50
07/17/2012 Sold-to-Open 3 VLO Aug2012 $24.00 Calls @ $1.95
08/03/2012 Bought-to-Close 3 VLO Aug2012 $24.00 Calls @ $4.00
08/03/2012 Sold-to-Open 3 VLO Aug2012 $28.00 Calls @ $.70
08/13/2012 Ex-dividend date at $.175 per share

A possible result from this position is as follows:
Stock Purchase Cost: $6,854.95 = ($22.82*300+$8.95 commission)

Net Profit:
(a) Options Income: -$761.80
= ($.46-$1.50+$1.95-$4.00+$.70)*300 shares) - 4*$11.20 commissions
(b) Dividend Income: $52.50 = $.175 * 300 shares
(c) Capital Appreciation (If stock price above $28.00 at Aug2012 options expiration): +$1,545.05
=($28.00-$22.82)*300 - $8.95 commissions

Total Net Profit(If stock price above $28.00 at Aug2012 options expiration): +$835.75 = (-$761.80 +$52.50 +$1,545.05)

Absolute Return (If Valero stock price above $28.00 at Aug2012 options expiration): +12.2% = +$835.75/$6,854.95
Annualized Return (If stock price above $28.00 at expiration): +76.7%
= (+$835.75/$6,854.95)*(365/58 days)

This roll-up transaction increases the maximum annualized return-on-investment from +53.9% prior to the roll-up to +76.7% now (if VLO is above $28.00 upon market close on the Aug 17th options expiration date).

Sold 100% Cash-Secured Puts -- General Motors Co.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in General Motors Co. (Symbol GM) with an Aug2012 expiration.

The transaction was as follows:
08/02/2012 Sold 7 General Motors Co.(GM) Aug2012 $19.00 Put Options @ $.32
Note: the price of GM was $19.50 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 seven Put options sold.

A possible overall performance results(including commissions) for this General Motors Co. transaction would be as follows:
100% Cash-Secured Cost Basis: $13,300.00 = $19.00*700

Net Profit:
(a) Options Income: +$209.80
= ($.32*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GM above $19.00 at Aug2012 expiration): +$0.00
= ($19.00-$19.00)*700

Total Net Profit (If GM remains above $19.00 at Aug2012 options expiration): +$209.80  = (+$209.80 +$0.00 +$0.00)

Absolute Return (If GM above $19.00 at Aug2012 options expiration and Put options thus expire worthless): +1.6%
= +$209.80/$13,300.00
Annualized Return (If stock price above $21.00 at expiration): +33.9%
= (+$209.80/$13,300.00)*(365/17 days)

The downside 'breakeven price' at expiration is at $18.68 ($19.00 - $.32). Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Aug2012 options expiration) for this General Motors Co.(GM) cash-secured Puts position is 65.6%. This compares with a probability of profit of 51.1% for a buy-and-hold of GM over the same time period.

The 'crossover price' at expiration is $19.82 ($19.50 + $.32). This is the price above which it would have been more profitable to simply buy-and-hold GM until Aug 17th(the Aug2012 options expiration date) rather than holding the short Put options. The probability of exceeding this crossover price at expiration is 42.2%.

Established McDermott International Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of McDermott International Inc. (symbol MDR) covered calls as follows:
08/01/2012 Bought 600 MDR @ $11.56
08/01/2012 Sold 6 MDR Aug2012 $12.00 Calls @ $.55

Two possible overall performance results (including commissions) for this McDermott position is as follows:
Stock Purchase Cost: $9,256.95
= ($11.56*600+$8.95 commission)

Net Profit:
(a) Options Income: +$316.55
= 600*$.55 - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MDR price unchanged at $11.56): -$8.95
= ($11.56-$11.56)*600 - $8.95 commissions
(c) Capital Appreciation (If MDR assigned at $12.00): +$255.05
= ($12.00-$11.56)*600 - $8.95 commissions

Total Net Profit(If MDR price unchanged at $11.56): +$307.60
= (+$316.55 +$0.00 -$8.95)
Total Net Profit(If MDR assigned at $12.00): +$571.60
= (+$316.55 +$0.00 +$255.05)


Absolute Return if Unchanged at $11.56: +3.3%
= +$307.60/$9,256.95
Annualized Return If Unchanged (ARIU): +63.8%
= (+$307.60/$9,256.95)*(365/19 days)

Absolute Return if Assigned at $12.00: +5.0%
= +$571.60/$9,256.95
Annualized Return If Assigned (ARIA): +118.6%
= (+$571.60/$9,256.95)*(365/19 days)

The potential returns for this position are abnormally high.  This is the case because the current Implied Volatility of 72 is very high for this particular option.  This is primarily because of the uncertainty caused by the quarterly earnings report for MDR (next Monday) which will occur prior to the Aug2012 expiration date of Aug 17th.

The downside 'breakeven price' at expiration is at $11.01 ($11.56 - $.55).
Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 19 days until Aug2012 options expiration) for this McDermott Intl. covered calls position is 65.2%. This compares with a probability of profit of 53.1% for a buy-and-hold of McDermott over the same time period.

The 'crossover price' at expiration is $12.55 ($12.00 + $.55).
This is the price above which it would have been more profitable to simply buy-and-hold MDR stock until August 18, 2012 (the Aug2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 32.6%.

Established Covered Calls Positions in Bank of America Corp., iShares MSCI South Korea ETF, and Market Vectors Russia ETF

Today, new covered calls positions were established in three equities [Bank of America Corp. (BAC), iShares MSCI South Korea ETF (FXI), and Market Vectors Russia ETF (RSX)] with Aug2012 expirations. The positions and some possible results are as follows:


1. Bank of America Corp.  
07/30/2012 Bought 1,000 BAC shares @ $7.29
08/01/2012 Sold 10 BAC Aug2012 $7.00 Call Options @ $.44
Note: the price of BAC was $7.34 today when these options were sold.

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $7,281.05
= ($7.29*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$423.55 = ($.44*1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BAC assigned at $7.00 upon expiration): -$298.95
=+($7.00-$7.29)*1,000 - $8.95 commissions

Total Net Profit(If BAC assigned at $7.00 at Aug2012 expiration): +$124.60
= (+$423.55 +$0.00 -$298.95)

Absolute Return (If BAC assigned at $7.00 at Aug2012 expiration): +1.7%
= +$124.60/$7,281.05
Annualized Return (If stock assigned): +32.9%
= (+$124.60/$7,281.05)*(365/19 days)


2. iShares MSCI South Korea ETF
07/30/2012 Bought 500 EWY shares @ $54.51
08/01/2012 Sold 5 EWY Aug2012 $56.00 Call Options @ $1.40
Note: the price of EWY was $56.40 today when the options were sold.

Two possible overall performance results (including commissions) for this iShares MSCI South Korea ETF covered calls position is as follows:
Stock Purchase Cost: $27,263.95
= ($54.51*500+$8.95 commission)

Net Profit:
(a) Options Income: +$687.30
= 500*$1.40 - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY price unchanged at $54.51): -$8.95
= ($54.51-$54.51)*500 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $56.00): +$736.05
= ($56.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $54.51): +$678.35
= (+$687.30 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $56.00): +$1,423.35
= (+$687.30 +$0.00 +$736.05)

Absolute Return if Unchanged at $54.51: +2.5%
= +$678.35/$27,263.95
Annualized Return If Unchanged (ARIU): +47.8%
= (+$678.35/$27,263.95)*(365/19 days)

Absolute Return if Assigned at $56.00: +5.2%
= +$1,423.35/$27,263.95
Annualized Return If Assigned (ARIA): +100.3%
= (+$1,423.35/$27,263.95)*(365/19 days)


3. Market Vectors Russia ETF
07/30/2012 Bought 600 RSX shares @ $26.59
08/01/2012 Sold 6 RSX Aug2012 $27.00 Call Options @ $.55
Note: the price of RSX was $26.70 today when these options were sold.

Two possible overall performance results (including commissions) for this Market Vectors Russia ETF covered calls position is as follows:
Stock Purchase Cost: $15,962.95
= ($26.59*600+$8.95 commission)

Net Profit:
(a) Options Income: +$316.55
= 600*$.55 - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If RSX price unchanged at $26.59): -$8.95
= ($26.59-$26.59)*600 - $8.95 commissions
(c) Capital Appreciation (If RSX assigned at $27.00): +$237.05
= ($27.00-$26.59)*600 - $8.95 commissions

Total Net Profit(If RSX price unchanged at $26.59): +$307.60
= (+$316.55 +$0.00 -$8.95)
Total Net Profit(If RSX assigned at $27.00): +$553.60
= (+$316.55 +$0.00 +$237.05)

Absolute Return if Unchanged at $26.59: +1.9%
= +$307.60/$15,962.95
Annualized Return If Unchanged (ARIU): +37.0%
= (+$307.60/$15,962.95)*(365/19 days)

Absolute Return if Assigned at $27.00: +3.5%
= +$553.60/$15,962.95
Annualized Return If Assigned (ARIA): +66.6%
= (+$553.60/$15,962.95)*(365/19 days)

Returns -- Through July 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 7.64% so far in 2012. This is 1.61 percentage points (+7.64% minus 9.25%) 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 July 31st, 2012) = +7.64%
($316,072.68-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through July 31st, 2012) = +9.25%
($81.10-$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