Returns -- Through October 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 11.57% so far in 2012. This is 0.90 percentage points (+11.57% minus 12.47%) 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 October 31, 2012) = +11.57%
= ($327,613.42-$293,634.14)/$293,634.14
Benchmark Russell 3000 (IWV) Absolute Return (Jan 1st through October 31, 2012)
= +12.47%
= ($83.43-$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 "NEUTRAL". The corresponding investing strategy is to, on-average, sell 1% 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

Established Mylan Inc. Covered Calls

Today, a new covered calls position was established in Mylan Inc. (ticker symbol MYL) with a Nov2012 expiration and at the $24.00 strike price. The transactions are as follows:
10/24/2012 Bought 1,000 MYL shares @ $23.88
10/25/2012 Sold 10 MYL Nov2012 $24.00 Call Options @ $.65
Note: the price of MYL shares was $24.36 today when these options were sold.

A possible overall performance result (including commissions) for this Mylan Inc. (MYL) covered calls position is as follows:
Stock Purchase Cost: $23,888.95
= ($23.88*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$633.55
= ($.65 X 1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MYL price unchanged at $23.88 upon expiration): -$8.95
=+($23.88-$23.88)*1,000 - $8.95 commissions; OR
(c) Capital Appreciation (If MYL assigned at $24.00 upon expiration): +$111.05
=+($24.00-$23.88)*1,000 - $8.95 commissions

Total Net Profit (If MYL price unchanged at $23.88 at Nov2012 expiration): +$624.60
= (+$633.55 +$0.00 -$8.95); OR
Total Net Profit (If MYL assigned at $24.00 at Nov2012 expiration): +$744.60
= (+$633.55 +$0.00 +$111.05)

1. Absolute Return (If MYL unchanged at $23.88 at Nov2012 expiration): +2.6%
= +$624.60/$23,888.95
Annualized Return (If stock assigned): +38.2%
= (+$624.60/$23,888.95)*(365/25 days); OR

2. Absolute Return (If MYL assigned at $24.00 at Nov2012 expiration): +3.1% = +$744.60/$23,888.95
Annualized Return (If stock assigned): +45.5%
= (+$744.60/$23,888.95)*(365/25 days)

Established Canadian Natural Resources LTD Covered Calls

Today, a new covered calls position was established in Canadian Natural Resources LTD (ticker symbol CNQ) with a Nov2012 expiration and at the $31.00 strike price. The transactions are as follows:
10/25/2012 Bought 600 CNQ shares @ $30.28
10/25/2012 Sold 6 CNQ Nov2012 $31.00 Call Options @ $.75
Note: the price of CNQ shares was $30.37 today when these options were sold.

A possible overall performance result (including commissions) for this Canadian Natural Resources LTD (CNQ) covered calls position is as follows:
Stock Purchase Cost: $18,176.95
= ($30.28*600+$8.95 commission)

Net Profit:
(a) Options Income: +$436.55
= ($.75 X 600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CNQ price unchanged at $30.28 upon expiration): -$8.95
=+($30.28-$30.28)*600 - $8.95 commissions; OR
(c) Capital Appreciation (If CNQ assigned at $31.00 upon expiration): +$423.05 =+($31.00-$30.28)*600 - $8.95 commissions

Total Net Profit (If CNQ price unchanged at $30.28 at Nov2012 expiration): +$427.60
= (+$436.55 +$0.00 -$8.95); OR
Total Net Profit (If CNQ assigned at $31.00 at Nov2012 expiration): +$859.60
= (+$436.55 +$0.00 +$423.05)

1. Absolute Return (If CNQ unchanged at $30.28 at Nov2012 expiration): +2.4%
= +$427.60/$18,176.95
Annualized Return (If stock assigned): +35.8%
= (+$427.60/$18,176.95)*(365/24 days); OR

2. Absolute Return (If CNQ assigned at $31.00 at Nov2012 expiration): +4.7% = +$859.60/$18,176.95
Annualized Return (If stock assigned): +71.9%
= (+$859.60/$18,176.95)*(365/24 days)

Established 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 Nov2012 expiration.

The transaction was as follows:
10/25/2012 Sold 10 United Continental Holdings Inc.(UAL) Nov2012 $19.00 Put Options @ $.48
Note: the price of UAL was $19.85 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: $19,000.00 = $19.00*1,000

Net Profit:
(a) Options Income: +$463.55
= ($.48*1,000 shares) - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL above $19.00 at Nov2012 expiration): +$0.00
= ($19.00-$19.00)*1,000

Total Net Profit (If UAL remains above $19.00 at Nov2012 options expiration): +$463.55  = (+$463.55 +$0.00 +$0.00)

Absolute Return (If UAL above $19.00 at Nov2012 options expiration and Put options thus expire worthless): +2.4%
= +$463.55/$19,000.00
Annualized Return (If stock price above $19.00 at expiration): +37.1%
= (+$463.55/$19,000.00)*(365/24 days)

The downside 'breakeven price' at expiration is at $18.52 ($19.00 - $.48). Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Nov2012 options expiration) for this United Continental (UAL) cash-secured Puts position is 75.8%. This compares with a probability of profit of 51.2% for a buy-and-hold of UAL over the same time period.

The 'crossover price' at expiration is $20.33 ($19.85 + $.48). This is the price above which it would have been more profitable to simply buy-and-hold UAL until Nov 21st (the Nov2012 options expiration date) rather than holding the short Put options. The probability of exceeding this crossover price at expiration is 43.3%.

Established iShares MSCI Emerging Markets ETF Covered Calls

Today, a new covered calls position was established in iShares MSCI Emerging Markets ETF (ticker symbol EEM) with a Nov2012 expiration and at the $41.00 strike price. The transactions are as follows:
10/23/2012 Bought 700 EEM shares @ $41.10
10/23/2012 Sold 7 EEM Nov2012 $41.00 Call Options @ $.98
Note: the price of EEM shares was $41.14 today when these options were sold.

A possible overall performance result (including commissions) for this iShares MSCI Emerging Markets ETF (EEM) covered calls position is as follows:
Stock Purchase Cost: $28,778.95
= ($41.10*700+$8.95 commission)

Net Profit:
(a) Options Income: +$671.80
= ($.98 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM assigned at $41.00 upon expiration): -$78.95
=+($41.00-$41.10)*700 - $8.95 commissions

Total Net Profit (If EEM assigned at $41.00 at Nov2012 expiration): +$592.85
= (+$671.80 +$0.00 -$78.95)

Absolute Return (If EEM assigned at $41.00 at Nov2012 expiration): +2.1%
= +$592.85/$28,778.95
Annualized Return (If stock assigned): +28.9%
= (+$592.85/$28,778.95)*(365/26 days)

The downside 'breakeven price' at expiration is at $40.12 ($41.10 - $.98).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 26 days until Nov2012 options expiration) for this iShares MSCI Emerging Markets ETF covered calls position is 66.5%. This compares with a probability of profit of 50.2% for a buy-and-hold of EEM over the same time period.

The 'crossover price' at expiration is $41.98 ($41.00 + $.98).  This is the price above which it would have been more profitable to simply buy-and-hold EEM stock until November 16, 2012 (the Nov2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 35.8%.

Established 100% Cash-Secured Puts -- Citigroup Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Citigroup Inc. at the $36.00 strike price and with a Nov2012 expiration. The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential financial result shown below reflect the fact that this position was established using 100% cash securitization.

Citigroup, Inc . (ticker symbol C) -- New Position
The transaction was as follows:
10/23/2012 Sold 4 Citigroup, Inc. (symbol C) Nov2012 $36.00 Put Options @ $.82
Note: the price of Citi stock was $36.97 today when these Puts were sold.

A possible overall performance result (including commissions) for this Citigroup, Inc.(C) transaction would be as follows:
100% Cash-Secured Cost Basis: $14,400.00
= $36.00*400

Net Profit:
(a) Options Income: +$316.05
= ($.82*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Citigroup stock above $36.00 at Nov2012 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit (If stock price above $36.00 at Nov2012 options expiration): +$316.05
= (+$316.05 options income +$0.00 dividends +$0.00 capital appreciation)

Absolute Return (If stock price above $36.00 at Nov2012 options expiration and Put options thus expire worthless): +2.2%
= +$316.05/$14,400.00
Annualized Return (If stock price above $36.00 at expiration): +32.0%
= (+$316.05/$14,400.00)*(365/25 days)

Established 100% Cash-Secured Puts -- MetLife Inc.

Today, the Covered Calls Advisor established new 100% Cash-Secured Puts position in MetLife Inc. at the $36.00 strike price and with an Nov2012 expiration. The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential financial result shown below reflect the fact that this position was established using 100% cash securitization.

MetLife Inc. (ticker symbol MET) -- New Position
The transaction was as follows:
10/22/2012 Sold 7 MetLife Inc. (MET) Nov2012 $36.00 Put Options @ $1.51
Note: the price of MetLife stock was $35.94 today when these Puts were sold.

A possible overall performance result (including commissions) for this MetLife Inc.(MET) transaction would be as follows:
100% Cash-Secured Cost Basis: $25,200.00
= $36.00*700

Net Profit:
(a) Options Income: +$1,042.80
= ($1.51*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MetLife stock above $36.00 at Nov2012 expiration): +$0.00
= ($36.00-$36.00) -$0.00 commissions

Total Net Profit (If stock price above $36.00 at Nov2012 options expiration): +$1,042.80
= (+$1,042.80 +$0.00 +$0.00)

Absolute Return (If stock price above $36.00 at Nov2012 options expiration and Put options thus expire worthless): +4.1%
= +$1,042.80/$25,200.00
Annualized Return (If stock price above $36.00 at expiration): +55.9%
= (+$1,042.80/$25,200.00)*(365/27 days)

Established Foot Locker Inc. Covered Calls

Today, a new covered calls position was established in Foot Locker Inc. (ticker symbol FL) with a Nov2012 expiration and at the $35.00 strike price. The transactions are as follows:
10/22/2012 Bought 300 FL shares @ $35.48
10/22/2012 Sold 3 FL Nov2012 $35.00 Call Options @ $1.45
Note: the price of FL shares was $35.55 today when these options were sold.

A possible overall performance result (including commissions) for this Foot Locker Inc. (FL) covered calls position is as follows:
Stock Purchase Cost: $10,635.05
= ($35.48*300+$8.95 commission)

Net Profit:
(a) Options Income: +$423.80
= ($1.45 X 300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FL assigned at $35.00 upon expiration): -$152.95
=+($35.00-$35.48)*300 - $8.95 commissions

Total Net Profit (If FL assigned at $35.00 at Nov2012 expiration): +$270.85
= (+$423.80 +$0.00 -$152.95)

Absolute Return (If FL assigned at $35.00 at Nov2012 expiration): +2.5%
= +$270.85/$10,635.05
Annualized Return (If stock assigned): +34.4%
= (+$270.85/$10,635.05)*(365/27 days)

The downside 'breakeven price' at expiration is at $34.03 ($35.48 - $1.45).  Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held 27 days until Nov2012 options expiration) for this Foot Locker Inc. covered calls position is 69.5%. This compares with a probability of profit of 51.0% for a buy-and-hold of FL over the same time period.

The 'crossover price' at expiration is $36.45 ($35.00 + $1.45).  This is the price above which it would have been more profitable to simply buy-and-hold FL stock until November 16, 2012 (the Nov2012 options expiration date) rather than establishing the covered calls position. The probability of exceeding this crossover price at expiration is 38.6%.

Continuation -- iShares MSCI South Korea ETF

After Oct2012 options expiration last Friday, two long uncovered stock positions (Apple Inc. and iShares MSCI South Korea ETF) 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 the iShares MSCI South Korea ETF (symbol EWY) and to re-establish a covered calls position with a Nov2012 expiration and at the $58.00 strike price. The detailed transactions history for this EWY position as well as a possible overall performance result is as follows:

iShares MSCI South Korea ETF (EWY) -- Continuation
This past Friday, the Oct2012 covered calls position in iShares MSCI South Korea ETF was closed out. Today, with iShares MSCI South Korea ETF (EWY) trading at $58.34, a covered calls position was established by selling the Nov2012 $58.00 calls.

The transactions history for this ongoing 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
09/21/2012 Bought-to-Close 5 EWY Sep2012 $57.00 Call Options at $2.90
09/21/2012 Sell-to-Open 5 EWY Oct2012 $59.00 Call Options at $1.87
Note: the price of EWY was $59.85 when this transaction was made.
10/20/2012 EWY Oct2012 call options expired
Note: price of EWY was $57.43 at the close on Oct2012 options expiration Friday.
10/22/2012 Sell-to-Open 5 EWY Nov2012 $58.00 Call Options at $1.56
Note: the price of EWY was $58.34 when this transaction was made.


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: +$1,089.20
= ($1.40-$1.68+$2.03-$2.90+$1.87+$1.56)*500 shares - 4*$12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY assigned at $58.00): +$1,736.05
= ($58.00-$54.51)*500 - $8.95 commissions

Total Net Profit(If EWY assigned at $58.00): +$2,825.25
= (+$1,089.20 +$0.00 +$1,736.05)

Absolute Return if Assigned at $58.00: +10.4%
= +$2,825.25/$27,263.95
Annualized Return If Assigned (ARIA): +34.4%
= (+$2,825.25/$27,263.95)*(365/110 days)

October 2012 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained six covered calls positions with October 2012 expirations. A summary of the results is as follows:

- Two positions (Apple Inc. and iShares MSCI South Korea ETF) had their options expire yesterday since the stock prices closed below the Oct2012 options' strike prices.  So now, the Covered Calls Advisor Portfolio (CCAP) is long 100 shares of Apple Inc. (AAPL) and 500 shares of iShares MSCI South Korea ETF (EWY).  A decision will be made by Monday to either sell these shares or to re-establish covered calls positions by selling Nov2012 call options.  When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day with the details.

- The other four positions (Citigroup Inc. Halliburton Co., iShares MSCI China ETF, and MetLife Inc.) were closed out upon Oct2012 options expiration. The options expired and the accompanying equities were assigned (i.e. equities called away) at their respective strike prices.  
With the cash available from the closing of these positions, the Covered Calls Advisor will establish new positions this week with Nov2012 options expirations and will post them on this blog the same day they occur.

The annualized return-on-investment financial results for these four closed positions are:
Citigroup Inc. = +33.6%
Halliburton Co. = +34.4%
iShares MSCI China ETF = +20.0%
MetLife Inc. = +22.3%


The detailed transactions history and results for these four closed positions are as follows:

1. Citigroup Inc. (C) -- Closed
The transactions history was as follows:
9/26/2012 Sold 10 Citigroup, Inc. (C) Oct2012 $31.00 Put Options @ $.73
Note: the price of Citi stock was $32.12 today when these Puts were sold.
10/19/2012 Citigroup Oct2012 Options expired
Note: the price of Citi was $37.16 upon options expiration.

The overall performance result (including commissions) for this Citigroup, Inc.(C) transaction was as follows:
100% Cash-Secured Cost Basis: $31,000.00
= $31.00*1,000

Net Profit:
(a) Options Income: +$713.75
= ($.73*1,000 shares) - $16.25 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Citigroup stock closed at $37.16, well above the $31.00 strike price at Oct2012 expiration): +$0.00
= ($31.00-$31.00) -$0.00 commissions

Total Net Profit: +$713.75
= (+$713.75 options income +$0.00 dividends +$0.00 capital appreciation)

Absolute Return: +2.3%
= +$713.75/$31,000.00
Annualized Return: +33.6%
= (+$713.75/$31,000.00)*(365/25 days)


2. Halliburton Co.(HAL) -- Closed 
The transactions history was as follows:
09/26/2012 Bought 700 HAL shares @ $33.819
09/26/2012 Sold 7 HAL Oct2012 $33.00 Call Options @ $1.65
Note: the price of HAL shares was $33.85 today when these options were sold.
10/19/2012 HAL Oct2012 Options expired
Note: the price of Halliburton stock was $34.98 upon options expiration.

The overall performance result (including commissions) for this Halliburton Co. (HAL) covered calls position was as follows: Stock Purchase Cost: $23,682.25
= ($33.819*700+$8.95 commission)

Net Profit:
(a) Options Income: +$1,140.80
= ($1.65 X 700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HAL assigned at $33.00 upon expiration): -$582.25
=+($33.00-$33.819)*700 - $8.95 commissions

Total Net Profit: +$558.55
= (+$1,140.80 +$0.00 -$582.25)

Absolute Return (HAL assigned at $33.00 at Oct2012 expiration): +2.4%
= +$558.55/$23,682.25
Annualized Return: +34.4%
= (+$558.55/$23,682.25)*(365/25 days)


3. iShares MSCI China ETF (FXI) -- Closed
The transaction history for this iShares MSCI China ETF (FXI) position was 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.
08/28/2012 Sold-to-Open 10 FXI Sep2012 $34.00 Calls @ $.56
Note: the price of FXI was $33.62 today when this transaction was made.
09/21/2012 Bought-to-Close 10 FXI Sep2012 $34.00 Call Options at $.90
09/21/2012 Sell-to-Open 10 FXI Oct2012 $34.00 Call Options at $1.35
Note: the price of FXI was $34.88 when this transaction was made.
10/19/2012 FXI Oct2012 Options expired
Note: the price of FXI was $37.13 upon options expiration.

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

Net Profit:
(a) Options Income: +$1,535.25
=($.80-$.42+$.31+$.56-$.90+$1.35)*1,000 shares - 4*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI assigned at $34.00 upon expiration): -$98.95
=($34.00-$34.09)*1,000 - $8.95 commissions

Absolute Return (FXI assigned at $34.00 at Oct2012 options expiration): +4.5%
= +$1,535.25/$34,098.95
Annualized Return: +20.0%
= (+$1,535.25/$34,098.95)*(365/82 days) The transactions are as follows:


4. MetLife Inc. (MET) -- Closed
The transaction history for this MetLife Inc. position was as follows:
09/26/2012 Bought 600 MET shares @ $33.80 09/26/2012 Sold 6 MET Oct2012 $33.00 Call Options @ $1.47
Note: the price of MET shares was $33.81 today when these options were sold.
10/19/2012 MET Oct2012 Options expired
Note: the price of MET was $35.93 upon options expiration.

The overall performance result (including commissions) for this MetLife Inc. (MET) covered calls position was as follows:
Stock Purchase Cost: $20,288.95
= ($33.80*600+$8.95 commission)

Net Profit:
(a) Options Income: +$868.55
= ($1.47 X 600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MET assigned at $33.00 upon expiration): -$488.95
=+($33.00-$33.80)*600 - $8.95 commissions

Total Net Profit (MET assigned at $33.00 at Oct2012 expiration): +$310.00
= (+$868.55 +$0.00 -$558.55)

Absolute Return (MET assigned at $33.00 at Oct2012 expiration): +1.5%
= +$310.00/$20,288.95
Annualized Return: +22.3%
= (+$310.00/$20,288.95)*(365/25 days)

Established New Positions in Fusion-io Inc., iShares MSCI China ETF, SPDR Gold Shares, and Potash Corp.

Today, new positions were established in four equities [Fusion-io Inc.(FIO), iShares MSCI China ETF (FXI), SPDR Gold Shares (GLD), and Potash Corp.(POT)] with Nov2012 expirations. The positions and some possible results are as follows:


1. Fusion-io Inc. (Ticker Symbol FIO) -- New Position
The transactions were as follows:
10/19/2012 Bought 300 FIO shares @ $27.55
10/19/2012 Sold 3 FIO Nov2012 $29.00 Call Options @ $2.55
Note: the price of FIO was $27.63 today when these options were sold.

A possible overall performance result (including commissions) is as follows:
Stock Purchase Cost: $8,273.95
= ($27.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$753.80 = ($2.55*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FIO price unchanged at $27.55 upon expiration): -$8.95
=+($27.55-$27.55)*300 - $8.95 commissions; OR
(c) Capital Appreciation (If FIO assigned at $29.00 upon expiration): +$426.05 =+($29.00-$27.55)*300 - $8.95 commissions

Total Net Profit (If FIO price unchanged at $27.55 upon expiration): +$744.85

= (+$753.80 +$0.00 -$8.95); OR
Total Net Profit (If FIO assigned at $29.00 at Nov2012 expiration): +$1,179.85 = (+$753.80 +$0.00 +$426.05)

Absolute Return (If FIO price unchanged at $27.55 upon Nov2012 expiration): +9.0%
= +$744.85/$8,273.95
Annualized Return (If stock assigned): +109.5%
= (+$744.85/$8,273.95)*(365/30 days); OR

Absolute Return (If FIO assigned at $29.00 at Nov2012 expiration): +14.3% = +$1,179.85/$8,273.95
Annualized Return (If stock assigned): +173.5%
= (+$1,179.85/$8,273.95)*(365/30 days)




2. iShares MSCI China ETF (Ticker Symbol FXI) -- New Position
The transactions were as follows:
10/19/2012 Bought 800 FXI shares @ $37.11
10/19/2012 Sold 8 FXI Nov2012 $36.00 Call Options @ $1.52
Note: the price of FXI was $37.14 today when the options were sold.

A possible overall performance result (including commissions) for this iShares MSCI China ETF covered calls position is as follows:
Stock Purchase Cost: $29,696.95
= ($37.11*800+$8.95 commission)

Net Profit:
(a) Options Income: +$1,201.05
= 800*$1.52 - $14.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI price unchanged at $37.11): -$8.95
= ($37.11-$37.11)*800 - $8.95 commissions
(c) Capital Appreciation (If FXI assigned at $36.00): -$896.95
= ($36.00-$37.11)*800 - $8.95 commissions

Total Net Profit (If FXI assigned at $36.00): +$304.10
= (+$1,201.05 +$0.00 -$896.95)

Absolute Return if Assigned at $36.00: +1.0%
= +$304.10/$29,696.95
Annualized Return If Assigned (ARIA): +12.5%
= (+$304.10/$29,696.95)*(365/30 days)

3. SPDR Gold Shares (Ticker Symbol GLD) -- New Position
The transaction was as follows:
10/19/2012 Sold 1 SPDR Gold Shares (GLD) Nov2012 $170.00 Put Options @ $4.40
Note: the price of GLD was $167.00 today when these Puts were sold.

Two possible overall performance result (including commissions) for this SPDR Gold Shares (GLD) transaction would be as follows:
100% Cash-Secured Cost Basis: $17,000.00 = $170.00*100

Net Profit:
(a) Options Income: +$430.30 = ($4.40*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GLD price unchanged at $167.00 at Nov2012 expiration):
-$300.00 = ($167.00-$170.00)*100 shares -$0.00 commissions; OR
(c) Capital Appreciation (If GLD price above $170.00 at Nov2012 expiration): +$0.00 = ($170.00-$170.00) -$0.00 commissions

Total Net Profit (If GLD price unchanged at $167.00 at Nov2012 options expiration): +$130.30 = (+$430.30 +$0.00 -$300.00); OR
Total Net Profit (If GLD price above $170.00 at Nov2012 options expiration): +$430.30 = (+$430.30 +$0.00 +$0.00)

Absolute Return (If GLD price unchanged at $167.00 at Nov2012 options expiration): +0.8% = +$130.30/$17,000.00
Annualized Return (If GLD price unchanged at $167.00 at Nov2012 expiration): +9.3%
= (+$130.30/$17,000.00)*(365/30 days)
Absolute Return (If GLD price above $170.00 at Nov2012 options expiration): +2.5% = +$430.30/$17,000.00
Annualized Return (If GLD above $170.00 at expiration): +30.8%
= (+$430.30/$17,000.00)*(365/30 days)

4.  Potash Corp. of Saskatchewan Inc. (Ticker Symbol POT) -- New Position
The transaction was as follows:
10/19/2012 Sold 3 Potash Corp.(POT) Nov2012 $40.00 Put Options @ $.88
Note: the price of Potash stock was $40.69 today when these Puts were sold.

A possible overall performance result (including commissions) for this Potash Corp.(POT) transaction would be as follows:
100% Cash-Secured Cost Basis:
$12,000.00 = $40.00*300

Net Profit:
(a) Options Income: +$252.80
= ($.88*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Potash stock above $40.00 at Nov2012 expiration): +$0.00 = ($40.00-$40.00) -$0.00 commissions

Total Net Profit (If stock price above $40.00 at Nov2012 options expiration): +$252.80 = (+$252.80 +$0.00 +$0.00)

Absolute Return (If stock price above $40.00 at Nov2012 options expiration and Put options thus expire worthless): +2.1%
= +$252.80/$12,000.00
Annualized Return (If stock price above $31.00 at expiration): +25.6%
= (+$252.80/$12,000.00)*(365/30 days)

Overall Market Meter Rating Remains at "Neutral"

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 Neutral.

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 3.38 (see blue line at the bottom of the chart above) is slightly lower than the 3.50 average of last month. The 3.38 is a Neutral rating (range from 2.51 to 3.50).  Five factors of the eight factors remained unchanged from last month.  The three factors that changed are as follows:
- Price Trend declined from Bullish to Slightly Bullish
- Interest Rates indicator improved from Slightly Bearish to Neutral
- Future Earnings Growth declined from Slightly Bullish to Neutral

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 1% out-of-the-money covered calls for the nearest expiration month." So with today's October 2012 options expiration, newly established positions for November 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