Established 100% Cash-Secured Puts -- Fusion-io Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Fusion-io Inc. (Ticker Symbol FIO) with a Feb2013 expiration.

The transaction was as follows:
01/29/2013 Sold 3 Fusion-io Inc. (FIO) Feb2013 $20.00 Put Options @ $2.00
Note: the price of FIO was $19.54 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 FIO transaction would be as follows:
100% Cash-Secured Cost Basis: $6,000.00 = $20.00*300

Net Profit:
(a) Options Income: +$588.80
= ($2.00*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FIO unchanged at $19.54 at Feb2013 expiration): -$138.00
= ($19.54-$20.00)*300 shares
(c) Capital Appreciation (If FIO above $20.00 at Feb2013 expiration): +$0.00 = ($20.00-$20.00)*300 shares

Total Net Profit (If FIO is unchanged at $19.54 at Feb2013 options expiration): +$450.80 = (+$588.80 +$0.00 -$138.00)
Total Net Profit (If FIO is above $20.00 strike price at Feb2013 options expiration): +$588.80  = (+$588.80 +$0.00 +$0.00)
Absolute Return (If FIO unchanged at $19.54 at Feb2013 options expiration and Put options are exercised at $20.00): +7.5%
= +$450.80/$6,000.00
Annualized Return (If stock price above $20.00 at expiration and Put options thus expire worthless): +144.3%
= (+$450.80/$6,000.00)*(365/19 days)

Absolute Return (If UAL above $20.00 at Feb2013 options expiration and Put options thus expire worthless): +9.8% = +$588.80/$6,000.00
Annualized Return (If stock price above $20.00 at expiration): +188.5%
= (+$588.80/$6,000.00)*(365/19 days)

The potential returns for this cash-secured short puts position are extraordinarily high since quarterly earnings are reported tomorrow.  So there is a great deal of price volatility embedded in today's option prices. 

Established Covered Call Position in Apple Inc.

Today, a new covered calls position was established in Apple Inc. (Ticker Symbol AAPL) with a Feb2012 options expiration as follows:

Apple Inc. (AAPL) -- New Covered Call Position
The transactions were as follows:
1/25/2013 Bought 100 AAPL shares @ $453.86
1/25/2013 Sold 1 AAPL Feb2013 $455.00 Call Option @ $12.35
Note: the price of AAPL was $454.35 when the option was sold.

A possible overall performance result (including commissions) for this Apple Inc. covered call is as follows:
Stock Purchase Cost: $45,394.95
= ($453.86*100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,225.30
= 100*$12.35 - $9.70 ommissions
(b) Dividend Income: +$265.00 ($2.65 * 100 shares) Ex-div on Feb 11th
(c) Capital Appreciation (If AAPL assigned at $455.00) = +$105.05
= ($455.00-$453.86)*100 - $8.95 commissions

Total Net Profit (If AAPL assigned at $455.00): +$1,595.35
= (+$1,225.30 +$265.00 +$105.05)

Absolute Return if Assigned (at $455.00): +3.5%
= +$1,595.35/$45,394.95
Annualized Return If Assigned (ARIA): +55.8%
= (+$1,595.35/$45,394.95)*(365/23 days)

Continuation -- iShares MSCI China ETF

This past Friday, the Jan2013 covered calls position in iShares MSCI China ETF was closed out by buying back the short Jan2013 call options.   Today, with iShares MSCI China ETF (Ticker Symbol FXI) trading at $41.75, a continuation of a covered calls position was re-established by selling the Feb2013 $41.00 calls.

The transactions history for this ongoing FXI covered calls position is as follows:
1/08/2013 Bought 1,000 FXI shares @ $40.619
1/08/2013 Sold 10 FXI Jan2013 $40.00 call options @ $.92
1/18/2013 Bought to Close 10 FXI Jan2013 $40.00 call options @ $1.70
1/24/2013 Sold 10 FXI Feb2013 $41.00 call options @ $1.12
Note: the price of FXI was $41.75 today when these 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: $40,627.95
= ($40.619*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$337.10
= 1,000*($.92-$1.70-$1.12) - 2*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $40.00): +$372.05
= ($41.00-$40.619)*1,000 - $8.95 commissions

Total Net Profit (If FXI assigned at $41.00): +$709.15
= (+$337.10 +$0.00 +$372.05)

Absolute Return if Assigned at $41.00: +1.7%
= +$709.15/$40,627.95
Annualized Return If Assigned (ARIA): +16.3%
= (+$709.15/$40,627.95)*(365/39 days)

Established Teva Pharmaceutical Industries Covered Calls Position

Today, a new covered calls position was established in Teva Pharmaceutical Industries Ltd (Ticker Symbol TEVA) with a Feb2012 options expiration as follows:

Teva Pharmaceutical Industries Ltd (TEVA) -- New Covered Calls Position
The transactions were as follows:
03/27/2013 Bought 300 TEVA shares @ $39.70
03/27/2013 Sold 3 TEVA Apr2013 $40.00 Call Options @ $.64
Note: the price of TEVA was $39.76 when these options were sold
A possible overall performance result (including commissions) for this Teva Pharmaceutical Industries Ltd  covered calls position is as follows:
Stock Purchase Cost: $11,918.95
= ($39.70*300+$8.95 commission)

Net Profit:
(a) Options Income: +$180.80
= 300*$.64 - $11.20 commissions
(b) Dividend Income: +$0.00   Note: next ex-div of $.31 is on May 16th
(c) Capital Appreciation (If TEVA price unchanged at $39.70 at Apr expiration): -$8.95
= ($39.70-$39.70)*300 - $8.95 commissions
(c) Capital Appreciation (If TEVA assigned at $40.00 at April expiration): +$81.05
= ($40.00-$39.70)*300 - $8.95 commissions

Total Net Profit (If TEVA price unchanged at $39.70): +$171.85
= (+$180.80 +$0.00 -$8.95)
Total Net Profit (If TEVA assigned at $40.00): +$261.85 = (+$180.80 +$0.00 +$81.05)

Absolute Return if Price Unchanged at $39.70: +1.4%
= +$171.85/$11,918.95
Annualized Return Price Unchanged: +21.1%
= (+$171.85/$11,918.95)*(365/25 days)

Absolute Return if Assigned (at $40.00): +2.2% = +$261.85/$11,918.95
Annualized Return If Assigned (ARIA): +32.1%
= (+$261.85/$11,918.95)*(365/25 days)

Establish Covered Calls Position in iShares MSCI China ETF

Today, a new covered calls position was established in iShares MSCI China ETF (FXI) with a Jan2012 options expiration. The positions and some possible results are as follows:

iShares MSCI China ETF (Ticker Symbol FXI) -- New Covered Calls Position
The transactions were as follows:
1/08/2013 Bought 1,000 FXI shares @ $40.619
1/08/2013 Sold 10 FXI Jan2013 $40.00 Call Options @ $.92

A possible overall performance result (including commissions) for this iShares MSCI China ETF covered calls position is as follows:
Stock Purchase Cost: $40,627.95
= ($40.619*1,000+$8.95 commission)

Net Profit:
(a) Options Income: +$903.55
= 1,000*$.92 - $16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $40.00): -$627.95
= ($40.00-$40.619)*1,000 - $8.95 commissions

Total Net Profit (If FXI assigned at $40.00): +$275.60
= (+$903.55 +$0.00 -$627.95)

Absolute Return if Assigned at $40.00: +0.7%
= +$275.60/$40,627.95
Annualized Return If Assigned (ARIA): +20.6%
= (+$275.60/$40,627.95)*(365/12 days)

Returns -- Through December 2012

This Covered Calls Advisor blog began in September 2007. The performance results have been as follows:

The Covered Calls Advisor uses the Russell 3000 Index as a benchmark against which the Covered Calls Advisor Portfolio is compared. The table above shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 13.67% over the 5.3 years that this blog has existed. As shown above, the corresponding average compound annual return-on-investment outperformance of 2.45% per year. This average is slightly below the Covered Calls Advisor's desired range of +3% to +5% outperformance for long-term results obtained from a well-managed covered calls investing program.

As also shown in the table above, the Covered Calls Advisor Portfolio (CCAP) underperformed the benchmark Russell 3000 index by 5.08 percentage points (+9.07% minus +14.15%) in calendar year 2012. One reason for this relative underperformance is the underperformance of emerging market equities compared with U.S. equities during this period. The benchmark Russell 3000 index consists solely of U.S. stocks whereas the Covered Calls Advisor's Portfolio has contained about 35% exposure to international (primarily emerging market) equities. While this emerging markets exposure has penalized comparative performance during the past two years, the Covered Calls Advisor maintains a commitment to the long-run benefits of global investing, namely:
(1)Improved portfolio diversification; and most importantly
(2)Achieving overall portfolio return-on-investment outperformance.
Another reason for CCAP's relative underperformance in 2012 was some counter-productive efforts at market timing.

As 2012 concludes, my wish for each of you is for a Happy and Prosperous New Year in 2013!

And remember the Covered Calls Advisor's motto: "Stick With Covered Calls".

Godspeed,
Jeff