February 2013 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained three covered calls positions with February 2013 expirations. A summary of the results is as follows:

- Two positions (Apple Inc. and Teva Pharmaceutical Industries Ltd) had their options exercised this past expiration Friday since the stock prices closed above the Feb2013 options' strike prices.  The associated equities were assigned (i.e. equities called away) at their respective strike prices. 

The annualized return-on-investment financial results for these two closed positions are:
Apple Inc. = +55.8%
Teva Pharmaceuticals = +27.1%
The detailed transactions history and results for these closed positions are provided below.

- For the other position which was in iShares MSCI China ETF (ticker symbol FXI),  the equity closed at $40.32, which was below the $41.00 strike price.  Therefore, the options expired worthless and the 1,000 shares of FXI were retained.  A decision will be made to either sell the remaining 1,000 FXI shares or to sell 10 March 2013 options to re-establish a covered calls position against the FXI shares currently held.

The history and results for the two positions closed out upon their Feb2013 expiration are:

1. Apple Inc. (AAPL) -- Closed
The transactions history was 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.
2/15/2013 100 AAPL shares assigned at $455.00 strike price
Note: the closing price of AAPL on expiration Friday was $460.16

The overall performance result (including commissions) for this Apple Inc. covered call was 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 commissions
(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 (AAPL stock assigned at $455.00): +$1,595.35
= (+$1,225.30 +$265.00 +$105.05)

Absolute Return: +3.5%
= +$1,595.35/$45,394.95
Annualized Return: +55.8%
= (+$1,595.35/$45,394.95)*(365/23 days)  


2. Teva Pharmaceutical Industries Ltd (TEVA) -- Closed
The transactions were as follows:
1/23/2013 Bought 300 TEVA shares @ $37.566
1/23/2013 Sold 3 TEVA Feb2013 $37.50 Call Options @ $.83
2/15/2013 100 TEVA shares assigned at $37.50 strike price
Note: the closing price of TEVA on expiration Friday was $38.34

A possible overall performance result (including commissions) for this Teva Pharmaceutical Industries Ltd covered calls position is as follows: Stock Purchase Cost: $11,278.75
= ($37.566*300+$8.95 commission)

Net Profit:
(a) Options Income: +$237.80
= 300*$.83 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TEVA assigned at $37.50): -$28.75
= ($37.50-$37.566)*300 - $8.95 commissions

Total Net Profit (TEVA assigned at $37.50): +$209.05
= (+$237.80 +$0.00 -$28.75)

Absolute Return: +1.9%
= +$209.05/$11,278.75
Annualized Return: +27.1%
= (+$209.05/$11,278.75)*(365/25 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 3.50 (see blue line at the bottom of the chart above) is slightly higher than the 3.38 average of last month. The 3.50 is a Neutral rating (range from 2.51 to 3.50).  Six factors of the eight factors remained unchanged from last month.  The two factors that changed are as follows:
- Price Trend improved from Neutral to Bullish
- Total Market Index-to-GDP Ratio declined from Slightly Bearish to Bearish

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 this week's February 2013 options expiration, newly established positions for March 2013 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

Closed -- Fusion-io Inc.

Unexpectedly, the 3 short Feb2013 $20.00 Puts were assigned overnight.  FIO exceeded its quarterly sales and profit estimates, but because of a delay in receiving orders from its two largest vendors (Apple and Facebook), it expects revenues to be substantially lower during the next two quarters than previously planned.  So the stock tanked on the day of this announcement.  This morning, with the stock trading higher than yesterday's close, a decision was made to sell the 300 shares of FIO and close out the position with a relatively small absolute loss of 1.5%.

The transactions were 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.
2/01/2013 3 Feb2013 FIO Puts assigned at $20.00 and thus 300 FIO shares purchased 02/01/2013 Sold 300 FIO shares at $17.74 to close out the position  

The overall performance result (including commissions) for this Fusion-io Inc. (FIO) cash-secured Puts position was as follows:
Stock Purchase Cost: $6,008.95
= ($20.00*300+$8.95 commission)

Net Profit:
(a) Options Income: +$588.80
= $2.00  X 300 shares - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$680.95
=+($17.76-$20.00)*300 - $8.95 commissions

Total Net Profit: -$92.15
= (+$588.80 +$0.00 -$680.95)

Absolute Return: -1.5%
= -$92.15/$6,008.95