Established a 100% Cash-Secured Puts Position in SanDisk Corporation

Today, a new 100% cash-secured Puts position was established in SanDisk Corporation (Ticker Symbol SNDK) with a Sep2013 expiration and at the $55.00 strike price.  As detailed below, this investment will provide a +2.6% absolute return in 26 days (which is equivalent to a +35.9% annualized return) if the stock closes at or above $55.00 at options expiration on Sept 20th.  The current Greek value of Delta for this option of 55.8% provides a good estimate of the probability that the stock price will be above the $55.00 strike price at Sep2013 options expiration. Thus, the resulting expected value of the annualized ROI for this investment is +20.1% = (+35.9%x.558).

Details of this transaction along with a potential return-on-investment result are: 

SanDisk Corporation (SNDK)
The transaction is as follows:
8/27/2013 Sold 2 Sep2013 $55.00 SNDK Puts @ $1.46
Note: The price of SNDK was $55.44 when this transaction was executed.

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 SanDisk transaction would be as follows:
100% Cash-Secured Cost Basis: $11,000.00 = $55.00*200

Net Profit:
(a) Options Income: +$281.55
= ($1.46*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SNDK remains above $55.00 at Sep2013 expiration): +$0.00
= ($55.00-$55.00)*200 shares

Total Net Profit (If SNDK is above $55.00 strike price at Sep2013 options expiration): +$281.55 
= (+$281.55 +$0.00 +$0.00)

Absolute Return (If SNDK is above $55.00 at Sep2013 options expiration and Put options thus expire worthless): +2.6%
= +$281.55/$11,000.00
Annualized Return (If SNDK above $55.00 at expiration): +35.9%
= (+$281.55/$11,000.00)*(365/26 days)

The downside 'breakeven price' at expiration is at $53.54 ($55.00 - $1.46), which is 3.4% below the current market price of $55.44.
The 'crossover price' at expiration is $56.90 ($55.44 + $1.46). This is the price above which it would have been more profitable to simply buy-and-hold SanDisk until Sep 20th (the Sep2013 options expiration date) rather than holding these short Put options.

Established Covered Calls Position in PulteGroup Inc.

Today, a new covered calls position was established in PulteGroup Inc. (Ticker Symbol PHM).  This PHM position was established at the $15.00 strike price and with an Oct2013 expiration. As detailed below, this investment will provide a +3.7% absolute return in 61 days (which is equivalent to a +22.4% annualized return) if the stock closes at or above $15.00 at options expiration on Oct 18th.  The current Greek value of Delta for this option of 68.3% provides a good estimate of the probability that the stock price will be above the $15.00 strike price at Oct2013 options expiration. Thus, the resulting expected value of the annualized ROI for this investment is +15.3% = (+22.4%x.683).

The details of the associated transactions and a potential return-on-investment result are as follows:

1. PulteGroup Inc. (PHM)
The transactions were as follows:
08/20/2013 Bought 300 PHM shares @ $16.08
08/20/2013 Sold 3 PHM Oct2013 $15.00 Call Options @ $1.75

A possible overall performance result (including commissions) for these Pulte covered calls is as follows:
Stock Purchase Cost: $4,832.95
= ($16.08*300+$8.95 commission)

Net Profit:
(a) Options Income: +$513.80
= 300*$1.75 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PHM assigned at $15.00) = -$332.95
= ($15.00-$16.08)*300 - $8.95 commissions

Total Net Profit (If PHM assigned at $15.00): +$180.85
= (+$513.80 +$0.00 -$332.95)

Absolute Return if Assigned (at $15.00): +3.7%
= +$180.85/$4,832.95
Annualized Return If Assigned (ARIA): +22.4%
= (+$180.85/$4,832.95)*(365/61 days)

Established a 100% Cash-Secured Puts Position in Citigroup Inc.

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Citigroup Inc. (Ticker Symbol C) with a Sep2013 expiration and at the $49.00 strike price.  As detailed below, this investment will provide a +2.3% absolute return in 34 days (which is equivalent to a +24.2% annualized return) if the stock closes at or above $49.00 at options expiration on Sept 20th.  The current Greek value of Delta for this option of 60% provides a good estimate of the probability that the stock price will be above the $49.00 strike price at Sep2013 options expiration. Thus, the resulting expected value of the annualized ROI for this investment is +14.5% = (+24.2%x.60).

Details of this transaction along with a potential return-on-investment result are: 

Citigroup Inc.(C)
The transaction is as follows:
8/19/2013 Sold 3 Sep2013 $49.00 Puts @ $1.14
Note: The price of Citi was $49.73 when this transaction was executed.

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 Citigroup transaction would be as follows:
100% Cash-Secured Cost Basis: $14,700.00 = $49.00*300
Note:  the price of C was $49.73 when these Put options were sold.

Net Profit:
(a) Options Income: +$330.80
= ($1.14*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If C remains above $49.00 at Sep2013 expiration): +$0.00
= ($49.00-$49.00)*300 shares

Total Net Profit (If C is above $49.00 strike price at Sep2013 options expiration): +$330.80 
= (+$330.80 +$0.00 +$0.00)

Absolute Return (If C is above $49.00 at Sep2013 options expiration and Put options thus expire worthless): +2.3%
= +$330.80/$14,700.00
Annualized Return (If C above $49.00 at expiration): +24.2%
= (+$330.80/$14,700.00)*(365/34 days)

The downside 'breakeven price' at expiration is at $47.86 ($49.00 - $1.14), which is 3.8% below the current market price of $49.73.
The 'crossover price' at expiration is $50.87 ($49.73 + $1.14). This is the price above which it would have been more profitable to simply buy-and-hold Citigroup until Sep 20th (the Sep2013 options expiration date) rather than holding these short Put options.

August 2013 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained four positions with August 2013 expirations.  A summary of the results is as follows:

-  Three of the four positions (Hertz Global Holdings Inc., Marathon Petroleum Corp., and Potash Corp. of Saskatchewan Inc.) were closed out at expiration.  This was the optimal result for these three positions in that the maximum potential return-on-investment (ROI) results from when the positions were established were actually achieved.  The annualized ROIs for these three closed positions are:
Hertz Global Holdings Inc. = +1.8% absolute return (equivalent to +38.4% annualized return for the 17 day holding period)
Marathon Petroleum Corp. = +1.7% absolute return (equivalent to +48.0% annualized return for 13 day holding period)
Potash Corp. of Saskatchewan Inc. = +1.6% absolute return (equivalent to +48.8% annualized return for 12 day holding period)
The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls positions are established (most likely in the upcoming week).  These transactions will be posted on this blog the same day they occur.

- One of the four positions (a Transocean Inc. covered calls position) had the options expire since the stock price closed Friday at $47.00, below the Aug2013 options' $48.00 strike price.  So, the Covered Calls Advisor Portfolio (CCAP) is now long shares in Transocean.  A decision will be made early this week to either sell these shares or to continue with another covered calls position by selling Sep2013 call options against the current long stock holding.  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 transaction details.

This was a very successful month given that the overall stock market declined by 2.4%, yet the Covered Calls Advisor Portfolio achieved very positive returns on each of the three positions that were closed this month.  This occurred primarily because relatively conservative strike prices were chosen (i.e. strikes below the stock prices when the positions were established).  The detailed transactions history and results for the three closed positions summarized above are:

1. Hertz Global Holdings (HTZ) -- Closed
The transaction is as follows:
8/1/2013 Sold 7 Aug2013 $24.00 Puts @ $.45
Note: The price of HTZ was $24.56 when this transaction was executed.

The overall performance result (including commissions) for this HTZ transaction was as follows:
100% Cash-Secured Cost Basis: $16,800.00 = $24.00*700

Net Profit:
(a) Options Income: +$300.80
= ($.45*700 shares) - $14.20 commissions
Note: Upon Aug2013 options expiration closing on Friday, HTZ stock closed at $24.66, above the $24.00 strike price; so the short Put options expired worthless and the full options income received when these options were originally sold was retained as profit.
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HTZ closed above $24.00 at Aug2013 expiration): +$0.00
= ($24.00-$24.00)*700 shares

Total Net Profit (HTZ closed above $24.00 strike price at Aug2013 options expiration): +$300.80  = (+$300.80 +$0.00 +$0.00)

Absolute Return (HTZ was above $24.00 at Aug2013 options expiration and Put options thus expire worthless): +1.8%
= +$300.80/$16,800.00
Annualized Return on Investment (AROI): +38.4%
= (+$300.80/$16,800.00)*(365/17 days)


2. Marathon Petroleum Corp. (MPC) -- Closed
The transaction is as follows:
8/5/2013 Sold 2 Aug2013 $70.00 Puts @ $1.25
Note: The price of MPC was $70.96 when this transaction was executed.

The performance result (including commissions) for this MPC transaction was as follows:
100% Cash-Secured Cost Basis: $14,000.00 = $70.00*200
Note:  the price of MPC was $70.96 when these Put options were sold.

Net Profit:
(a) Options Income: +$239.55
= ($1.25*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (MPC closed at the $70.00 strike price at Aug2013 expiration): +$0.00
= ($70.00-$70.00)*200 shares

Total Net Profit (MPC closed at the $70.00 strike price at Aug2013 options expiration): +$239.55 
= (+$239.55 +$0.00 +$0.00)

Absolute Return (MPC closed at the $70.00 at Aug2013 options expiration and Put options thus expire worthless): +1.7%
= +$239.55/$14,000.00
Annualized Return on Investment (AROI): +48.0%
= (+$239.55/$14,000.00)*(365/13 days)



3.  Potash Corp of Saskatchewan Inc. (POT) -- Closed
The transactions were as follows:
08/06/2013 Bought 300 POT shares @ $28.80
08/06/2013 Sold 3 POT Aug2013 $28.00 Call Options @ $1.33
Note: the price of POT was $28.82 when the options were sold.

The performance result (including commissions) for these Potash (POT) covered calls is as follows:
Stock Purchase Cost: $8,648.95
= ($28.80*300+$8.95 commission)

Net Profit:
(a) Options Income: +$387.80
= 300*$1.33 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (POT assigned at $28.00) = -$248.95
= ($28.00-$28.80)*300 - $8.95 commissions

Total Net Profit (POT assigned at $28.00): +$138.85
= (+$387.80 +$0.00 -$248.95)

Absolute Return: +1.6%
= +$138.85/$8,648.95
Annualized Return: +48.8%
= (+$138.85/$8,648.95)*(365/12 days)

Established a 100% Cash-Secured Puts Position in Marathon Petroleum Corporation

Today, the Covered Calls Advisor established a new 100% Cash-Secured Puts position in Marathon Petroleum Corporation (Ticker Symbol MPC) with a Sep2013 expiration and at the $70.00 strike price.  As detailed below, this investment will provide a +3.6% absolute return in 38 days (which is equivalent to a +35.0% annualized return) if the stock closes at or above $70.00 at options expiration on Sept 20th.

This position was established because the MPC Aug2013 short Puts will likely expire tomorrow and the Covered Calls Advisor wants to retain a position in MPC.  I agree with both Goldman Sachs and Credit Suisse that MPC is undervalued at its current price, however relatively conservative out-of-the-money Puts were sold because of the current stock market volatility.  An open order was placed early this afternoon and was executed within the last 15 minutes prior to today's market close.  This transaction along with a potential return-on-investment result are: 

Marathon Petroleum Corp. (MPC)
The transaction is as follows:
8/15/2013 Sold 2 Sep2013 $70.00 Puts @ $2.60
Note: The price of MPC was $70.74 when this transaction was executed.

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 two Put options sold.

A possible overall performance results(including commissions) for this MPC transaction would be as follows:
100% Cash-Secured Cost Basis: $14,000.00 = $70.00*200
Note:  the price of MPC was $70.74 when these Put options were sold.

Net Profit:
(a) Options Income: +$509.55
= ($2.60*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MPC remains above $70.00 at Sep2013 expiration): +$0.00
= ($70.00-$70.00)*200 shares

Total Net Profit (If MPC is above $70.00 strike price at Sep2013 options expiration): +$509.55 
= (+$509.55 +$0.00 +$0.00)

Absolute Return (If MPC is above $70.00 at Sep2013 options expiration and Put options thus expire worthless): +3.6%
= +$509.55/$14,000.00
Annualized Return (If MPC above $70.00 at expiration): +35.0%
= (+$509.55/$14,000.00)*(365/38 days)

The downside 'breakeven price' at expiration is at $67.40 ($70.00 - $2.60), which is 3.6% below the current market price.
The 'crossover price' at expiration is $73.34 ($70.74 + $2.60). This is the price above which it would have been more profitable to simply buy-and-hold MPC until Sep 20th (the Sep2013 options expiration date) rather than holding the short Put options.

Established Five New Positions -- Citigroup Inc., Freeport McMoran Inc., Hertz Global Holdings Inc., Intel Corp, and iShares MSCI South Korea ETF

The Covered Calls Advisor has established three new positions in United Continental Holdings Inc.(Ticker Symbol UAL), iShares MSCI China ETF (Ticker Symbol FXI), and Potash Corp of Saskatchewan Inc.(Ticker Symbol FXI). The UAL and FXI positions are 100% Cash-Secured Put Options.  The Covered Calls Advisor does not use margin, so the potential results shown below reflect the fact that these positions were established using 100% cash securitization for the Put options positions sold.   The position in POT was established as covered calls.  

As we know, Covered Calls and 100% Cash-Secured Puts are synthetically equivalent positions when established at the same strike price and same expiration date.  The Covered Calls Advisor's selection in each case was based on establishing a position where the Implied Volatility (IV) was ever-so-slightly higher (when comparing the comparable Puts and Calls for each equity).

Details for each position are provided below. In each case, Sep2013 expirations were selected and conservative positions were established at strike prices below the current market price of the equities.

1. United Continental Holdings Inc. (UAL)

The transaction is as follows:

8/15/2013 Sold 3 Sep2013 $28.00 Puts @ $1.04

Note: The price of UAL was $29.57 when this transaction was executed.

A possible overall performance results (including commissions) for this UAL transaction would be as follows:

100% Cash-Secured Cost Basis: $8,400.00 = $28.00*300

Net Profit:

(a) Options Income: +$300.80

= ($1.04*300 shares) - $11.20 commissions

(b) Dividend Income: +$0.00

(c) Capital Appreciation (If UAL remains above $28.00 at Sep2013 expiration): +$0.00

= ($28.00-$28.00)*300 shares

Total Net Profit (If UAL is above $28.00 strike price at Sep2013 options expiration): +$300.80 

= (+$300.80 +$0.00 +$0.00)

Absolute Return (If UAL is above $28.00 at Sep2013 options expiration and Put options thus expire worthless): +3.6%
= +$300.80/$8,400.00

Annualized Return (If UAL above $28.00 at expiration): +34.4%

= (+$300.80/$8,400.00)*(365/38 days)

The downside 'breakeven price' at expiration is at $26.96 ($28.00 - $1.04).  This is the price at which this 100% cash-secured Puts investment would make neither a profit or a loss.

The 'crossover price' at expiration is $30.61 ($29.57 + $1.04). This is the price above which it would have been more profitable to simply buy-and-hold UAL stock until Sep 20th (the Sep2013 options expiration date) rather than holding the short Put options.

2. iShares MSCI China ETF (FXI)
The transaction is as follows:
8/15/2013 Sold 5 Sep2013 $35.00 Puts @ $.65
Note: The price of FXI was $35.95 when this transaction was executed.

A possible overall performance results(including commissions) for this FXI transaction would be as follows:
100% Cash-Secured Cost Basis: $17,500.00 = $35.00*500

Net Profit:
(a) Options Income: +$312.30
= ($.65*500 shares) - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains above $35.00 at Sep2013 expiration): +$0.00
= ($35.00-$35.00)*500 shares

Total Net Profit (If FXI is above $35.00 strike price at Sep2013 options expiration): +$312.30  = (+$312.30 +$0.00 +$0.00)

Absolute Return (If FXI is above $35.00 at Sep2013 options expiration and Put options thus expire worthless): +1.8%
= +$312.30/$17,500.00
Annualized Return (If FXI above $35.00 at expiration): +17.1%
= (+$312.30/$17,500.00)*(365/38 days)

The downside 'breakeven price' at expiration is at $34.35 ($35.00 - $.65).
The 'crossover price' at expiration is $36.60 ($35.95 + $.65). This is the price above which it would have been more profitable to simply buy-and-hold FXI until Sep 20th (the Sep2013 options expiration date) rather than investing in the short Put options.


3.  Potash Corp of Saskatchewan Inc. (POT)

The transactions were as follows:
08/15/2013 Bought 300 POT shares @ $30.10
08/06/2013 Sold 3 POT Sep2013 $29.00 Call Options @ $2.00

A possible overall performance result (including commissions) for these Potash (POT) covered calls is as follows:

Stock Purchase Cost: $9,038.95

= ($30.10*300+$8.95 commission)

Net Profit:

(a) Options Income: +$588.80

= 300*$2.00 - $11.20 commissions

(b) Dividend Income: +$0.00

(c) Capital Appreciation (If POT assigned at $29.00) = -$338.95
= ($29.00-$30.10)*300 - $8.95 commissions

Total Net Profit (If POT assigned at $29.00): +$249.85

= (+$588.80 +$0.00 -$338.95)

Absolute Return if Assigned (at $29.00): +2.8%

= +$249.85/$9,038.95

Annualized Return If Assigned (ARIA): +26.6%

= (+$249.85/$9,038.95)*(365/38 days)

The downside 'breakeven price' at expiration is at $28.10 ($30.10 - $2.00).  This is the price at which this covered calls investment would make neither a profit or a loss.

The 'crossover price' at expiration is $31.00 ($29.00 + $2.00). This is the price above which it would have been more profitable to simply buy-and-hold POT stock until Sep 20th (the Sep2013 options expiration date) rather than establishing the covered calls in POT.

Established Two New Positions in Transocean Inc.

Today, two new positions were established in Transocean Inc. (Ticker Symbol RIG).  Both positions were established at the $48.00 strike price.  Today's 2nd quarter earnings release was in-line for both revenue and earnings.  These investments are made primarily because Transocean has an attractive valuation, but today's quarterly report also revealed this trifecta of encouraging guidance:

1. Increasing demand for its services as demonstrated by a 19% increase in its year-over-year backlog.
2. Prices Increasing.  As also signaled in earlier earnings reports by RIG's competitors (Ensco and Noble Corp), recent contract extensions for its rigs have been signed at significant increases compared with current pricing.
3. Strong internal cost controls.  The new CEO is committed to improved operating margins, and implementation of his expense control process has begun.

The detailed transactions and some potential results are as follows:

1. Transocean Inc. -- 100% Cash-Secured Puts for August Expiration
The transaction is as follows:
8/08/2013 Sold 2 Aug2013 $48.00 Puts @ $.78
Note: The price of RIG was $47.79 when this transaction was executed.

A possible overall performance result (including commissions) for this RIG transaction would be as follows:
100% Cash-Secured Cost Basis: $9,600.00
= $48.00*200

Net Profit:
(a) Options Income: +$145.55
= ($.78*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If RIG closes above $48.00 at Aug2013 expiration): +$0.00
= ($48.00-$48.00)*200 shares

Total Net Profit (If RIG is above $48.00 strike price at Aug2013 options expiration): +$145.55 
= (+$145.55 +$0.00 +$0.00)

Absolute Return (If RIG is above $48.00 at Aug2013 options expiration and Put options thus expire worthless): +1.5%
= +$145.55/$9,600.00
Annualized Return (If RIG above $48.00 at expiration): +55.3%
= (+$145.55/$9,600.00)*(365/10 days)

The downside 'breakeven price' at expiration is at $47.22 ($48.00 - $.78).  This is the price at which this 100% cash-secured Puts investment would make neither a profit or a loss.
The 'crossover price' at expiration is $48.57 ($47.79 + $.78). This is the price above which it would have been more profitable to simply buy-and-hold RIG stock until Aug 16th (the Aug2013 options expiration date) rather than holding the short Put options.


2. Transocean Inc -- Covered Calls for September expiration
08/08/2013 Bought 200 RIG shares @ $48.76

08/08/2013 Sold 2 RIG Sep2013 $48.00 Call Options @ $1.65
08/21/2013 Ex-dividend of $.56 per share

This covered calls investment is a strategic one that explicitly considers the upcoming quarterly dividend of $.56 with an ex-dividend date in 13 days (Aug 21st).  If the current time value (i.e. extrinsic value) of $.89 = [$1.65 option premium - ($48.76 stock price - $48.00 strike price)] remaining in the short call option decays to less than the $.56 ex-dividend amount in 12 more days [i.e. Aug 20th (the business day prior to the ex-div date)], then there is a 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:

If Early Assignment: +1.6% absolute return (equivalent to +45.6% annualized return) if the stock is assigned early (day prior to Aug 21st ex-div date); OR

If Dividend Capture: +2.8% absolute return (equivalent to +22.5% annualized return) if the stock is assigned at Sep 2013 expiration on September 20th

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 $48.00 strike price at assignment (1.6% of downside protection).  Alternatively, if the stock declines below the strike price, the breakeven price of $47.11 ($48.76-$1.65) provides 3.4% downside breakeven protection from the original $48.76 purchase price. 

In summary, this covered calls investment provides the potential for nice absolute and annualized ROIs for a six week covered calls trade.

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 at options expiration.   There are a very limited number of these "Early Assignment or Dividend Capture" covered call opportunites that meet the criteria below, but if/when we find them we should take full advantage.

As shown below, this Transocean position satisfies ALL of these criteria:

Two possible overall performance results (including commissions) for this Transocean Inc. (RIG) covered calls position are as follows:
Stock Purchase Cost: $9,760.95
= ($48.76*200+$8.95 commission)

Net Profit:
(a) Options Income: +$319.55
= ($1.65*200 shares) - $10.45 commissions
(b) Dividend Income (If option exercised early on day prior to Aug 21st ex-div date): +$0.00; or
(b) Dividend Income (If stock assigned at Sep2013 expiration): +$112.00
= ($.56 dividend per share x 200 shares);

(c) Capital Appreciation (If stock assigned early on Aug 20th): -$160.95
+($48.00-$48.76)*200 - $8.95 commissions; or
(c) Capital Appreciation (If stock assigned at $48.00 at Sep2013 expiration): -$160.95
+($48.00-$48.76)*200 - $8.95 commissions

Total Net Profit (If option exercised on day prior to Aug 21st ex-div date): +$158.60
= (+$319.55 +$0.00 -$160.95); or
Total Net Profit (If stock assigned at $48.00 at Sep2013 expiration): +$270.60

= (+$319.55 +$112.00 -$160.95)

1. Absolute Return (If option exercised on day prior to Aug 21st ex-div date): +1.6%
= +$158.60/$9,760.95
Annualized Return (If option exercised early): +45.6%
= (+$158.60/$9,760.95)*(365/13 days); OR

2. Absolute Return (If stock assigned at $48.00 at Sep2013 expiration): +2.8%
= +$270.60/$9,760.95
Annualized Return (If stock assigned): +22.5%

= (+$270.60/$9,760.95)*(365/45 days);

Established Two Covered Calls Positions -- Hertz Global Holdings Inc. and Potash Corp of Saskatchewan Inc.

Today, two new covered calls position were established in Hertz Global Holdings Inc. (Ticker Symbol HTZ) and Potash Corp of Saskatchewan Inc. (Ticker Symbol POT).  The HTZ position was established at the $24.00 strike price and with a Sep2013 expiration while the POT position was at the $28.00 strike price and with an Aug2013 expiration.  The details are as follows:


1. Hertz Global Holdings (HTZ)
The transactions were as follows:
08/06/2013 Bought 700 HTZ shares @ $24.50
08/06/2013 Sold 7 HTZ Sep2013 $24.00 Call Options @ $1.50

A possible overall performance result (including commissions) for these Hertz covered calls is as follows:
Stock Purchase Cost: $17,158.95
= ($24.50*700+$8.95 commission)

Net Profit:
(a) Options Income: +$1,035.80
= 700*$1.50 - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HTZ assigned at $24.00) = -$358.95
= ($24.00-$24.50)*700 - $8.95 commissions

Total Net Profit (If HTZ assigned at $24.00): +$676.85
= (+$1,035.80 +$0.00 -$358.95)

Absolute Return if Assigned (at $24.00): +3.9%
= +$676.85/$17,158.95
Annualized Return If Assigned (ARIA): +30.6%
= (+$676.85/$17,158.95)*(365/47 days)


2.  Potash Corp of Saskatchewan Inc. (POT)
The transactions were as follows:
08/06/2013 Bought 300 POT shares @ $28.80
08/06/2013 Sold 3 POT Aug2013 $28.00 Call Options @ $1.33
Note: the price of POT was $28.82 when the options were sold.

A possible overall performance result (including commissions) for these Potash (POT) covered calls is as follows:
Stock Purchase Cost: $8,648.95
= ($28.80*300+$8.95 commission)

Net Profit:
(a) Options Income: +$387.80
= 300*$1.33 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If POT assigned at $28.00) = -$248.95
= ($28.00-$28.80)*300 - $8.95 commissions

Total Net Profit (If POT assigned at $28.00): +$138.85
= (+$387.80 +$0.00 -$248.95)

Absolute Return if Assigned (at $28.00): +1.6%
= +$138.85/$8,648.95
Annualized Return If Assigned (ARIA): +48.8%
= (+$138.85/$8,648.95)*(365/12 days)

Establish 100% Cash-Secured Puts Position in U.S. Airways

Today, the following transaction was made in the Covered Calls Advisor Portfolio:
8/6/2013  Sold 4 US Airways (Symbol LCC) 100% Cash-Secured Puts for $.60 each at the Sep2013 $18.00 Strike Price
Note:  the price of LCC was $19.02 when this transaction was executed.

A possible overall performance results(including commissions) for this US Airways transaction would be as follows:
100% Cash-Secured Puts Cost Basis: $7,200.00
= $18.00*400

Net Profit:
(a) Options Income: +$228.05
= ($.60*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If LCC remains above $18.00 at Sep2013 expiration): +$0.00
= ($18.00-$18.00)*400 shares

Total Net Profit (If LCC is above $18.00 strike price at Sep2013 options expiration): +$228.05
= (+$228.05 +$0.00 +$0.00)

Absolute Return (If LCC is above $18.00 at Sep2013 options expiration and Put options thus expire worthless): +3.3%
= +$228.05/$7,200.00
Annualized Return (If LCC above $18.00 at expiration): +25.9%
= (+$228.05/$7,200.00)*(365/47 days)

The downside 'breakeven price' at expiration is at $17.40 ($18.00 - $.60). This is the price at which this 100% cash-secured Puts investment would breakeven (i.e. make neither a profit or a loss).
The 'crossover price' at expiration is $19.62 ($19.02 + $.60). This is the price above which it would have been more profitable to simply buy-and-hold LCC stock until Sep 20th (the Sep2013 options expiration date) rather than holding the short Put options.

Established 100% Cash-Secured Put Positions -- Blackstone Group, Hertz Global Holdings, and Marathon Petroleum Corp.

The Covered Calls Advisor has established three new 100% cash-secured put positions. The stocks are Blackstone Group (Ticker Symbol BX), Hertz Global Holdings (Ticker Symbol HTZ), and Marathon Petroleum Corp. (Ticker Symbol MPC). The Covered Calls Advisor does not use margin, so the detailed information for these positions and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the three Put option positions sold. These positions are:

1. Blackstone Group (BX)
The transaction is as follows:
8/5/2013 Sold 3 Sep2013 $22.00 Puts @ $.58
Note: The price of BX was $22.74 when this transaction was executed.

A possible overall performance results(including commissions) for this BX transaction would be as follows:
100% Cash-Secured Cost Basis: $6,600.00 = $22.00*300

Net Profit:
(a) Options Income: +$162.80
= ($.58*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BX remains above $22.00 at Sep2013 expiration): +$0.00
= ($22.00-$22.00)*300 shares

Total Net Profit (If BX is above $22.00 strike price at Sep2013 options expiration): +$162.80 
= (+$162.80 +$0.00 +$0.00)

Absolute Return (If BX is above $22.00 at Sep2013 options expiration and Put options thus expire worthless): +2.5%
= +$162.80/$6,600.00

Annualized Return (If BX above $22.00 at expiration): +18.8%
= (+$162.80/$6,600.00)*(365/48 days)

The downside 'breakeven price' at expiration is at $21.42 ($22.00 - $.58).  This is the price at which this 100% cash-secured Puts investment would make neither a profit or a loss.
The 'crossover price' at expiration is $23.32 ($22.74 + $.58). This is the price above which it would have been more profitable to simply buy-and-hold BX stock until Sep 20th (the Sep2013 options expiration date) rather than holding the short Put options.


2. Hertz Global Holdings (HTZ)
The transaction is as follows:
8/1/2013 Sold 7 Aug2013 $24.00 Puts @ $.45
Note: The price of HTZ was $24.56 when this transaction was executed.

A possible overall performance results(including commissions) for this HTZ transaction would be as follows:
100% Cash-Secured Cost Basis: $16,800.00 = $24.00*700

Net Profit:
(a) Options Income: +$300.80
= ($.45*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HTZ remains above $24.00 at Aug2013 expiration): +$0.00
= ($24.00-$24.00)*700 shares

Total Net Profit (If HTZ is above $24.00 strike price at Aug2013 options expiration): +$300.80  = (+$300.80 +$0.00 +$0.00)

Absolute Return (If HTZ is above $24.00 at Aug2013 options expiration and Put options thus expire worthless): +1.8%
= +$300.80/$16,800.00
Annualized Return (If HTZ above $24.00 at expiration): +38.4%
= (+$300.80/$16,800.00)*(365/17 days)

The downside 'breakeven price' at expiration is at $23.55 ($24.00 - $.45).
The 'crossover price' at expiration is $25.01 ($24.56 + $.45). This is the price above which it would have been more profitable to simply buy-and-hold HTZ until Aug 16th (the Aug2013 options expiration date) rather than holding the short Put options.


3. Marathon Petroleum Corp. (MPC)
The transaction is as follows:
8/5/2013 Sold 2 Aug2013 $70.00 Puts @ $1.25
Note: The price of MPC was $70.96 when this transaction was executed.

A possible overall performance results(including commissions) for this MPC transaction would be as follows:
100% Cash-Secured Cost Basis: $14,000.00 = $70.00*200
Note:  the price of MPC was $70.96 when these Put options were sold.

Net Profit:
(a) Options Income: +$239.55
= ($1.25*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MPC remains above $70.00 at Aug2013 expiration): +$0.00
= ($70.00-$70.00)*200 shares

Total Net Profit (If MPC is above $70.00 strike price at Aug2013 options expiration): +$239.55 
= (+$239.55 +$0.00 +$0.00)

Absolute Return (If MPC is above $70.00 at Aug2013 options expiration and Put options thus expire worthless): +1.7%
= +$239.55/$14,000.00
Annualized Return (If MPC above $70.00 at expiration): +48.0%
= (+$239.55/$14,000.00)*(365/13 days)

The downside 'breakeven price' at expiration is at $68.75 ($70.00 - $1.25).
The 'crossover price' at expiration is $72.21 ($70.96 + $1.25). This is the price above which it would have been more profitable to simply buy-and-hold MPC until Aug 16th (the Aug2013 options expiration date) rather than holding the short Put options.