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)
