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)