As detailed below, this investment will result in an overall +30.1% absolute return in 141 days (which is equivalent to a +78.0% annualized return) if the stock closes at $34.05 upon the March 21st options expiration -- which is the price of AEM when the Mar2014 call options were sold.
The details of the associated transactions and two potential return-on-investment results are as follows:
1. Agnico Eagle Mines Ltd (AEM) -- Covered Calls Continuation
10/31/2013 Bought 600 AEM shares @ $29.086
10/31/2013 Sold 6 AEM Dec2013 $27.50 Call Options @ $2.72
Note: the price of AEM was $29.20 today when these options were sold.
11/27/2013 Ex-dividend of $.22 per share
12/20/2013 Dec2013 AEM Call Options expired
01/20/2014 600 long shares of AEM @ $29.36
2/25/2014 Sold 6 AEM Mar2014 $35.00 Call Options @ $.92
Note: the price of AEM was $34.05 when these options were sold.
Some possible overall performance results (including commissions) for this Agnico Eagle(AEM) covered calls position are:
Stock Purchase Cost: $17,460.55
= ($29.086*600+$8.95 commission)
Net Profit:
(a) Options Income: +$2,157.10
= ($2.72+$.92)*600 shares) - 2*$13.45 commissions
(b) Dividend Income: +$132.00 = ($.22 dividend per share x 600 shares)
(c) Capital Appreciation (If stock price unchanged at expiration at $34.05): +$2,969.45
= +($34.05-$29.086)*600 - $8.95 commission; OR
(c) Capital Appreciation (If stock assigned at $35.00 strike price): +$3,539.45
= +($35.00-$29.086)*600 - $8.95 commission
Two possible net profit outcomes:
Total Net Profit (If stock price unchanged at Mar2014 expiration): +$5,258.55
= (+$2,157.10 +$132.00 +$2,969.45); OR
Total Net Profit (If stock assigned at $35.00 strike price): +$5,828.55
=+($2,157.10+$132.00+$3,539.45)
Two possible return-on-investment outcomes:
1. Absolute Return (If stock price unchanged at $34.05): +30.1%
= +$5,258.55/$17,460.55
Annualized Return (If stock price unchanged at expiration): +78.0%
= (+$5,258.55/$17,460.55)*(365/141); OR
2. Absolute Return (If stock assigned at $35.00 strike price at expiration): +33.4%
= +$5,828.55/$17,460.55
Annualized Return (If stock assigned at $35.00 strike price): +86.4%
= +($5,828.55/$17,460.55)*(365/141)
