As detailed below, this investment will result in an overall -8.4% absolute return in 137 days (which is equivalent to a -22.3% annualized return) if the stock closes at or above $31.00 at options expiration on March 21st.
The details of the associated transactions and a potential return-on-investment result are as follows:
1. Noble Corporation (NE) -- Covered Calls Position
The transactions are as follows:
11/04/2013 Sold 3 Dec2013 $37.00 Noble Corp 100% Cash-Secured Put Options @ $1.24
Note: the price of NE was $37.32 when these options were sold
12/20/2013 Purchased 300 NE shares assigned at $37.00 strike price
Note: the price of NE was $36.32 at Dec2013 options expiration
12/31/2013 Sold 3 Jan2014 $37.00 Noble Corp Call Options @ $.80
Note: the price of NE was $36.97 when these options were sold
1/17/2014 Jan2014 $37.00 Noble Corp call options expired
Note: price of NE was $35.39 when these options expired
2/25/2014 Sold 3 Mar2014 $31.00 Noble Corp call options @ $1.00
Note: price of NE was $31.33 when these options were sold
The overall performance result (to-date including commissions) for these Noble Corp covered calls is as follows:
Stock Purchase Cost: $11,108.95
= ($37.00*300+$8.95 commission)
Net Profit:
(a) Options Income: +$878.40
= 300*($1.24+$.80+$1.00) - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (if assigned at $31.00) = -$1,808.95
= ($31.00-$37.00)*300 - $8.95 commissions
Total Net Profit (if assigned at Mar2014 expiration): -$930.55
= (+$878.40 +$0.00 -$1,808.95)
Absolute Return (if assigned): -8.4%
= -$930.55/$11,108.95
Annualized Return (if assigned at $31.00 at Mar2014 expiration): -22.3%
= (-$930.55/$11,108.95)*(365/137 days)
