The Covered Calls Advisor has established five new positions in Citigroup Inc.(ticker symbol C), Freeport McMoran Copper and Gold Inc.(ticker FCX), Hertz Global Holdings Inc.(ticker HTZ), Intel Corporation (ticker INTC), and iShares MSCI South Korea ETF (ticker EWY). All five positions are established as 100% Cash-Secured Put Options with April 2014 options expirations.
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 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.
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. Details for each position are provided below. In each case, conservative positions were established at strike prices below the current market price of the equities.
1. Citigroup Inc. (C)
The transaction is as follows:
The transaction is as follows:
3/24/2014 Sold 7 Apr2014 $49.00 Puts @ $.89
Note: The price of Citi was $50.03 when this transaction was executed.
A possible overall performance results (including commissions) for this Citigroup transaction would be as follows:
100% Cash-Secured Cost Basis: $34,300.00
= $49.00*700
= $49.00*700
Net Profit:
(a) Options Income: +$608.80
= ($.89*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If C remains above $49.00 at Apr2014 expiration): +$0.00
= ($49.00-$49.00)*700 shares
Total Net Profit (If Citi is above $49.00 strike price at Apr2014 options expiration): +$608.80
= (+$608.80 +$0.00 +$0.00)
Absolute Return (If C closes above $49.00 at Apr2014 options expiration and Put options thus expire worthless): +1.8%
= +$608.80/$34,300.00
Annualized Return (If C above $49.00 at expiration): +24.0%
= (+$608.80/$34,300.00)*(365/27 days) The downside 'breakeven price' at expiration is at $48.11 ($49.00 - $.89). 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 $50.92 (50.03 + $.89). This is the price above which it would have been more profitable to simply buy-and-hold Citigroup Inc. stock until April 18th (the Apr2014 options expiration date) rather than holding the short Put options.
2. Freeport McMoran Copper and Gold Inc. (FCX)
The transaction is as follows:
3/24/2014 Sold 6 Apr2014 $30.00 Puts @ $.44
Note: The price of FCX was $31.51 when this transaction was executed.
A possible overall performance results(including commissions) for this FCX transaction would be as follows:
100% Cash-Secured Cost Basis: $18,000.00 = $30.00*600
Net Profit:
(a) Options Income: +$250.55
= ($.44*600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FCX remains above $30.00 at Apr2014 expiration): +$0.00
= ($30.00-$30.00)*600 shares
Total Net Profit (If FCX is above $30.00 strike price at Apr2014 options expiration): +$250.55 = (+$250.55 +$0.00 +$0.00)
Absolute Return (If FCX is above $30.00 at Apr2014 options expiration and Put options thus expire worthless): +1.4%
= +$250.55/$18,000.00
Annualized Return (If FCX above $30.00 at expiration): +18.8%
= (+$250.55/$18,000.00)*(365/27 days)
The downside 'breakeven price' at expiration is at $29.56 ($30.00 - $.44).
The 'crossover price' at expiration is $31.95 ($31.51 + $.44). This is the price above which it would have been more profitable to simply buy-and-hold FCX until April 18th (the Apr2014 options expiration date) rather than investing in the short Put options.
3. Hertz Global Holdings Inc. (HTZ)
3/24/2014 Sold 7 Apr2014 $26.00 Puts @ $.55
A possible overall performance results(including commissions) for this HTZ transaction would be as follows:
100% Cash-Secured Cost Basis: $18,200.00 = $26.00*700
Net Profit:
(a) Options Income: +$370.80
= ($.55*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HTZ remains above $26.00 at Apr2014 expiration): +$0.00
= ($26.00-$26.00)*700 shares
Total Net Profit (If HTZ is above $26.00 strike price at Apr2014 options expiration): +$370.80
= (+$370.80 +$0.00 +$0.00)
Absolute Return (If HTZ is above $26.00 at Apr2014 options expiration and Put options thus expire worthless): +2.0%
= +$370.80/$18,200.00
Annualized Return (If HTZ closes above $26.00 at expiration): +27.5%
= (+$370.80/$18,200.00)*(365/27 days)
The downside 'breakeven price' at expiration is at $25.45 ($26.00 - $.55).
The 'crossover price' at expiration is $27.31 ($26.76 + $.55). This is the price above which it would have been more profitable to simply buy-and-hold HTZ until April 18th (the Apr2014 options expiration date) rather than investing in the short Put options.
4. Intel Corporation (INTC)
3/24/2014 Sold 7 Apr2014 $25.00 Puts @ $.51
Note: The price of Intel was $25.11 when this transaction was executed.
A possible overall performance results (including commissions) for this INTC transaction would be as follows:
100% Cash-Secured Cost Basis: $17,500.00
= $25.00*700
= $25.00*700
Net Profit:
(a) Options Income: +$342.80
= ($.51*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If INTC remains above $25.00 at Apr2014 expiration): +$0.00
= ($25.00-$25.00)*700 shares
Total Net Profit (If Intel closes above $25.00 strike price at Apr2014 options expiration): +$342.80
= (+$342.80 +$0.00 +$0.00)
Absolute Return (If INTC closes above $25.00 at Apr2014 options expiration and Put options thus expire worthless): +2.0%
= +$342.80/$17,000.00
Annualized Return (If INTC above $25.00 at expiration): +26.5%
= (+$342.80/$17,000.00)*(365/27 days)
The downside 'breakeven price' at expiration is at $24.49 ($25.00 - $.51). 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 $25.62 (25.11 + $.51). This is the price above which it would have been more profitable to simply buy-and-hold Intel Corp. stock until April 18th (the Apr2014 options expiration date) rather than holding the short Put options.
5. iShares MSCI South Korea ETF (EWY)
3/24/2014 Sold 4 Apr2014 $58.00 Puts @ $.74
Note: The price of EWY was $58.95 when this transaction was executed.
A possible overall performance results(including commissions) for this EWY transaction would be as follows:
100% Cash-Secured Cost Basis: $23,200.00
= $58.00*400
Net Profit:
(a) Options Income: +$284.05
= ($.74*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY remains above $58.00 at Apr2014 expiration): +$0.00
= ($58.00-$58.00)*400 shares
Total Net Profit (If EWY is above $58.00 strike price at Apr2014 options expiration): +$284.05
= (+$284.05 +$0.00 +$0.00)
Absolute Return (If EWY is above $58.00 at Apr2014 options expiration and Put options thus expire worthless): +1.2%
= +$284.05/$23,200.00
Annualized Return (If EWY above $58.00 at expiration): +16.6%
= (+$284.05/$23,200.00)*(365/27 days)
The downside 'breakeven price' at expiration is at $57.26 ($58.00 - $.74).
The 'crossover price' at expiration is $59.69 ($58.95 + $.74). This is the price above which it would have been more profitable to simply buy-and-hold FCX until April 18th (the Apr2014 options expiration date) rather than investing in the short Put options.
