The details of the associated transactions and two potential return-on-investment results are as follows:
1. Fusion-io Inc. (FIO)
The transactions are as follows:
04/28/2014 Sold 7 Fusion-io Inc. (FIO) May2014 $9.00 Put Options @ $.80
Note: the price of FIO was $8.40 when these Puts were sold.
05/16/2014 FIO put options expired, so 700 shares of FIO were purchased at $9.00
Note: the price of FIO was $8.09 on the May2014 options expiration date
05/21/2014 Sold to Open 7 FIO Jun2014 $9.00 Call options @ $.30
Note: the price of FIO was $8.63 when these call options were sold
Two possible overall performance results(including commissions) for these FIO transactions would be as follows:
100% Cash-Secured Cost Basis: $6,300.00
= $9.00*700
Net Profit:
(a) Options Income: +$743.60
= ($.80+$.30) *700 shares - 2*$13.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FIO remains unchanged at $8.63 price upon Jun2014 expiration): -$259.00
= ($8.63-$9.00)*700 shares
(c) Capital Appreciation (If FIO closes above $9.00 strike price upon Jun2014 expiration):
+$0.00 = ($9.00-$9.00)*700 shares
Total Net Profit (If FIO remains unchanged at $8.63 price upon Jun2014 expiration): +$484.60 = (+$743.60 +$0.00 -$259.00)
Total Net Profit (If FIO is above $9.00 strike price at Jun2014 options expiration): +$743.60 = (+$743.60 +$0.00 +$0.00)
1. Absolute Return (If FIO remains unchanged at $8.63 price at Jun2014 options expiration and Put options thus expire worthless): +7.7%
= +$484.60/$6,300.00
Annualized Return (If stock price unchanged at $8.63 at expiration): +52.0%
= (+$484.60/$6,300.00)*(365/54 days); OR
2. Absolute Return (If FIO stock price is above $9.00 upon Jun2014 expiration and Put options thus expire worthless): +11.8%
= +$743.60/$6,300.00
Annualized Return (If stock price above $9.00 at expiration): +79.8%
= (+$743.60/$6,300.00)*(365/54 days)
