The details of the associated transactions and potential return-on-investment results are as follows:
1. iShares MSCI China ETF (FXI)
The transactions were as follows:
10/22/2014 Bought 400 FXI shares @ $38.48
10/22/2014 Sold 4 FXI Nov2014 $38.00 Call Options @ $1.18
Note: the price of FXI was $38.48 today when these options were sold.
Two possible overall performance result (including commissions) for these FXI covered calls is as follows:
Stock Purchase Cost: $15,400.95
= ($38.48*400+$8.95 commission)
Net Profit:
(a) Options Income: +$460.05
= 400*$1.18 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI assigned at $38.00 strike price at Nov2014 expiration)
= -$200.95
= ($38.00-$38.48)*400 - $8.95 commissions
Total Net Profit (If FXI assigned at $38.00): +$259.10
= (+$460.05 +$0.00 -$200.95)
Absolute Return if Assigned (at $38.00): +1.7%
= +$259.10/$15,400.95
Annualized Return If Assigned (ARIA): +19.8%
= (+$259.10/$15,400.95)*(365/31 days)
2. iShares MSCI China ETF (FXI)The transaction is as follows:
10/22/2014 Sold 4 iShares MSCI China ETF Dec2014 $38.00 Puts @ $1.25
Note: The price of FXI was $38.48 when this transaction was executed.
The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the four Put options sold.
A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $15,200.00
= $38.00*400
Note: the price of FXI was $38.48 when these Put options were sold.
Net Profit:
(a) Options Income: +$488.05
= ($1.25*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains above $38.00 at Dec2014 expiration): +$0.00
= ($38.00-$38.00)*400 shares
Total Net Profit (If FXI is above $38.00 strike price at Dec2014 options expiration):+$488.05
= (+$488.05 +$0.00 +$0.00)
Absolute Return (If FXI is above $38.00 at Dec2014 options expiration and Put options thus expire worthless): +3.2%
= +$488.05/$15,200.00
Annualized Return (If FXI above $38.00 at expiration): +19.5%
= (+$488.05/$15,200.00)*(365/60 days)
The downside 'breakeven price' at expiration is at $36.75 ($38.00 - $1.25), which is 4.5% below the current market price of $38.48.
The 'crossover price' at expiration is $39.73 ($38.48 + $1.25). This is the price above which it would have been more profitable to simply buy-and-hold FXI until Dec 19th (the Dec2014 options expiration date) rather than holding these short Put options.
