The details of the associated transaction and two potential return-on-investment results are:
1. iShares China Large-Cap ETF (FXI) -- New Position
The transaction was as follows:
12/01/2014 Sold 4 iShares China Large-Cap ETF Dec2014 $40.00 Puts @ $1.45
Note: The price of FXI was $39.44 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: $16,000.00
= $40.00*400
Note: the price of FXI was $39.44 when these Put options were sold.
Net Profit:
(a) Options Income: +$568.05
= ($1.45*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI remains at current $39.44 price at Dec2014 expiration): -$224.00
= ($39.44-$40.00)*400 shares; or
(c) Capital Appreciation (If FXI is above $40.00 strike price at Dec2014 expiration): +$0.00
= ($40.00-$40.00)*400 shares
1. Total Net Profit (If FXI remains at current $39.44 price at Dec2014 expiration):+$344.05
= (+$568.05 +$0.00 -$224.00); or
2. Total Net Profit (If FXI is above $40.00 strike price at Dec2014 options expiration):+$568.05
= (+$568.05 +$0.00 +$0.00)
1. Absolute Return (If FXI remains at current $39.44 price at Dec2014 expiration): +2.2%
= +$344.05/$16,000.00
Annualized Return: +39.2%
= (+$344.05/$16,000.00)*(365/20 days); or
2. Absolute Return (If FXI is above $40.00 strike price at Dec2014 options expiration): +3.6%
= +$568.05/$16,000.00
Annualized Return (If FXI above $40.00 at expiration): +64.8%
= (+$568.05/$16,000.00)*(365/20 days)
The downside 'breakeven price' at expiration is at $38.55 ($40.00 - $1.45), which is 2.3% below the current market price of $39.44.
The 'crossover price' at expiration is $40.89 ($39.44 + $1.45). 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 investing in these short Put options.
