Established New Short Weekly 100% Cash-Secured Puts Position in Delta Air Lines Inc.

Today, the Covered Calls Advisor established a new position in Delta Air Lines Inc. (Symbol DAL) by selling 3 March 6th, 2015 $44.00 Put options.

This is a Weekly position and reflects that the Covered Calls Advisor would be very willing to purchase Delta shares at $44.00 (for future covered calls investments) upon the close of business next Friday if the stock continues to decline to below the $44.00 strike price.  If the stock remains above $44 by the market close on the options expiration date next Friday, then the $213.55 profit detailed below (a 1.5% absolute return-on-investment result in only 8 days) will have been achieved.

A conservative (3% out-of-the-money) short Puts position  was established.  The investment thesis is that for at least the next six months, the cost of oil will continue to be substantially below the prior year levels.  This is a tremendous tailwind (pun intended) to the airline companies, where oil is about 30% of their expenses.  So even with stagnant passenger bookings versus last year, quarterly earnings are expanding dramatically and have yet to be fully appreciated in the stock price.  Even with relatively stagnant passenger bookings versus last year, the domestic airlines remain an oligarchy and will continue to benefit greatly from their commitment to maintain pricing (including those obnoxious extra fees we all despise) near current very profitable levels. Another benefit of this position is that the implied volatility in this weekly option remains elevated despite Delta having already reported earnings (so there will be no earnings announcement prior to the March 6th options expiration date).
 
This transaction and the potential return-on-investment result is:

1.  Delta Air Lines Inc. (DAL) -- New Position
The transaction was as follows:
02/27/2015 Sold 3 Delta Air Lines Inc. Mar 6, 2015 $44.00 Puts @ $.69
Note: The price of DAL was $45.35 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 three Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $13,200.00
= $44.00*300
Note:  the price of DAL was $45.35 when these Put options were sold.

Net Profit:
(a) Options Income: +$195.80
= ($.69*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If DAL is above $44.00 strike price at Mar 6th, 2015 expiration): +$0.00
= ($44.00-$44.00)*300 shares

Total Net Profit (If DAL is above $44.00 strike price upon next Friday's options expiration): +$195.80
= (+$195.80 +$0.00 +$0.00)

Absolute Return (If DAL is above $44.00 strike price at Mar 6th, 2015 options expiration): +1.5%
= +$195.80/$13,200.00

Annualized Return (If DAL is above $44.00 at expiration): +67.7%
= (+$195.80/$13,200.00)*(365/8 days)

The downside 'breakeven price' at expiration is at $43.31 ($44.00 - $.69), which is 4.5% below the current market price of $45.35.
The 'crossover price' at expiration is $46.04 ($45.35 + $.69).  This is the price above which it would have been more profitable to simply buy-and-hold Delta Air Lines stock until March 6th (the March 6, 2015 options expiration date) rather than selling these Put options.

Established New Positions in Alcoa Inc., Community Health Systems Inc., and YRC Worldwide Inc.

Yesterday, the Covered Calls Advisor established three short 100% cash-secured Puts positions in Alcoa Inc. (ticker symbol AA), Community Health Systems Inc. (CYH), and YRC Worldwide Inc. (YRCW).  All three positions were established with a March 2015 options expiration date and were sold at somewhat conservative strike prices that provide good downside protection.  The Covered Calls Advisor does not use margin, so the detailed information on these positions and some potential return-on-investment results shown below reflect the fact that these positions were established using 100% cash securitization for the Put options sold.

• The Alcoa Inc. investment will yield a +2.0% absolute return in 27 days (which is equivalent to a +26.4% annualized return-on-investment) if AA closes above the $15.00 strike price on the Mar2015 options expiration date. 
• The Community Health Systems Inc. investment will yield a +2.4% absolute return in 27 days (which is equivalent to a +32.7% annualized return-on-investment) if CYH closes above the $46.00 strike price on the Mar2015 options expiration date. 
• The YRC Worldwide Inc. investment will yield a +9.2% absolute return in 27 days (which is equivalent to a +124.8% annualized return-on-investment) if YRCW closes above the $20.00 strike price on the Mar2015 options expiration date. 

 The details for each of these positions is as follows:

1.  Alcoa Inc. (AA) -- New Position
The transaction was as follows:
02/23/2015  Sold 3 AA Mar2015 $15.00 100% cash-secured Put options @ $.33
Note: The price of AA was $15.47 when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $4,500.00
= $15.00*300

Net Profit:
(a) Options Income: +$87.80
= ($.33*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AA is above $15.00 strike price at Mar2015 expiration): +$0.00
= ($15.00-$15.00)*300 shares

Total Net Profit (If AA is above $15.00 strike price at Mar2015 options expiration): +$87.80
= (+$87.80 +$0.00 +$0.00)

Absolute Return (If AA is above $15.00 strike price at Mar2015 options expiration): +2.0%
= +$87.80/$4,500.00
Annualized Return: +26.4%
= (+$87.80/$4,500.00)*(365/27 days)

The downside 'breakeven price' at expiration is at $14.67 ($15.00 - $.33), which is 5.2% below the current market price of $15.47.
The 'crossover price' at expiration is $15.80 ($15.47 + $.33).  This is the price above which it would have been more profitable to simply buy-and-hold AA until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

2.  Community Health Systems Inc. (CYH) -- New Position
The transaction was as follows:
02/23/2015  Sold 3 CYH Mar2015 $46.00 100% cash-secured Put options @ $1.15
Note: The price of CYH was $47.68 when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $13,800.00
= $46.00*300

Net Profit:
(a) Options Income: +$333.80
= ($1.15*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CYH is above $46.00 strike price at Mar2015 expiration): +$0.00
= ($46.00-$46.00)*300 shares

Total Net Profit (If CYH is above $46.00 strike price at Mar2015 options expiration): +$333.80
= (+$333.80 +$0.00 +$0.00)

Absolute Return (If CYH is above $46.00 strike price at Mar2015 options expiration): +2.4%
= +$333.80/$13,800.00
Annualized Return (If CYH is above $46.00 at expiration): +32.7%
= (+$333.80/$13,800.00)*(365/27 days)

The downside 'breakeven price' at expiration is at $44.85 ($46.00 - $1.15), which is 5.9% below the current market price of $47.68.
The 'crossover price' at expiration is $48.83 ($47.68 + $1.15).  This is the price above which it would have been more profitable to simply buy-and-hold CYH until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

3.  YRC Worldwide Inc. (YRCW) -- New Position
The transaction was as follows:
02/23/2015  Sold 4 YRCW Mar2015 $20.00 100% cash-secured Put options @ $1.30
Note: The price of YRCW was $19.67 when this transaction was executed.

Two possible overall performance results (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $8,000.00
= $20.00*400

Net Profit:
(a) Options Income: +$508.05
= ($1.30*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If YRCW stock price is unchanged at $19.67 at Mar2015 expiration): -$132.00
= ($19.67-$20.00)*400 shares; or
(c) Capital Appreciation (If YRCW is above $20.00 strike price at Mar2015 expiration): +$0.00
= ($20.00-$20.00)*400 shares

1. Total Net Profit (If YRCW is unchanged at $19.67 at Mar2015 options expiration): +$606.80
= (+$738.80 +$0.00 -$132.00); or
2. Total Net Profit (If YRCW is above $20.00 strike price at Mar2015 options expiration): +$738.80
= (+$738.80 +$0.00 +$0.00)

1. Absolute Return (If YRCW is unchanged at $19.67 at Mar2015 options expiration): +7.6%
= +$606.80/$8,000.00
Annualized Return: +102.5%
= (+$606.80/$18,000.00)*(365/27 days); or
2. Absolute Return (If YRCW is above $20.00 strike price at Mar2015 options expiration): +9.2%
= +$738.80/$18,000.00
Annualized Return: +124.8%
= (+$738.80/$18,000.00)*(365/27 days)

The downside 'breakeven price' at expiration is at $18.37 ($19.67 - $1.30), which is 9.2% below the current market price of $19.67.
The 'crossover price' at expiration is $20.97 ($19.67 + $1.30).  This is the price above which it would have been more profitable to simply buy-and-hold YRCW until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

February 2015 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained nine positions with February 2015 expirations.

The results are as follows:
- All nine positions (Alcoa Inc., Avis Budget Group Inc., Delta Air Lines Inc., iShares China Large-Cap ETF,  iShares MSCI Germany ETF, Google Inc., Hertz Global Holdings Inc., United Continental Holdings Inc., and The Williams Companies Inc.) were closed out at expiration. This was the optimal result for these positions in that the maximum potential return-on-investment (ROI) results were achieved from when each of these positions was established.  The annualized ROI for these positions are:

• Alcoa Inc. = +2.5% absolute return (equivalent to +23.4% annualized return for the 39 days holding period)
• Avis Budget Group Inc. = +1.5% absolute return (equivalent to +21.1% annualized return for the 26 days holding period)
• Delta Air Lines Inc. = +2.7% absolute return (equivalent to +49.7% annualized return for the 20 days holding period)
• iShares China Large-Cap ETF = +1.3% absolute return (equivalent to +14.5% annualized return for the 33 days holding period)
• iShares MSCI Germany ETF = +1.1% absolute return (equivalent to +4.8% annualized return for the 80 days holding period)
• Google Inc. = +3.4% absolute return (equivalent to +17.1% annualized return for the 73 days holding period)
• Hertz Global Holdings Inc. = +4.1% absolute return (equivalent to +45.4% annualized return for the 33 days holding period)
• United Continental Holdings Inc. = +2.4% absolute return (equivalent to +27.0% annualized return for the 33 days holding period)
• The Williams Companies Inc. = +4.1% absolute return (equivalent to +29.4% annualized return for the 51 days holding period)

The detailed transactions history and results for each of these positions is detailed below. The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established.

1.  Alcoa Inc.(AA) -- Closed
The transaction was as follows:
01/14/2015 Sold 4 Alcoa Inc. Feb2015 $14.00 Puts @ $.38
Note: The price of AA was $14.78 today when this transaction was executed.
02/20/2015 4 Alcoa Puts expired
Note: the price of AA was $15.79 upon Feb2015 options expiration

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $5,600.00
= $14.00*400
Note:  the price of AA was $14.78 when these Put options were sold.

Net Profit:
(a) Options Income: +$140.05
= ($.38*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (AA closed above $14.00 strike price at Feb2015 expiration): +$0.00
= ($14.00-$14.00)*400 shares

Total Net Profit (AA closed above $14.00 strike price at Feb2015 options expiration): +$140.05
= (+$140.05 +$0.00 +$0.00)

Absolute Return (AA closed above $14.00 strike price at Feb2015 options expiration): +2.5%
= +$140.05/$5,600.00
Annualized Return: +23.4%
= (+$140.05/$5,600.00)*(365/39 days)


2.  Avis Budget Group Inc. (CAR) -- Closed
The transaction was as follows:
01/27/2015 Sold 2 Avis Budget Group Inc. Feb2015 $55.00 Puts @ $.88
Note: The price of CAR was $59.90 when this transaction was executed.
02/20/2015 2 Avis Budget Group Puts expired
Note: the price of CAR was $62.45 upon Feb2015 options expiration

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $11,000.00
= $55.00*200
Note:  the price of CAR was $59.90 when these Put options were sold.

Net Profit:
(a) Options Income: +$165.55
= ($.88*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (CAR was above $55.00 strike price at Feb2015 expiration): +$0.00
= ($55.00-$55.00)*200 shares

Total Net Profit (CAR was above $55.00 strike price at Feb2015 options expiration): +$165.55
= (+$165.55 +$0.00 +$0.00)

Absolute Return (CAR was above $55.00 strike price at Feb2015 options expiration): +1.5%
= +$165.55/$11,000.00
Annualized Return: +21.1%
= (+$165.55/$11,000.00 )*(365/26 days)


3.  iShares China Large-Cap ETF (FXI) -- Closed
The transactions were as follows:
01/20/2015  Bought 400 iShares China Large-Cap ETF shares @ $41.63
02/20/2015 Sold 4 FXI Feb2015 $40.00 Call options @ $2.23
Note: The price of FXI was $41.63 today when this transaction was executed.
02/20/2015 4 FXI Call options exercised and 400 FXI shares sold at $40.00 strike price
Note: the price of FXI was $43.33 upon the Feb2015 options expiration date

The overall performance result (including commissions) was as follows:
Bought 400 share FXI: $16,660.95
= $41.63*400 + $8.95 commission

Net Profit:
(a) Options Income: +$880.05
= ($2.23*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI closed above $40.00 strike price at Feb2015 expiration): -$660.95
= ($40.00-$41.63)*400 shares - $8.95 commissions

Total Net Profit (FXI closed above $40.00 strike price at Feb2015 options expiration): +$219.10
= (+$880.05 +$0.00 -$660.95)

Absolute Return (FXI was above $40.00 strike price at Feb2015 options expiration): +1.3%
= +$219.10/$16,660.95
Annualized Return: +14.5%
= (+$219.10/$16,660.95)*(365/33 days)


4.  Delta Air Lines Inc. (DAL) -- Closed
The transaction was as follows:
02/02/2015 Sold 2 Delta Air Lines Inc. Feb2015 $44.00 Puts @ $1.25
Note: The price of DAL was $45.27 when this transaction was executed.
02/20/2015 2 Delta Puts expired
Note: the price of DAL was $47.44 upon Feb2015 options expiration

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $8,800.00
= $44.00*200
Note:  the price of DAL was $45.27 when these Put options were sold.

Net Profit:
(a) Options Income: +$239.55
= ($1.25*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (DAL was above $44.00 strike price at Feb2015 expiration): +$0.00
= ($44.00-$44.00)*200 shares

Total Net Profit (DAL was above $44.00 strike price at Feb2015 options expiration): +$239.55
= (+$239.55 +$0.00 +$0.00)

Absolute Return (DAL was above $44.00 strike price at Feb2015 options expiration): +2.7%
= +$239.55/$8,800.00
Annualized Return: +49.7%
= (+$239.55/$8,800.00)*(365/20 days)


5. iShares MSCI Germany ETF (EWG) -- Closed
The transactions are as follows:
12/02/2014 Sold 3 iShares MSCI Germany ETF Dec2014 $29.00 Puts @ $.70
Note: The price of EWG was $28.57 when this transaction was executed.
12/26/2014 Sold 3 EWG Jan2015 $28.00 Call options @ $.60
Note: the price of EWG was $28.24 when these options were sold.
12/16/2015 Jan2015 EWG Call options expired
12/20/2015 Sold 3 EWG Feb2015 $27.00 Call options @ $1.15
Note: the price of EWG was $27.72 when this transaction was executed.
02/20/2015 3 EWG Call options exercised and 300 EWG shares sold at $27.00 strike price
Note: the price of EWG was $29.50 upon the Feb2015 options expiration date
A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,700.00
= $29.00*300


Net Profit:
(a) Options Income: +$701.40
= ($.70+$.60+$1.15)*300 shares - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (EWG was above $27.00 strike price at Feb2015 expiration): -$608.95
= ($27.00-$29.00)*300 shares - $8.95 commissions

Total Net Profit (EWG was above $27.00 strike price at Feb2015 options expiration): +$92.45 
= (+$701.40 +$0.00 -$608.95)

Absolute Return (EWG was above $27.00 strike price at Feb2015 options expiration): +1.1%
= +$92.45/$8,700.00
Annualized Return: +4.8%
= (+$92.45/$8,700.00)*(365/80 days)


6.  Google Inc. (GOOG) -- Closed

The transactions are as follows:
12/09/2014 Sold 1 Jan2015 $530.00 Put @ $18.20
Note: The price of Google was $522.64 when this transaction was executed.
01/16/2015 1 GOOG Jan2015 Put options expired
Note: the price of Google stock was $508.08 upon Jan2015 options expiration.
01/21/2015 Sold 1 Feb2015 $520.00 Call option @ $10.20
Note: Google Inc. stock was $509.22 when this Call option was sold.
02/20/2015 1 GOOG Call option exercised and 100 GOOG shares sold at $320.00 strike price
Note: the price of GOOG was $538.95 upon the Feb2015 options expiration date

The overall performance result (including commissions) for these Google transactions was as follows:
100% Cash-Secured Cost Basis: $53,000.00
= $530.00*100

Net Profit:
(a) Options Income: +$2,820.60
= ($18.20+$10.20)*100 shares - 2*$9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (GOOG was above $520.00 at Feb2015 expiration): -$1,008.95
= ($520.00 liquidation cost if assigned - $530.00 cash-secured cost basis)*100 shares - $8.95 commission

Total Net Profit (GOOG was above $520.00 strike price at Feb2015 options expiration): +$1,811.65 
= (+$2,820.60 +$0.00 -$1,008.95)

Absolute Return (GOOG was above $520.00 at Feb2015 options expiration): +3.4%
= +$1,811.65/$53,000.00
Annualized Return (GOOG was above $520.00 at expiration): +17.1%
= (+$1,811.65/$53,000.00)*(365/73 days)



7.  Hertz Global Holdings Inc. (HTZ) -- Closed
The transaction was as follows:
01/20/2015 Sold 4 Hertz Global Holdings Inc. Feb2015 $20.00 Puts @ $.85
Note: The price of HTZ was $20.72 when this transaction was executed.
02/20/2015 4 Hertz Puts expired
Note: the price of HTZ was $23.20 upon Feb2015 options expiration

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $8,000.00
= $20.00*400
Note:  the price of HTZ was $20.72 when these Put options were sold.

Net Profit:
(a) Options Income: +$328.05
= ($.85*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HTZ was above $20.00 strike price at Feb2015 expiration): +$0.00
= ($20.00-$20.00)*400 shares

Total Net Profit (HTZ was above $20.00 strike price at Feb2015 options expiration): +$328.05
= (+$328.05 +$0.00 +$0.00)

Absolute Return (HTZ was above $20.00 strike price at Feb2015 options expiration): +4.1%
= +$328.05/$8,000.00
Annualized Return: +45.4%
= (+$328.05/$8,000.00)*(365/33 days)


8.  United Continental Holdings Inc. (UAL) -- Closed
The transactions were as follows:
01/20/2015  Sold 3 UAL 100% cash-secured $60.00 Put options @ $1.50
Note: The price of UAL was $67.25 today when this transaction was executed.
02/20/2015 3 United Continental Puts expired
Note: the price of UAL was $68.01 upon Feb2015 options expiration

The overall performance result (including commissions) was as follows:
100% Cash-Secured Cost Basis: $18,000.00
= $60.00*300


Net Profit:
(a) Options Income: +$438.80
= ($1.50*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (UAL was above $60.00 strike price at Feb2015 expiration): +$0.00
= ($60.00-$60.00)*300 shares

Total Net Profit (UAL was above $60.00 strike price at Feb2015 options expiration): +$438.80
= (+$438.80 +$0.00 +$0.00)

Absolute Return (UAL is above $60.00 strike price at Feb2015 options expiration): +2.4%
= +$438.80/$18,000.00
Annualized Return: +27.0%
= (+$438.80/$18,000.00)*(365/33 days)


9.  Williams Companies Inc. (WMB) -- Closed
The transactions are as follows:
12/31/2014 Sold 3 Williams Companies Inc. Jan2015 $44.00 Puts @ $.90
Note: The price of WMB was $44.96 when this transaction was executed.
01/16/2015 3 WMB Jan2015 Put options expired
Note: the price of Williams Companies was $42.00 upon Jan2015 options expiration.
01/21/2015 Sold 3 Feb2015 $44.00 Call options @ $.98
Note: WMB stock was $42.49 when these options were sold.
02/20/2015 3 WMB Call options exercised and 300 WMB shares sold at $44.00 strike price
Note: the price of WMB was $48.87 upon the Feb2015 options expiration date

The overall performance result (including commissions) for these transactions was as follows:
100% Cash-Secured Cost Basis: $13,200.00
= $44.00*300
Note:  the price of WMB was $44.96 when these Put options were sold.

Net Profit:
(a) Options Income: +$541.60
= ($.90 + $.98)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (WMB was above $44.00 strike price at Feb2015 expiration): +$0.00
= ($44.00 liquidation price if assigned -$44.00 cash-secured cost basis)*300 shares

Total Net Profit (WMB was above $44.00 strike price at Feb2015 options expiration): +$541.60= (+541.60 +$0.00 +$0.00)

Absolute Return (WMB was above $44.00 strike price at Feb2015 options expiration): +4.1%= +$541.60/$13,200.00
Annualized Return: +29.4%
= (+$541.60/$13,200.00)*(365/51 days)

Established a March 2015 100% Cash-Secured Puts Position in Micron Technology Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Micron Technology Inc. (Ticker Symbol MU) with a March2015 expiration and at the $30.00 strike price.  As detailed below, this investment will provide a +1.7% absolute return in 31 days (which is equivalent to a +19.6% annualized return) if Micron Technology stock remains at or above $30.00 at options expiration on March 20th.

Details of this transaction along with a potential return-on-investment result are: 

Micron Technology Inc. (MU)
The transaction is as follows:
02/19/2015 Sold 4 Micron Technology Inc. Mar2015 $30.00 Puts @ $.53
Note: The price of Micron was $31.88 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: $12,000.00
= $30.00*400
Note:  the price of Micron was $31.88 when these Put options were sold.

Net Profit:
(a) Options Income: +$200.05
= ($.53*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MU remains above $30.00 at Mar2015 expiration): +$0.00
= ($30.00-$30.00)*400 shares

Total Net Profit (If MU is above $30.00 strike price at Mar2015 options expiration): +$200.05 
= (+$200.05 +$0.00 +$0.00)

Absolute Return (If MU is above $30.00 at Mar2015 options expiration and Put options thus expire worthless): +1.7%
= +$200.05/$12,000.00
Annualized Return (If MU above $30.00 at expiration): +19.6%
= (+$200.05/$12,000.00 )*(365/31 days)

The downside 'breakeven price' at expiration is at $29.47 ($30.00 - $.53), which is 7.6% below the current market price of $31.88.
The 'crossover price' at expiration is $32.41 ($31.88 + $.53).  This is the price above which it would have been more profitable to simply buy-and-hold Micron stock until March 20th (the Mar2015 options expiration date) rather than holding these short Put options.

Short Weekly Puts Position in Delta Air Lines Inc. Assigned

Yesterday was the March 6th weekly options expiration.  The Covered Calls Advisor's three short Put options position expired with the price of Delta stock below the $44.00 strike price (i.e. at $43.78).  So, 300 shares of Delta (ticker symbol DAL) were purchased at $44.00.  A decision will be made early next week to either sell these shares or to establish a Mar2015 covered calls position by selling three Call options against the 300 DAL shares now owned. When a trade is made, it will be posted on this site on the same day that it occurs along with the detailed transactions to-date for this Delta Air Lines position.

Established New Position in United Continental Holdings Inc.

Yesterday, the Covered Calls Advisor established a new position in United Continental Holdings Inc.(ticker symbol UAL) by selling three Mar2015 Put options. This is the second short Puts position established with UAL (the prior position is at the same $60 strike price but is for the Feb2015 expiration).  Both positions are conservative ones in that they were established with substantial downside protection.

As detailed below, the United Continental investment will yield a +4.1% absolute return in 41 days (which is equivalent to a +36.5% annualized return-on-investment) if UAL closes above the $60.00 strike price on the Mar2015 options expiration date. 

This potential return is outstanding given the 8.5% downside protection (from the $65.60 stock price to the $60.00 strike price) when the position was established.  The implied volatility in the options was a very high 57 when this position was established; so the $2.50 price per share received when the Puts were sold is very attractive to us option sellers, especially since the level of unknowns between now and the Mar2015 options expiration is relatively low, given that UAL has already announced their 4th quarter earnings results as well as their January operating results.  With about 30% of airline companies' operating earnings coming from fuel expense, they will likely continue to achieve substantial earnings benefits (compared with last year) for at least the next two quarters from oil prices that are substantially below where they were in the prior year.  Their bookings are stable and their pricing remains strong.  This situation does not appear to be fully appreciated in the price of airlines stocks, including United Continental.    

1.  United Continental Holdings Inc. (UAL) -- New Position
The transaction was as follows:
02/09/2015  Sold 3 UAL 100% cash-secured $60.00 Put options @ $2.50
Note: The price of UAL was $65.60 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 both of these positions were established using 100% cash securitization for the three Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $18,000.00
= $60.00*300

Net Profit:
(a) Options Income: +$738.80
= ($2.50*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL is above $60.00 strike price at Mar2015 expiration): +$0.00
= ($60.00-$60.00)*300 shares

Total Net Profit (If UAL is above $60.00 strike price at Mar2015 options expiration): +$738.80
= (+$738.80 +$0.00 +$0.00)

Absolute Return (If UAL is above $60.00 strike price at Mar2015 options expiration): +4.1%
= +$738.80/$18,000.00
Annualized Return (If UAL is above $60.00 at expiration): +36.5%
= (+$738.80/$18,000.00)*(365/41 days)

The downside 'breakeven price' at expiration is at $57.50 ($60.00 - $2.50), which is 12.3% below the current market price of $65.60.
The 'crossover price' at expiration is $68.10 ($65.60 + $2.50).  This is the price above which it would have been more profitable to simply buy-and-hold UAL until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

Country Value Rankings

A comprehensive approach to asset allocation extends beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.). It should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leading advocate for developing a globally oriented value investing perspective to achieve investing outperformance.

The Covered Calls Advisor has developed a method for determining the relative investing worthiness of twenty-two countries and two regions around the world.  The "Country Value Rankings" table below is based on a weighted-average ranking system.  The eight factors used to calculate these rankings are as follows:

Today's results, shown in the table below, provides a value-oriented and objective framework that assists this advisor make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's Portfolio.

From the chart above, the resulting overall market ratings for individual countries and regions are:
Very Bullish (Above 25 total points) -- None
Bullish (20-25 points) -- South Korea, China, Singapore, and Switzerland
Slightly Bullish (15-20 points) -- Taiwan and Malaysia
Neutral (10-15 points) -- Emerging Markets, Sweden, Hong Kong, Germany, Australia, and U.S.
Slightly Bearish -- Spain, Canada, United Kingdom, France, India, and Mexico
Bearish -- Italy
Very Bearish -- Japan, S Africa, Brazil, and Russia


Future investments in the Covered Calls Advisor Portfolio will overweight the higher rated countries. It should also be noted that the U.S. is currently ranked 12th of the 24 ratings and the overall rating for the U.S. is at the low end of the range for Neutral.

This Country Value Rankings spreadsheet is detailed in terms of both the methodology used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please email your comments and questions (to the address in the top right sidebar of this blog). They are always welcomed.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,
Jeff

Established New Short 100% Cash-Secured Puts Position in Delta Air Lines Inc.

Today, the Covered Calls Advisor established a new position in Delta Air Lines Inc. (ticker symbol DAL) by selling 2 Feb2015 $44.00 Put options.  A conservative (3% out-of-the-money) short Puts position  was established.  The investment thesis is that for at least the next six months, the cost of oil will continue to be substantially below the prior year levels.  This is a tremendous tailwind (pun intended) to the airline companies, where oil is about 30% of their expenses.  So even with stagnant passenger bookings versus last year, quarterly earnings are expanding dramatically and have yet to be fully appreciated in the stock price.  Even with relatively stagnant passenger bookings versus last year, the domestic airlines remain an oligarchy and will continue to benefit greatly from their commitment to maintain pricing (including those obnoxious extra fees we all despise) near current very profitable levels. The implied volatility in the Feb2015 options remains high despite Delta having already reported earnings (so there will be no earnings announcement prior to the Feb2015 options expiration date).

As detailed below, this investment will yield a +2.7% absolute return in 20 days (which is equivalent to a +49.7% annualized return-on-investment) if Delta Air Lines stock closes above the $44.00 strike price on the Feb 20th options expiration date.


1.  Delta Air Lines Inc. (DAL) -- New Position
The transaction was as follows:
02/02/2015 Sold 2 Delta Air Lines Inc. Feb2015 $44.00 Puts @ $1.25
Note: The price of DAL was $45.27 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 two Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,800.00
= $44.00*200
Note:  the price of DAL was $45.27 when these Put options were sold.

Net Profit:
(a) Options Income: +$239.55
= ($1.25*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If DAL is above $44.00 strike price at Feb2015 expiration): +$0.00
= ($44.00-$44.00)*200 shares

Total Net Profit (If DAL is above $44.00 strike price at Feb2015 options expiration): +$239.55
= (+$239.55 +$0.00 +$0.00)

Absolute Return (If DAL is above $44.00 strike price at Feb2015 options expiration): +2.7%
= +$239.55/$8,800.00
Annualized Return (If DAL is above $44.00 at expiration): +49.7%
= (+$239.55/$8,800.00)*(365/20 days)

The downside 'breakeven price' at expiration is at $42.75 ($44.00 - $1.25), which is 5.6% below the current market price of $45.27.
The 'crossover price' at expiration is $46.52 ($45.27 + $1.25).  This is the price above which it would have been more profitable to simply buy-and-hold Delta Air Lines stock until Feb 20th (the Feb2015 options expiration date) rather than selling these Put options.