Established Four New Positions

Four new positions were established in Energy Transfer Equity LP (ticker symbol ETE), Facebook Inc. (FB), HCA Holdings Inc. (HCA), and Metlife Inc.(MET) all with Feb2017 options expirations.  Energy Transfer Equity and Metlife are covered calls positions, each of which includes consideration of the upcoming ex-dividend dates prior to expiration. Both Facebook and HCA Holdings are short 100% cash-secured Put options positions.  The short Puts were chosen instead of covered calls since the potential return-on-investment result was slightly higher for the Puts in this instance.  Given the Covered Calls Advisor's current Slightly Bearish market outlook, for all four stocks, conservative positions with strike prices below the current stock prices were established.

As detailed below, some potential returns are:
1. Energy Transfer Equity LP: +3.7% absolute return in 19 days (equivalent to a +70.3% annualized return-on-investment)
2. Facebook Inc.: +1.6% absolute return in 19 days (equivalent to a +30.1% annualized return-on-investment)
3. HCA Holdings Inc.: +2.0% absolute return in 19 days (equivalent to a +39.1% annualized return-on-investment)
4. Metlife Inc.: +1.3% absolute return in 19 days (equivalent to a +25.0% annualized return-on-investment)
It seems counterintuitive that the position with the largest potential return-on-investment is with the only one of the four companies that does not have a quarterly earnings report before the Feb2017 options expiration date.

The details for each position are provided below.

1. Energy Transfer Equity LP (ETE) -- New Covered Calls Position

The transactions were as follows:
01/30/2017 Bought 1,000 ETE shares @ $18.07
01/30/2017 Sold 10 ETE Feb2017 $18.00 Call options @ $.47
Note: a simultaneous buy/write transaction was executed.
02/03/2017 Upcoming ex-dividend of $.285 per share

A possible overall performance result (including commissions) for this Energy Transfer covered calls position is as follows:
Stock Purchase Cost: $18,077.95
= ($18.07*1,000+$7.95 commission)

Net Profit:
(a) Options Income: +$454.55
= ($.47*1,000 shares) - $15.45 commissions
(b) Dividend Income: +$285.00
= ($.285 dividend per share x 1,000 shares)

(c) Capital Appreciation (If price of ETE stock is above $18.00 strike price at Feb2017 options expiration date): -$77.95
=+($18.00-$18.07)*1,000 - $7.95 commissions

Total Net Profit (If Energy Transfer stock is assigned at $18.00 at Feb2017 expiration): +$661.60

= (+$454.55 options income +$285.00 dividend income -$77.95 capital appreciation)

Absolute Return: +3.7%

= +$661.60/$18,077.95

Annualized Return: +70.3%

= (+$659.55/$18,077.95)*(365/19 days)

2. Facebook Inc. (FB) -- New 100% Cash-Secured Puts Position

The Covered Calls Advisor established a new position in Facebook Inc. (ticker symbol FB) by selling three Feb2017 Put options at the $125.00 strike price. This position is a conservative one since it was established when the price of Facebook was $129.88 (3.8% downside protection to the strike price) and 19 days remaining until the options expiration date.

The implied volatility of the Put options was 34 when this position was established; so the $1.99 price received per share received when the Puts were sold is a nice premium to receive for these out-of-the-money Put options.    

The transaction was as follows:
01/30/2017  Sold 3 FB Feb2017 $125.00 100% Cash-Secured Put options @ $1.99
Note: the price of FB was $129.88 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result shown below reflect the fact that this position was established using 100% cash securitization for the Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $37,507.95
= $125.00*300 + $7.95 commission
Note: the price of FB was $129.88 when these options were sold

Net Profit:
(a) Options Income: +$586.80
= ($1.99*300 shares) - $10.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FB is above $125.00 strike price at Feb2017 expiration): +$0.00
= ($125.00-$125.00)*300 shares

Total Net Profit (If Facebook stock price remains above $125.00 strike price at Feb2017 options expiration): +$586.80
= (+$586.80 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If Facebook is above $125.00 strike price at Feb2017 options expiration): +1.6%
= +$586.80/$37,507.95
Annualized Return: +30.1%
= (+$586.80/$37,507.95)*(365/19 days)

The downside 'breakeven price' at expiration is at $123.01 ($125.00 - $1.99), which is 5.3% below the current market price of $129.88.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this Facebook short Puts position is 70.3%. This compares with a probability of profit of 50.3% for a buy-and-hold of FB shares over the same time period. Using this probability of profit of 70.3%, the expected value annualized return-on-investment (if held until expiration) is +21.2% (+30.1% * 70.3%), an attractive risk/reward profile for this conservative investment.  

The 'crossover price' at expiration is $131.87 ($129.88 + $1.99).  This is the price above which it would have been more profitable to simply buy-and-hold Facebook stock until the Feb2017 options expiration date rather than selling these Put options.


3. HCA Holdings Inc. (HCA) -- New 100% Cash-Secured Puts Position

Today, the Covered Calls Advisor established a new position in HCA Holdings Inc. (HCA) by selling five Feb2017 Put options at the $77.50 strike price. This position is a slightly conservative one since it was established when the price of HCA was $78.66 (1.5% downside protection to the strike price) and 19 days remaining until the options expiration date.

The implied volatility of the Put options was 28 when this position was established; so the $1.60 price received per share received when the Puts were sold is a nice premium to receive for these out-of-the-money Put options.    

The transaction was as follows:
01/30/2017  Sold 5 HCA Feb2017 $77.50 100% cash-secured Put options @ $1.60
Note: the price of HCA was $78.66 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result shown below reflect the fact that this position was established using 100% cash securitization for the Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $38,757.95
= $77.50*500 + $7.95 commission
Note: the price of HCA was $78.66 when these options were sold

Net Profit:
(a) Options Income: +$788.30
= ($1.60*500 shares) - $11.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HCA is above $77.50 strike price at Feb2017 expiration): +$0.00
= ($77.50-$77.50)*500 shares

Total Net Profit (If HCA Holdings stock price is above $77.50 strike price at Feb2017 options expiration): +$788.30
= (+$788.30 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If HCA is above $77.50 strike price at Feb2017 options expiration): +2.0%
= +$788.30/$38,757.95
Annualized Return: +39.1%
= (+$788.30/$38,757.95)*(365/19 days)

The downside 'breakeven price' at expiration is at $75.90 ($77.50 - $1.60), which is 3.5% below the current market price of $78.66.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this HCA short Puts position is 60%. This compares with a probability of profit of 50.3% for a buy-and-hold of HCA shares over the same time period. Using this probability of profit of 60%, the expected value annualized return-on-investment (if held until expiration) is +23.5% (+39.1% * 60%), an attractive risk/reward profile for this investment.  

The 'crossover price' at expiration is $80.26 ($78.66 + $1.60).  This is the price above which it would have been more profitable to simply buy-and-hold HCA stock until the Feb2017 options expiration date rather than selling these Put options.


4. Metlife Inc. (MET) -- New Covered Calls Position

The transactions were as follows:
01/30/2017 Bought 600 MET shares @ $54.90
01/30/2017 Sold 6 MET Feb2017 $52.50 Call options @ $2.75
Note: a simultaneous buy/write transaction was executed.
02/02/2017 Upcoming ex-dividend of $240.00 = $.40 per share x 600 shares

A possible overall performance result (including commissions) for this MET covered calls position are as follows:
Stock Purchase Cost: $32,947.95
= ($54.90*600+$7.95 commission)

Net Profit:
(a) Options Income: +$1,637.55
= ($2.75*600 shares) - $12.45 commissions
(b) Dividend Income: +$240.00
= ($.40 dividend per share x 600 shares)

(c) Capital Appreciation (If price of Metlife stock is above $52.50 strike price at Feb2017 options expiration date): -$1,447.95
=+($52.50-$54.90)*600 - $7.95 commissions

Total Net Profit (If Metlife stock assigned at $52.50 at Feb2017 expiration): +$429.60

= (+$1,637.55 +$240.00 -$1,447.95)

Absolute Return (If MET assigned at $52.50 at Feb2017 expiration): +1.3%

= +$429.60/$32,947.95

Annualized Return: +25.0%

= (+$429.60/$32,947.95)*(365/19 days)

AerCap Holdings NV Position Closed

The Jan2017 covered calls position in AerCap Holdings NV (ticker AER) expired upon last Friday's options expiration. Of the three positions in the Covered Calls Advisor Portfolio with Jan2017 expirations, AerCap Holdings was the only one that expired out-of-the-money. The results of the other two positions were presented previously in this post: Jan2017 Options Expiration Results.

Today, the Covered Calls Advisor decided to sell the 1,000 long shares of AER.  The result of this AerCap position was a +1.1% absolute return in 14 days (equivalent to a +27.9% annualized return-on-investment).  The associated transactions and return-on-investment result are detailed below.

AerCap Holdings NV (AER)- Position Closed
The transactions were as follows:
01/10/2017 Sold 10 Jan2017 $42.50 Puts @ $.45
Note: The price of AerCap stock was $43.15 when this transaction was executed.
01/20/2017 10 Puts assigned and 1,000 shares of AER purchased at $42.50 strike price with stock price at $42.08 upon options expiration
01/24/2017 Sold 1,000 shares of AER at $42.52

The overall performance result (including commissions) for this AerCap transaction was:
100% Cash-Secured Cost Basis: $42,500.00 = $42.50 * 1,000 shares

Net Profit:
(a) Options Income: +$434.55
= ($.45*1,000 shares) - $15.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$20.00
= ($42.52 sales price -$42.50 purchase price)*1,000 shares

Total Net Profit:+$454.55 
= (+$434.55 options income +$0.00 dividend income +$20.00 capital appreciation)

Absolute Return: +1.1%
= +$454.55/$42,500.00
Annualized Return: +27.9%
= (+$454.55/$42,500.00)*(365/14 days)

Established Three New Short Put Options Positions

Yesterday, the Covered Calls Advisor established 100% cash-secured Puts positions with Feb2017 expirations in Celgene Corporation (ticker symbol CELG), JetBlue Airways Corp. (JBLU), and Las Vegas Sands Corp. (LVS).  Since the Covered Calls Advisor's Overall Market Viewpoint is Slightly Bullish, all three Put positions were established out-of-the-money (strike price below the current stock price). 

As detailed below, the potential returns are:
1. Celgene Corporation: +2.1% absolute return in 26 days (equivalent to a +30.1% annualized return-on-investment)
2. JetBlue Airways Corp.: +1.9% absolute return in 26 days (equivalent to a +27.0% annualized return-on-investment)
3. Las Vegas Sands Corp.: +1.4% absolute return in 26 days (equivalent to a +20.2% annualized return-on-investment)
The potential results for each of these three positions exceeds the Covered Calls Advisor's desired threshold of >20% potential annualized return-on-investment.  The elevated levels of implied volatility in each of these options is attributed to the increased volatility always associated with quarterly earnings reports which for all three companies will be issued prior to the Feb2017 options expiration date.   

The Covered Calls Advisor does not use margin, so the detailed information on these positions shown below reflect the fact that these positions were established using 100% cash securitization for the Put options sold.

This transactions and the associated potential return-on-investment results are detailed below.

1.  Celgene Corporation (CELG) -- New Position

The transaction was as follows:
01/23/2017 Sold 3 CELG Feb2017 $110.00 Puts @ $2.39
Note: The price of CELG was $112.24 when this transaction was executed.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $33,000.00
= $110.00*300

Net Profit:
(a) Options Income: +$706.80
= ($2.39*300 shares) - $10.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CELG is above $110.00 strike price at Feb2017 expiration): +$0.00
= ($110.00-$110.00)*300 shares

Total Net Profit (If CELG is above $110.00 strike price upon the Feb2017 options expiration): +$706.80
= (+$706.80 +$0.00 +$0.00)

Absolute Return (If CELG is above $110.00 strike price at Feb2017 options expiration): +2.1%
= +$706.80/$33,000.00
Annualized Return: +30.1%
= (+$706.80/$33,000.00)*(365/26 days)

The downside 'breakeven price' at expiration is at $107.61 ($110.00 - $2.39), which is 4.1% below the current market price.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this short Puts position is 62.5%. This compares with a probability of profit of 50.2% for a buy-and-hold of Celgene stock over the same time period. Using this probability of profit of 62.5%, the Expected Value annualized ROI of this investment (if held until expiration) is +18.80% (+30.1% * 62.5%).

The 'crossover price' at expiration is $115.03 ($112.64 + $2.39).  This is the price above which it would have been more profitable to simply buy-and-hold Celgene stock until February 17th (the Feb2017 options expiration date) rather than holding this short Put options position.


2.  JetBlue Airways Corp. (JBLU) -- New Position

The transaction was as follows:
01/23/2017 Sold 10 JBLU Feb2017 $20.00 Puts @ $.40
Note: The price of JBLU was $21.17 when this transaction was executed.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $20,000.00
= $20.00*1,000

Net Profit:
(a) Options Income: +$384.55
= ($.40*1,000 shares) - $15.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If JBLU is above $20.00 strike price at Feb2017 expiration): +$0.00
= ($20.00-$20.00)*1,000 shares

Total Net Profit (If JBLU is above $20.00 strike price upon the Feb2017 options expiration): +$384.55
= (+$384.55 +$0.00 +$0.00)

Absolute Return (If JBLU is above $20.00 strike price at Feb2017 options expiration): +1.9%
= +$384.55/$20,000.00
Annualized Return: +33.9%
= (+$384.55/$20,000.00)*(365/26 days)

The downside 'breakeven price' at expiration is at $19.60 ($20.00 - $.40), which is 7.4% below the current market price.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this JetBlue short Puts position is 73%. This compares with a probability of profit of 50.4% for a buy-and-hold of JetBlue stock over the same time period. Using this probability of profit of 73%, the Expected Value annualized ROI of this investment (if held until expiration) is +19.7% (+27.0% * 73%).

The 'crossover price' at expiration is $21.57 ($21.17 + $.40).  This is the price above which it would have been more profitable to simply buy-and-hold JetBlue stock until February 17th (the Feb2017 options expiration date) rather than holding this short Put options position.


3.  Las Vegas Sands Corp. (LVS) -- New Position

The transaction was as follows:
01/23/2017 Sold 5 LVS Feb2017 $52.50 Puts @ $.78
Note: The price of LVS was $55.35 when this transaction was executed.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $26,250.00
= $52.50*500

Net Profit:
(a) Options Income: +$378.30
= ($.78*500 shares) - $11.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If LVS is above $52.50 strike price at Feb2017 expiration): +$0.00
= ($52.50-$52.50)*500 shares

Total Net Profit (If LVS is above $52.50 strike price upon the Feb2017 options expiration): +$378.30
= (+$378.30 +$0.00 +$0.00)

Absolute Return (If LVS is above $52.50 strike price at Feb2017 options expiration): +1.44%
= +$378.30/$26,250.00
Annualized Return: +20.2%
= (+$378.30/$26,250.00)*(365/26 days)

The downside 'breakeven price' at expiration is at $51.72 ($52.50 - $.78), which is 6.6% below the current market price of $55.35.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Jan 20th, 2017 options expiration) for this short Puts position is 73.5%. This compares with a probability of profit of 50.3% for a buy-and-hold of Las Vegas Sands stock over the same time period. Using this probability of profit of 73.5%, the Expected Value annualized ROI of this investment (if held until expiration) is +14.8% (+20.2% * 73.5%).

The 'crossover price' at expiration is $56.13 ($55.35 + $.78).  This is the price above which it would have been more profitable to simply buy-and-hold Las Vegas Sands stock until Feb17th (the Feb2017 options expiration date) rather than holding this short Put options position.

January 2017 Option Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained three positions with January 2017 expirations.  Two of the three positions (Alibaba Group Holdings and Agnico Eagle Mines) were closed out at the options expiration this past Friday.  For the other position (AerCap Holdings Inc.), the price of the stock closed at $42.08 (below the $42.50 strike price). So the Put options were assigned and 1,000 shares were purchased at $42.50. The shares will remain in the Covered Calls Advisor Portfolio until they are either sold or a continuation covered calls position is established by selling Feb2017 call options against the shares owned.  The results for each of these three positions are:  

I.  For the two closed positions:
The return-on-investment results for each position was:

• Alibaba Group Holdings = +1.7% absolute return (+7.3% annualized return)
• Agnico Eagle Mines Ltd. = +6.9% absolute return (+39.0% annualized return)

The cash now available in the Covered Calls Advisor Portfolio from the closing of these positions will be retained until new covered calls and/or 100% cash-secured puts positions are established.  Any new positions established in the near future with this available cash will be posted on this site on the same day the transactions occur.


Alibaba Group Holdings -- Covered Calls Position Closed at Expiration
The transactions were as follows:
10/26/2016 Sold 4 Alibaba (BABA) Nov2016 $95.00 100% Cash-Secured Put options @ $1.25
11/18/2016 4 BABA Puts assigned and 400 shares of Alibaba purchased at $95.00
11/21/2016 Sold 4 BABA Dec2016 $95.00 Call options @ $2.26
Note: the price of BABA was $94.27 when these Call options were sold
12/16/2016 4 BABA Call options expired worthless
12/29/2016 Sold 4 Jan2017 BABA $92.50 Call options @ $.72 when stock price was $88.05
01/20/2017 4 BABA Call options were in-the-money at the Jan2017 options expiration, so 400 shares of BABA were sold at the $92.50 strike price
Note: the closing price of BABA was $96.06 upon the options expiration

The overall performance result (including commissions) for this BABA position was as follows:
Stock Purchase Cost: $38,007.95
= ($95.00*400+$7.95 commission)

Net Profit:
(a) Options Income: +$1,659.15
= ($1.25 + $2.26 + $.72) * 400 shares - 3*$10.95 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividend per share x 400 shares)

(c) Capital Appreciation (Stock assigned at $92.50 at Jan 20, 2017 expiration): -$1,007.95
+($92.50-$95.00)*500 - $7.95 commissions

Total Net Profit: +$651.20

= (+$1,659.15 options income +$0.00 dividend income -$1,007.95 capital appreciation)

Absolute Return: +1.7%

= +$651.20/$38,007.95

Annualized Return: +7.3%
= (+$1,493.65/$21,507.95)*365/86 days


Agnico Eagle Mines Ltd. -- Covered Calls Position Closed at Expiration
The transactions were as follows:
11/16/2016 Sold 5 Dec2016 $43.00 Puts @ $1.95
Note: The price of Agnico Eagle was $43.93 when this transaction was executed.
12/16/2016 5 Put options exercised and 500 shares AEM purchased at $43.00 strike price.
12/29/2016 Sold 5 Jan2017 AEM $42.50 Call options @ $1.60 when stock price was $42.10
01/20/2017 5 AEM Call options were in-the-money at the Jan2017 options expiration, so 500 shares of Agnico Eagle stock were sold at the $42.50 strike price
Note: the closing price of AEM was $45.64 upon the options expiration

The overall performance result (including commissions) for this AEM position was as follows:
Stock Purchase Cost: $21,507.95
= ($43.00*500+$7.95 commission)

Net Profit:
(a) Options Income: +$1,751.60
= ($1.95 + $1.60)*500 shares - 2*$11.70 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividend per share x 500 shares)

(c) Capital Appreciation (If stock assigned at $42.50 at Jan 20, 2017 expiration): -$257.95
+($42.50-$43.00)*500 - $7.95 commissions

Total Net Profit: +$1,493.65

= (+$1,751.60 options income +$0.00 dividend income -$257.95 capital appreciation)

Absolute Return: +6.9%

= +$1,493.65/$21,507.95

Annualized Return: +39.0%

= (+$1,493.65/$21,507.95)*365/65 days

II. For the one continuing position:
The position that ended at Jan2017 options expiration with the price of the stock below the strike price was AerCap Holdings NV (1,000 shares of AER stock).

This position in AerCap Holdings is included in the listing of the current Covered Calls Advisor Portfolio shown in the right sidebar on this page. For this position, the long shares will remain in the Portfolio until they are either sold or new Covered Calls are established by selling associated Feb2017 options against the stock currently held.   In either case, transactions and overall position results will be posted on this site on the same day they occur.

Overall Market Meter Remains "Slightly Bearish"

Today, the Covered Calls Advisor recalculated the current values for each of the seven factors used to determine the "Overall Market Meter" rating.  The result is that the Covered Calls Advisor's current market viewpoint remains at Slightly Bearish.  A graphical representation of the "Overall Market Meter" is shown in the right sidebar on this page.    

The seven factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next two indicators), and
- growth (the last indicator).
Note: The rating for each of these factors is not subjective.  Each factor is calculated using objective, quantifiable measures.

The current Market Meter average of 3.00 (see blue line at the bottom of the chart above) is in the Slightly Bearish range (Note: the Slightly Bearish range is from 2.35 to 3.09). 

Both of the value-related factors are now Very Bearish.  The current P/E ratio for the S&P 500 (based on the average of the Operating and As Reported earnings for the past year) is very high at 23.9.  This is much higher than the expected current P/E ratio of 18.6 (based on the current 2.1% CPI-U inflation rate for the past year).  The market would have to decline by 22.2% from its current level to reach a P/E ratio of 18.6.  Despite the fact that most other factors are Bullish, these two Very Bearish value factors (i.e. P/E Ratio and the Total Market to GDP Ratio) coupled with an expectation of modest sales and earnings growth over the next year explains why the Covered Calls Advisor Portfolio is currently 25% invested and 75% in cash at this time.  

As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bearish sentiment is to "on-average sell 1% in-the-money covered calls for the next options expiration month".

Your comments or questions regarding this post (or the details related to any of the seven factors used in this model) are welcomed. Please email me at the address shown in the upper-right sidebar.

Regards and Godspeed,
Jeff

Established Positions in Citigroup Inc. and Hawaiian Holdings Inc.

Two positions have been established in Citigroup Inc.(ticker symbol C) and Hawaiian Holdings Inc.(ticker HA).  Citigroup Inc. is a covered calls position with a Feb2017 expiration at the $60.00 strike price that includes the expected upcoming quarterly ex-dividend of $.16 around Jan 30th.  For Hawaiian Holdings Inc., five February 2017 100% cash-secured Put options were sold at the $50 strike price.  The short Puts were chosen instead of covered calls since the potential return-on-investment result was slightly higher for the Puts in this instance.

As detailed below, some potential returns are:
1. Citigroup Inc.: +1.4% absolute return in 31 days (equivalent to a +16.9% annualized return-on-investment) if the price of Citigroup is unchanged at expiration.  If the stock increases above the strike price at expiration, there would be a +5.8% absolute return and a +68.5% annualized roi.
2. Hawaiian Holdings Inc.: +1.4% absolute return in 32 days (equivalent to a +15.4% annualized return-on-investment)

The details for each position are provided below.

1. Citigroup Inc. (C) -- New Covered Calls Position

The transactions were as follows:
01/18/2017 Bought 500 Citi shares @ $57.48
01/18/2017 Sold 5 Citi Feb2017 $60.00 Call options @ $.63
Note: a simultaneous buy/write transaction was executed.
01/30/2017 Estimated upcoming ex-dividend of $.16 per share

Two possible overall performance results (including commissions) for this Citi covered calls position are as follows:
Stock Purchase Cost: $28,747.95
= ($57.48*500+$7.95 commission)

Net Profit:
(a) Options Income: +$340.80
= ($.63*500 shares) - $11.70 commissions
(b) Dividend Income: +$80.00
= ($.16 dividend per share x 500 shares)

(c) Capital Appreciation (If price of Citi stock is unchanged at $57.48 upon Feb2017 options expiration date): -$7.95
=+($57.48-$57.48)*500 - $7.95 commissions; or
(c) Capital Appreciation (If price of Citi stock rises to above $60.00 strike price at Feb2017 options expiration date): +$1,252.05
=+($60.00-$57.48)*500 - $7.95 commissions

Total Net Profit (If Citi stock price unchanged at Feb2017 expiration): +$412.85

= (+$340.80 options income +$80.00 dividend income -$7.95 capital appreciation); or

Total Net Profit (If Citi stock assigned at $60.00 at Feb2017 expiration): +$1,672.85

= (+$340.80 +$80.00 +$1,252.05)

1. Absolute Return (If Citi stock price unchanged at expiration): +1.4%

= +$412.85/$28,747.95

Annualized Return: +16.9%

= (+$412.85/$28,747.95)*(365/31 days); OR

2. Absolute Return (If Citi assigned at $60.00 at Feb2017 expiration): +5.8%

= +$1,672.85/$28,747.95

Annualized Return: +68.5%

= (+$1,672.85/$28,747.95)*(365/31 days)

2. Hawaiian Holdings Inc. (HA) -- New 100% Cash-Secured Puts Position

Yesterday, the Covered Calls Advisor established a new position in Hawaiian Holdings Inc. (ticker symbol HA) by selling five Feb2017 Put options at the $50.00 strike price. This position is a very conservative one since it was established when the price of Hawaiian Air was $56.50 (11.5% downside protection to the strike price) and 32 days remaining until the options expiration date.

The implied volatility of the Put options was 41.6 when this position was established; so the $.70 price received per share received when the Puts were sold is a nice premium to receive for these 11.5% out-of-the-money Put options.    

The transaction was as follows:01/17/2017  Sold 5 HA Feb2017 $50.00 100% cash-secured Put options @ $.70
Note: the price of HAL was $56.50 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and a potential result shown below reflect the fact that this position was established using 100% cash securitization for the Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $24,992.05
= $50.00*500 - $7.95 commission
Note: the price of HA was $56.50 when these options were sold

Net Profit:
(a) Options Income: +$338.30
= ($.70*500 shares) - $11.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HA is above $50.00 strike price at Feb2017 expiration): +$0.00
= ($55.00-$55.00)*500 shares

Total Net Profit (If Hawaiian Holdings stock price is above $50.00 strike price at Feb2017 options expiration): +$338.30
= (+$338.30 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If HA is above $50.00 strike price at Feb2017 options expiration): +1.4%
= +$338.30/$24,992.05
Annualized Return: +15.4%
= (+$338.30/$24,992.05)*(365/32 days)

The downside 'breakeven price' at expiration is at $449.30 ($50.00 - $.70), which is 12.7% below the current market price of $56.50.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this Hawaiian Holdings short Puts position is 84.4%. This compares with a probability of profit of 50.3% for a buy-and-hold of HA shares over the same time period. Using this probability of profit of 84.4%, the expected value annualized return-on-investment (if held until expiration) is +13.0% (+15.4% * 84.4%), an attractive risk/reward profile for this very conservative investment.  

The 'crossover price' at expiration is $57.20 ($56.50 + $.70).  This is the price above which it would have been more profitable to simply buy-and-hold HA stock until the Feb2017 options expiration date rather than selling these Put options.

Sold a 100% Cash-Secured Put Option in Amazon.com Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Put position in Amazon.com Inc.(Ticker Symbol AMZN) with a Feb2017 expiration and at the $770.00 strike price.  As detailed below, this investment will provide a +2.3% absolute return in 37 days (which is equivalent to a +22.3% annualized return) if Amazon.com stock closes at or above $770.00 at options expiration on Feb 17th.  This potential result exceeds the Covered Calls Advisor's desired threshold of >20% potential annualized return-on-investment.  

Given the Covered Calls Advisor's current 'Slightly Bearish' overall market outlook, one out-of-the-money Put option was sold with the strike price of $770.00 (which is 4.2% below the stock price of $813.49) at the time this Put option was sold.

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

Amazon.com Inc. (AMZN)
The transaction is as follows:
01/12/2017 Sold 1 Feb2017 $770.00 Put @ $17.50
Note: The price of Amazon.com stock was $803.49 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 Put option sold.

A possible overall performance result (including commissions) for this Amazon.com transaction would be as follows:
100% Cash-Secured Cost Basis: $77,000.00 = $770.00 * 100 shares

Net Profit:
(a) Options Income: +$1,741.30

= ($17.50*100 shares) - $8.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AMZN closes above $770.00 at Feb2017 expiration): +$0.00
= ($770.00-$770.00)*100 shares

Total Net Profit (If AMZN is above $770.00 strike price at Feb2017 options expiration):+$1,741.30 
= (+$1,741.30 option income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If AMZN is above $770.00 at Feb2017 options expiration and Put option thus expires worthless): +2.3%
= +$1,741.30/$75,000.00
Annualized Return: +22.3%
= (+$1,741.30/$75,000.00)*(365/37 days)

The downside 'breakeven price' at expiration is at $752.50 ($770.00 - $17.50), which is 6.3% below the current market price of $803.49.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this Amazon.com short Put position is 68.5%. This compares with a probability of profit of 50.3% for a buy-and-hold of Amazon.com stock over the same time period. Using this probability of profit of 68.5%, the Expected Value annualized ROI of this investment (if held until expiration) is +15.3% (+22.3% * 68.5%).
 
The 'crossover price' at expiration is $820.99 ($803.49 + $17.50).  This is the price above which it would have been more profitable to simply buy-and-hold Amazon.com stock until Feb 17th (the Feb2017 options expiration date) rather than selling this short Put option.

Established Covered Calls Position in Hanes Brands Inc.

Today, a covered calls position was established in Hanes Brands Inc. (ticker symbol HBI) with a Feb2017 expiration.  This covered calls position includes consideration of the upcoming $.15 quarterly dividend on February 10th. Given the Covered Calls Advisor's current Slightly Bearish overall market outlook, an in-the-money covered calls position was established with the strike price of $21.00 (below the stock purchase price of $22.05).

As detailed below, a potential return is +3.1% absolute return in 38 days (equivalent to a +29.8% annualized return-on-investment)

Note: This potential result is above the Covered Calls Advisor's desired threshold of 20% annualized return-on-investment.  

The detailed transactions and potential return-on-investment result is as follows:

1.  Hanes Brands Inc. (HBI) -- New Covered Calls Position

The transactions were as follows:
01/11/2017  Bought 1,000 Hanes Brands shares @ $22.05
01/11/2017 Sold 10 HBI Feb2017 $21.00 Call options @ $1.60
Note: this was a simultaneous buy/write transaction.
02/10/2017 Ex-dividend of $150.00 ($.15 x 1,000 shares)

A possible overall performance result (including commissions) would be as follows:
Bought 1,000 shares HBI: $22,057.95
= $22.05*1,000 + $7.95 commission

Net Profit:
(a) Options Income: +$1,592.50
= ($1.60*1,000 shares) - $7.50 commissions
(b) Dividend Income: +$150.00
= $.15 * 1,000 shares
(c) Capital Appreciation (If HBI is above $21.00 strike price at Feb2017 expiration): -$1,057.95
= ($21.00-$22.05)*1,000 shares - $7.95 commissions

Total Net Profit (If HBI is above $21.00 strike price at Feb2017 options expiration): +$684.55
= (+$1,592.50 options income +$150.00 dividends -$1,057.95 capital appreciation)

Absolute Return (If HBI is above $21.00 strike price at Feb2017 options expiration): +3.1%
= +$684.55/$22,057.95
Annualized Return: +29.8%
= (+$684.55/$22,057.95)*(365/38 days)

The downside 'breakeven price' at expiration is at $20.30 ($22.05 - $.15 -$1.60), which is 7.9% below the current market price of $22.05.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Feb 17th, 2017 options expiration) for this Hanes Brands covered calls position is 68%. This compares with a probability of profit of 50.3% for a buy-and-hold of Hanes stock over the same time period. Using this probability of profit of 68%, the Expected Value annualized ROI of this investment (if held until expiration) is +20.3% (+29.8% * 68%).

The 'crossover price' at expiration is $23.50 ($22.05 + $1.60 - $.15).  This is the price above which it would have been more profitable to simply buy-and-hold Hanes stock until Feb 17th (the Feb2017 options expiration date) rather than establishing this covered calls position.

Sold 100% Cash-Secured Put Options in AerCap Holdings NV

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in AerCap Holdings NV (Ticker Symbol AER) with a Jan2017 expiration and at the $42.50 strike price.  As detailed below, this investment will provide a +1.0% absolute return in 11 days (which is equivalent to a +33.9% annualized return) if AerCap stock closes at or above $42.50 at options expiration on Jan 20th.  This potential result exceeds the Covered Calls Advisor's desired threshold of >20% annualized return-on-investment.  

Given the Covered Calls Advisor's current 'Slightly Bearish' overall market outlook, ten out-of-the-money Put options were sold with the strike price of $42.50 below the current stock price of $43.15 when these options were sold.

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

AerCap Holdings NV (AER)
The transaction is as follows:
01/10/2017 Sold 10 Jan2017 $42.50 Puts @ $.45
Note: The price of AerCap stock was $43.15 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 Put options sold.

A possible overall performance result (including commissions) for this AerCap transaction would be as follows:
100% Cash-Secured Cost Basis: $42,500.00 = $42.50 * 1,000 shares

Net Profit:
(a) Options Income: +$434.55
= ($.45*1,000 shares) - $15.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AER closes above $42.50 at Jan2017 expiration): +$0.00
= ($42.50-$42.50)*1,000 shares

Total Net Profit (If AER is above $42.50 strike price at Jan2017 options expiration):+$434.55 
= (+$434.55 +$0.00 +$0.00)

Absolute Return (If AER is above $42.50 at Jan2017 options expiration and Put options thus expire worthless): +1.0%
= +$434.55/$42,500.00
Annualized Return: +33.9%
= (+$434.55/$42,500.00)*(365/11 days)

The downside 'breakeven price' at expiration is at $42.05 ($42.50 - $.45), which is 2.5% below the current market price of $43.15.

Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing Calculator, the probability of making a profit (if held until the Jan 20th, 2017 options expiration) for this AerCap short Pus position is 65%. This compares with a probability of profit of 50.4% for a buy-and-hold of Amazon.com stock over the same time period. Using this probability of profit of 65%, the Expected Value annualized ROI of this investment (if held until expiration) is +22.0% (+33.9% * 65%).
 
The 'crossover price' at expiration is $43.60 ($43.15 + $.45).  This is the price above which it would have been more profitable to simply buy-and-hold AerCap stock until Jan 20th (the Jan2017 options expiration date) rather than selling these short Put options.