January 19th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had eight positions with January 19th, 2018 options expirations.  All eight positions closed in-the-money, so the maximum potential return-on-investment result was achieved for every position: 

• Alibaba Group Holding Ltd.:  +4.5% absolute return (+22.6% annualized return) in 72 days
• Bristol-Myers Squibb Co.:  +1.3% absolute return (+26.6% annualized return) in 18 days
• Gap Inc.: +2.2% absolute return (+34.1% annualized return) in 23 days
• General Motors Co.:  +2.1% absolute return (+14.3% annualized return) in 54 days
• iShares China Large-Cap ETF: +0.7% absolute return (+19.1% annualized return) in 13 days
• JPMorgan Chase & Co.:  +1.2% absolute return (+17.9% annualized return) in 25 days
• Las Vegas Sands Corp.:  +1.5% absolute return (+43.4% annualized return) in 13 days
• Skyworks Solutions Inc.:  +2.6% absolute return (+21.5% annualized return) in 44 days

Two positions shown above (iShares China Large-Cap ETF and Las Vegas Sands) had early assignments (on the day prior to their ex-dividend date in each instance).  The remaining six Covered Calls positions expired in-the-money on their options expiration date yesterday.

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.  We have now entered earnings season and 4th quarter earnings reports have just begun.  Most companies will be reporting their results during the next three weeks, so we will be following these reports closely to identify Covered Calls positions to establish for next month's (Feb 16th, 2018) options expiration.  Given the stock market is at record highs and (1) overvalued by historic valuation metrics and (2) overbought by short-term metrics, the Covered Calls Advisor will be very cautious in investing the current mostly cash position in the Portfolio.  As always, any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

To demonstrate how return-on-investment results for closed Covered Calls positions are calculated, the details for the first position listed above (Alibaba Group Holding Ltd.) is provided here:


Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position Closed

The transactions were as follows:
11/09/2017 Bought 300 shares of Alibaba stock @ $182.08 per share 
11/09/2017 Sold 3 Alibaba December 15th, 2017 $175.00 Call options @ $11.28 per share
Note: this was a simultaneous Buy/Write transaction
12/15/2017 3 Dec 15th, 2017 Call options expired
12/18/2017 Sold 3 BABA Jan 19th, 2018 $170.00 Call options @ $8.45 per share
Note: the price of Alibaba was $174.15 when these Calls were sold
01/19/2018 3 BABA Jan 19th, 2018 $170.00 Call options expired in-the-money, so 300 shares of BABA owned were sold at the $170.00 strike price, thus closing out this Covered Calls position.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $51,246.96
= ($182.08 - $11.28)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$5,912.04
= ($11.28 + $8.45) * 300 shares - $6.96 commission
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock was sold at $170.00 strike price on Jan. 19th expiration date): -$3,628.95
= ($170.00 -$182.08)* 300 shares - $4.95 commission

Total Net Profit: +$2,283.09
= (+$5,912.04 options income +$0.00 dividend income -$3,628.95 capital appreciation)

Absolute Return: +4.5%
= +$2,283.09/$51,246.96
Equivalent Annualized Return: +22.6%
= (+$1,155.05/$51,246.96)*(365/72 days)

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