Established Covered Calls Position in Goldman Sachs Group Inc.

Today, a Covered Calls position was established in Goldman Sachs Group Inc. (ticker symbol GS) with a June 21st, 2019 expiration and at the $190.00 strike price.  This position has an upcoming quarterly ex-dividend on May 29th of $.85 per share which is included in the calculations below.  Given the Covered Calls Advisor's current Slightly Bearish overall market outlook, an in-the-money Covered Calls position was established.

As detailed below, a potential return-on-investment result is +1.7% absolute return in 31 days (equivalent to a +20.1% annualized return-on-investment).


Goldman Sachs Group Inc. (GS) -- New Covered Calls Position
The transactions were:
05/22/2019 Bought 200 GS shares @ $196.54
05/22/2019 Sold 2 GS June 21, 2019 $190.00 Call options @ $8.92
Note: a simultaneous buy/write transaction was executed.
05/29/2019 Upcoming quarterly ex-dividend of $.85 per share

A possible overall performance result (including commissions) for this GS Covered Calls position are as follows:
Covered Calls Cost Basis: $37,528.95
= ($196.54 - $8.92) * 200 shares +$4.95 commission

Net Profit:
(a) Options Income: +$1,782.66
= ($8.92 *200 shares) - $1.34 commissions

(b) Dividend Income (If GS assigned at June 21st, 2019 expiration): +$170.00
= ($.85 dividend per share x 200 shares)

(c) Capital Appreciation (If GS assigned at expiration): -$1,312.95
+($190.00 - $196.54) * 200 shares - $4.95 commissions

Total Net Profit (If GS assigned at $190.00 at June 21st options expiration): +$639.71

= (+$1,782.66 +$170.00 -$1,312.95)

Absolute Return: +1.7%

= +$639.71/$37,528.95

Annualized Return: +20.1%

= (+$639.71/$37,528.95)*(365/31 days)

Established Covered Calls Position in Alibaba Group Holding Ltd.

A new Covered Calls positions was established in Alibaba Group Holding Ltd. with a June 21st, 2019 options expiration date and at the $155.00 strike price when Alibaba was priced at $161.53. 

The Covered Calls Advisor considers Alibaba to be a core portfolio holding, so the current intention is to continue the pattern of prior months by establishing ongoing monthly Covered Calls positions in Alibaba. 

As detailed below, a potential return-on-investment result is +2.6% absolute return in 33 days (equivalent to a +28.5% annualized return-on-investment).
The transactions and a potential result are detailed below:

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

The transactions were as follows:
05/20/2019 Bought 200 shares of Alibaba stock @ $161.53 per share 
05/20/2019 Sold 2 Alibaba June 21st, 2019 $155.00 Call options @ $10.45 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $30,222.29
= ($161.53 - $10.45) * 200 shares + $6.29 commission

Net Profit Components:
(a) Options Income: +$2,090.00
= ($10.45* 200 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is above $155.00 strike price at June 21st expiration): -$1,310.95
= ($155.00 -$161.53) * 200 shares - $4.95 commission

Total Net Profit: +$779.05
= (+$2,090.00 options income +$0.00 dividend income -$1,310.95 capital appreciation)

Absolute Return: +2.6%
= +$779.05/$30,222.29
Equivalent Annualized Return: +28.5%
= (+$779.05/$30,222.29)*(365/33 days)

The downside 'breakeven price' at expiration is at $151.08 ($161.53 - $10.45), which is 6.5% below the current market price of $161.53.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the June 21, 2019 options expiration) for this Alibaba Covered Calls position is 67.9%, so the expected value annualized ROI of this investment (if held until expiration) is +19.4% (+28.5% * 67.9%), a nice result for this moderately in-the-money Covered Calls position, especially since there is no earnings report prior to the options expiration date.

The 'crossover price' at expiration is $165.45 = $161.53 + [$10.45 - ($161.53 - $155.00)].
This is the price at expiration above which it would have been more profitable to simply buy-and-hold Alibaba stock until the June 21st, 2019 options expiration date rather than establishing this Covered Calls position.

May 17th, 2019 Options Expiration Results

The Covered Calls Advisor Portfolio had five Covered Call positions since the April 18th, 2019 monthly options expiration date.  Four Covered Calls positions were closed out at a profit prior to the May 17th expiration.  The detailed results for each position were provided on this blog on the same day they were closed:

• Bristol-Myers Squibb Co. (BMY) -- See link
• Baidu Inc. (BIDU) -- link
• UnitedHealth Group Inc. (UNH) -- link
• Alibaba Group Holding Ltd. (BABA) -- link 

• One Covered Call position (Alphabet Inc.) closed in-the-money on the May 17th options expiration date yesterday, so those shares were assigned (sold) at the $1,160.00 strike price.  The return-on-investment result for this position was +12.5% absolute return (equivalent to +33.3% annualized) for the 137 days of this investment.  Details are shown below.     

All 30 positions that have been closed out so far in 2019 achieved a profit.  The weighted average annualized return on investment for these 30 positions is +44.0%.  As shown in the right sidebar, there are now no open positions in the Covered Calls Advisor Portfolio.  The cash (held in money market account at 2.3% yield) now available in the Covered Calls Advisor Portfolio from the closing of these position will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  All future transactions will continue to be posted on this site on the same day they occur.  As always, please email me at the address shown in the right sidebar with any questions or comments related to this Covered Calls Advisor blog.

Alphabet Inc. Class A (GOOGL) -- Covered Call Position Closed

The transactions were as follows:
01/01/2019 100 GOOGL shares owned at $1,044.96 per share
01/01/2019 1 Jan 18th, 2019 $1,085.00 short Call option valued at $19.80 per share
01/18/2019  Bought-to-Close 1 Jan 18th $1,085.00 Call option @ $19.25
01/18/2019 Sold-to-Open 1 Feb 15th, 2019 $1,095.00 Call @ $41.70
Note: the price of GOOGL stock was $1,104.73 when this roll out and up transaction occurred.
02/15/2019 Bought-to-Close 1 Feb 15th $1,095.00 Call @ $22.40
02/15/2019 Sold-to-Open 1 Mar 15th, 2019 $1,090.00 Call @ $44.50
Note: the price of GOOGL stock was $1,117.25 when this roll out and down transaction occurred.
03/15/2019 Bought-to-Close 1 Mar 15th $1,090.00 Call @ $98.82
03/15/2019 Sold-to-Open 1 April 18th, 2019 $1,130.00 Call @ $69.72
Note: the price of GOOGL stock was $1,188.50 when this roll out and up transaction occurred.
04/18/2019 Bought-to-Close 1 Apr 18th $1,130.00 Calls @ $111.40
04/18/2019 Sold-to-Open 1 May 17th, 2019 $1,160.00 Calls @ $91.90
05/17/2019 One Alphabet Inc. May 17th, 2019 $1,160.00 Call option expired in-the-money, so 100 shares of GOOGL stock sold at $1,160.00 strike price
Note: the price of GOOGL stock was $1,168.78 at the May 17th options expiration

The overall performance result (including commissions) of this in-the-money position was as follows:
Cost Basis: $104,496.00
= $1,044.96 per share value at end of December, 2018 * 100 shares

Net Profit Components:
(a) Options Income: +$1,550.46
= (+$19.80 - $19.25 + $41.70 - $22.40 + $44.50 -$98.82 +$69.72 - $111.40 + $91.90) * 100 shares - $24.54 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (GOOGL stock closed above $1,160.00 strike price at May 17th expiration): +$11,499.05
= ($1,160.00 -$1,044.96) * 100 shares - $4.95 commission

Total Net Profit: +$13,049.51
= (+$1,550.46 options income +$0.00 dividend income +$11,499.05 capital appreciation)

Absolute Return: +12.5%
= +$13,049.51/$104,496.00
Equivalent Annualized Return: +33.3%
= (+$13,049.51/$104,496.00)*(365/137 days)

Position Closed in Alibaba Group Holding Ltd

This morning, the Covered Calls Advisor decided to close the existing Alibaba Group Holding Ltd ( ticker symbol BABA) Covered Calls position. The next quarterly earnings is tomorrow morning and it was determined that not holding the position on the earnings date was the most prudent decision, so the position was closed out.   There is a relatively high degree of uncertainty with this earnings report since the straddle price indicates a likely stock price move of about 7% up or down after the release.  The recent earnings report from JD.com included less than expected customer traffic statistics which heightens concerns related to Alibaba's results.  In addition, since the Covered Calls Advisor believes we are most likely near a market top (see link) and the Overall Market Meter outlook is Slightly Bearish, I am temporarily continuing to increase the cash position (held in a money market fund at about 2.3% yield) in the Covered Calls Advisor Portfolio pending greater clarity on trade negotiations and corporate earnings outlooks.  Despite these uncertainties, since Alibaba is a core holding of the Covered Calls Advisor, it is likely that a new, conservative Alibaba Covered Calls position will be established within a few days after tomorrow's earnings report. 

As detailed below, the result was a +13.3% absolute return-on-investment (equivalent to +36.6% on an annualized basis) for the 133 days that this position was held.


Alibaba (BABA) -- Covered Calls Position Closed

The transactions were as follows:
01/01/2019 200 BABA shares owned at $137.07 per share
01/07/2019 2 Jan 18, 2019 $145.00 short Call options sold at $2.09 per share
01/18/2019 Bought-to-Close 2 Jan 18th $145.00 Calls @ $11.22
01/18/2019 Sold-to-Open 2 Feb 15th, 2019 $155.00 Calls @ $7.47
Note: the price of BABA stock was $156.24 when this roll out and up transaction occurred.
02/15/2019 Bought-to-Close 2 Feb 15th $155.00 Calls @ $11.15
02/15/2019 Sold-to-Open 2 Mar 15th, 2019 $160.00 Calls @ $9.05
Note: the price of BABA stock was $166.10 when this roll out and up transaction occurred.
03/15/2019 Bought-to-Close 2 Mar 15th $160.00 Calls @ $20.34
03/15/2019 Sold-to-Open 2 Apr 18th, 2019 $170.00 Calls @ $12.51
Note: the price of BABA stock was $180.29 when this roll out and up transaction occurred.
04/18/2019 Bought-to-Close 2 Apr 18th $170.00 Calls @ $16.79
04/18/2019 Sold-to-Open 2 May 17th, 2019 $175.00 Calls @ $14.45
Note: the price of BABA stock was $186.77 when this roll out and up transaction occurred.
05/14/2019 Unwound the Alibaba Buy/Write position by simultaneous transaction to Buy-to-Close 2 BABA May 17th, 2019 $175.00 Call options and Sell 200 BABA shares
Note: the share price was $174.02 and the Call options were bought-to-close at $4.52 per share


The overall performance result (including commissions) was as follows:
Cost Basis: $27,414.00
= $137.07 per share value at end of December, 2018 * 200 shares

Net Profit Components:
(a) Options Income: -$3,726.84
= ($2.09 - $11.22 + $7.47 - $11.15 + $9.05 -$20.34 +$12.51 -$16.79 +$14.45 -$4.52) * 200 shares - $36.84 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock sold at $174.02 per share): +$7,385.05
= ($174.02 -$137.07) * 200 shares - $4.95 commission

Total Net Profit: +$3,658.21
= (-$3,726.84 options income +$0.00 dividend income +$7,385.05 capital appreciation)

Absolute Return: +13.3%
= +$3,658.21/$27,414.00
Equivalent Annualized Return: +36.6%
= (+$3,658.21/$27,414.00)*(365/133 days)

May 3rd, 2019 Options Expiration Result -- UnitedHealth Group Inc. Covered Call Position Closed

The Covered Calls Advisor Portfolio (CCAP) contained one position (UnitedHealth Group Inc.) with a May 3rd, 2019 options expiration.  Today, with the stock price closing at $231.95, the $230.00 Call option expired in-the-money; so the 100 shares of UNH stock were assigned (i.e. sold) at the $230.00 strike price.  The absolute return-on-investment (ROI) was +3.1% (equivalent to +30.1% annualized return) for the 38 days holding period, which is detailed below. 


UnitedHealth Group Inc. (UNH) -- Covered Calls Position Assigned (i.e. Closed Out) at the May 3rd, 2019 Options Expiration
The transactions were as follows:
03/27/2019  Bought 100 shares UnitedHealth Group @ $239.44
03/27/2019 Sold 1 UNH April 18, 2019 $230.00 Call option @ $13.39
Note: this was a simultaneous Buy/Write transaction.
04/18/2019 One UNH April 18th $230.00 Call option expired with the UNH stock price at $221.75 (below the $230.00 strike price)
04/22/2019 Sold 1 UnitedHealth Group May 3rd, 2019 $230.00 Call option @ $3.25
Note: the price of UnitedHealth Group stock was $225.30 when this Call was sold and its Implied Volatility was 30.4
05/03/2019  One UNH May 3rd, 2019 $230.00 Call option expired in-the-money, so 100 shares of UNH stock sold at the $230.00 strike price
Note: the price of UNH stock was $231.95 upon the May 3rd options expiration

The overall performance result (including commissions) was as follows:
Covered Call Cost Basis: $22,610.62
= ($239.44 - $13.39) * 100 shares + $5.62 commission

Net Profit:
(a) Option Income: +$1,658.38
= ($13.39 +$3.25) * 100 shares - $5.62 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (100 UnitedHealth Group Inc. shares assigned at $230.00 strike price at May 3rd options expiration): -$948.95
= ($230.00-$239.44) * 100 shares - $4.95 commission

Total Net Profit: $709.43
= +$1,658.38 option income + $0.00 dividend income - $948.95 capital appreciation

Absolute Return: +3.1%
= +$709.43/$22,610.62
Annualized Return: +30.1%
= (+$709.43/$22,610.62)*(365/38 days)

Position Closed in Baidu Inc.

This morning, the Covered Calls Advisor decided to close the existing Baidu (symbol BIDU) Covered Call position. The next quarterly earnings is the day prior to the May 17th options expiration date.  In this case, it was determined that not holding the position on the earnings date was the most prudent decision, so the position was closed out.

As detailed below, the result was a +2.0% absolute return-on-investment (equivalent to +17.1% on an annualized basis) for the 43 days that this position was held.

Since the Covered Calls Advisor believes we are most likely near a market top (see link) and my Overall Market Meter outlook is Slightly Bearish, I am continuing to increase the cash position (held in a money market fund at about 2.3% yield) in the portfolio.  I am now continuing to monitor corporate revenue, earnings, and future earnings guidance during this first quarter earnings reporting season before establishing new Covered Calls positions.  See Benjamin Graham quotation under 'Investing Words of Wisdom' in the right sidebar of this blog. 

Baidu Inc. (BIDU) -- Covered Call Position Closed
The transactions were as follows:
03/20/2019  Bought 100 shares of BIDU @ $168.69
03/20/2019 Sold 1 BIDU April 18, 2019 $165.00 Call option @ $7.35
Note: this was a simultaneous Buy/Write transaction.
04/18/2019 Bought-to-Close 1 Apr 18th $165.00 Call @ $6.30
04/18/2019 Sold-to-Open 1 May 17th, 2019 $165.00 Call @ $10.70
Note: the price of BIDU stock was $171.24 when this roll out transaction occurred.
05/02/2019  Unwound the Baidu Buy/Write position by simultaneous transaction to Buy-to-Close 1 BIDU May 17th, 2019 $165.00 Call option and Sell 100 BIDU shares
Note: the share price was $166.80 and the Call option was bought-to-close at $6.50 per share

The overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $16,128.38
= ($168.69 - $7.35) * 100 shares + $5.62 commission

Net Profit:
(a) Options Income: +$518.71
= ($7.35 - $6.30 + $10.70 - $6.50) * 100 shares) - $6.29 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Baidu shares sold at $166.80): -$193.95
= ($166.80 - $168.69) * 100 shares - $4.95 commission

Total Net Profit: +$324.76
= (+$518.71 options income +$0.00 dividend income -$193.95 capital appreciation)

Absolute Return: +2.0%
= +$324.76/$16,128.38
Equivalent Annualized Return: +17.1%
= (+$324.76/$16,128.38)*(365/43 days)