Three New Positions Established in Alibaba Group, Boeing Co, and JPMorgan Chase

Today, three new positions were established in Alibaba Group Holdings Ltd. (BABA), Boeing Co. (BA), and JPMorgan Chase & Co. (JPM) all with April 17th, 2020 options expiration dates.  For Alibaba and Boeing, 100% Cash-Secured Puts were sold -- two Alibaba $165 strike Puts at $6.65 when the ADR price was $180.92  and two Boeing $90 strike Puts at $17.80 when the stock price was $103.72.  Two JPMorgan Chase Covered Calls were established by purchasing 200 shares at $88.05 and two Calls were sold at $15.41 at the $80.00 strike price.     

The Covered Calls Advisor is now about 25% invested (the remaining cash being temporarily in a money market fund).  As is the case with these three investments today, additional cash will be invested in Covered Calls (or 100% Cash-Secured Puts) gradually in the days and weeks ahead when the Implied Volatility is high so the options income obtainable from Covered Calls and thus the potential return-on-investment results is very attractive.  I will also continue tracking the Coronavirus statistics daily (link) and will deploy cash into additional investments more aggressively when daily new cases peaks and begins to decline and will further accelerate new investments to the point of being fully invested when daily new cases continue to decline to the point when they are less than daily new recoveries.

As detailed below, the potential return-on-investment results are: 

• Alibaba Group Holdings Ltd. : +4.0% absolute return in 33 days (equivalent to a +44.5% annualized return-on-investment);
• Boeing Co. : +19.8% absolute return in 33 days (equivalent to a +218.7% annualized return-on-investment); and
• JPMorgan Chase & Co. : +11.4% absolute return in 33 days (equivalent to a +125.8% annualized return-on-investment)

1.  Alibaba Group Holdings Ltd. (BABA) -- New 100% Cash-Secured Puts Position

The transaction was as follows:
03/17/2020 Sold 2 April 17, 2020 $165.00 100% Cash-Secured Put options @ $6.65 per share 
Note: The Open Interest in these Puts was 4,287 contracts

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $33,000.00
= $165.00 per share * 200 shares

Net Profit Components:
(a) Options Income: +$1,328.66
= ($6.65 * 200 shares)- $1.34 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Alibaba is above $165.00 strike price at Apr 17th expiration): +$0.00
= ($165.00 -$165.00) * 200 shares

Potential Total Net Profit (If Alibaba price is above $165.00 strike price at April 17th options expiration): +$1,328.66
= (+$1,328.33 options income +$0.00 dividend income + $0.00 capital appreciation)

Absolute Return: +4.0%
= +$1,328.66/$33,000.00
Equivalent Annualized Return: +44.5%
= (+$1,328.66/$33,000.00)*(365/33 days)



2. Boeing Co. (BA) -- New 100% Cash-Secured Puts Position

The transaction was as follows:
03/17/2020 Sold 2 April 17, 2020 $90.00 100% Cash-Secured Put options @ $17.80 per share 
Note: The Open Interest in these Puts was 617 contracts and the Implied Volatility was an extraordinary 208.3.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $18,000.00
= $90.00 per share * 200 shares

Net Profit Components:
(a) Options Income: +$3,558.66
= ($17.80 per share * 200 shares) - $1.34 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Boeing stock is above $90.00 strike price at Apr 17th expiration): +$0.00
= ($90.00 -$90.00) * 200 shares

Potential Total Net Profit (If Boeing price is above $90.00 strike price at April 17th options expiration): +$3,558.66
= (+$3,558.66 options income +$0.00 dividend income + $0.00 capital appreciation)

Absolute Return: +19.8%
= +$3,558.66/$18,000.00
Equivalent Annualized Return: +218.7%
= (+$3,558.66/$18,000.00)*(365/33 days)



3. JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

The transaction was as follows:
03/17/2020 Bought 200 shares of JPMorgan Chase & Co. @ $88.05 per share 
03/17/2020 Sold 2 JPMorgan Chase April 17, 2020 $80.00 Call option @ $15.41 per share
Note 1: the Implied Volatility of the Call option was 109.2
Note 2: this was a simultaneous Buy/Write transaction
04/03/2020 Ex-dividend of $.90 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $14,529.34
= ($88.05 - $15.41) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$3,082.00
= ($15.41 * 200 shares)
(b) Dividend Income: +$180.00
= $.90 per share x 200 shares 
(c) Capital Appreciation (If JPM stock is above $80.00 strike price at the April 17th expiration): -$1,610.00
= ($80.00 - $88.05) * 200 shares

Total Net Profit: +$1,652.00
= (+$3,082.00 options income +$180.00 dividend income -$1,606.00 capital appreciation)

Absolute Return: +11.4%
= +$1,652.00/$14,529.34
Equivalent Annualized Return: +125.8%
= (+$1,652.00/$14,529.34)*(365/33 days)