The Covered Calls Advisor Portfolio had three positions with April 1st, 2021 options expirations. Two positions (Financial Select Sector SPDR Fund and iShares MSCI Emerging Markets ETF) closed in-the-money, so the maximum potential return-on-investment results were achieved for these positions. The results for these closed positions were:
- Financial Select Sector SPDR Fund (XLF) -- +1.1% absolute return (equivalent to +23.0% annualized roi) for the 17 days of this investment
- iShares MSCI Emerging Markets ETF (EEM) -- +0.5% absolute return (equivalent to +23.7% annualized roi) for the 8 days of this investment
The Covered Calls position in Alibaba Group Holdings Ltd. at the $242.50 strike price closed out-of-the money at $224.36, so the Call options expired and 200 shares of Alibaba stock now remain in the Covered Calls Advisor Portfolio. This position is now at a net loss and it is likely that the position will be continued early next week by selling two Calls against the 200 shares currently held.
The cash now available from the assignment (i.e. closing) of the two in-the-money positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established. Given the Covered Calls Advisor's currently cautious Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at moderately in-the-money strike prices with good downside protection.
The detailed transactions and results for these two closed positions are as follows:
1. Financial Select Sector SPDR Fund(XLF) -- Covered Calls Position Closed Out
The buy/write transaction was as follows:
03/16/2021 Bought 400 shares of the Financial Select Sector SPDR Fund @ $34.16 per share
03/16/2021 Sold 4 XLF April 1st, 2021 $33.00 Call options @ $1.36 per share when the Implied Volatility of the Call options was 21.6
03/22/2021 Ex-distribution of $.1512 per share
04/01/2021 4 XLF Call options expired in-the-money and 400 XLF shares were sold at the $33.00 strike price. The XLF shares closed at $34.47 on the 4/1/2021 expiration date.
The overall performance results (including commissions) was as follows:
Covered Calls Cost Basis: $13,122.68
= ($34.16 - $1.36) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$544.00
= ($1.36 * 400 shares)
(b) Distribution Income (XLF shares assigned on April 1st options expiration date): +$60.48
= $.1512 per share x 400 shares
(c) Capital Appreciation: -$464.00
= ($33.00 - $34.16) * 400 shares
Total Net Profit (XLF shares assigned on April 1st options expiration date): +$140.48
= (+$544.00 Call options income +$60.48 dividend income -$464.00 capital appreciation)
Absolute Return: +1.1%
= +$140.48/$13,122.68
Equivalent Annualized Return: +23.0%
= (+$140.48/$13,122.68)*(365/17 days)
2. iShares MSCI Emerging Markets ETF (EEM) -- 100% Cash-Secured Puts Position Closed Out
The transaction today was as follows:
03/24/2021 Sold 10 EEM April 1st, 2021 $51.00 100% Cash-Secured Put options @ $.27 per share.
04/01/2021 The price of EEM shares was $53.86 at expiration on 4/1/2021 so the 10 EEM $51.00 Cash-Secured Puts expired in-the-money and the Put options premium was retained as profit in the Covered Calls Advisor Portfolio.
The overall performance result (including commissions) was as follows:
100% Cash-Secured Put Cost Basis: $50,736.70
= ($51.00 - $.27) * 1,000 shares + $6.70 commission
Net Profit:
(a) Options Income: +$263.30
= ($.27 * 1,000 shares) - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (EEM shares closed above $51.00 strike price at the April 1st expiration): +$0.00
= ($51.00 - $51.00) * 1,000 shares
Total Net Profit: +$263.30
= (+$263.30 Put options income +$0.00 dividend income +$0.00 capital appreciation)
Absolute Return: +0.5%
= +$263.30/$50,736.70
Annualized Return: +23.7%
= (+$263.30/$50,736.70)*(365/8 days)
Best Wishes and Godspeed,
Jeff Partlow
partlow@cox.net
