The Covered Calls Advisor Portfolio has a Covered Calls position in iShares China Large-Cap ETF (ticker FXI) that has an expiration date today at the $32.00 strike price. FXI's price was out-of-the-money at $30.975 with less than an hour remaining in today's trading session and the remaining time value in the Calls had declined to only $.01.
I remain confident in the iShares China Large-Cap ETF. Some valuation metrics such as P/E ratio and Price-to-Sales (P/S) ratio for FXI are approximately only sixty percen of those of SPY. Also, although China's economic policies are erratic, which complicates analysis of the impact on its stock market, it is now a rare country that is in the process of implementing quantitative easing this year--which is normally favorable to economies and stocks. In contrast, the U.S. Federal Reserve Board which has now begun both regular Federal Funds Rate increases and also quantitative tightening--which is normally unfavorable to economies and stocks. So, I decided to maintain the FXI Covered Calls position by rolling-down-and-out the existing Covered Calls two weeks to the July 29th, 2022 expiration and from the original $32.00 strike price to the $31.00 strike price. This credit spread transaction was executed at a net credit of $.79 per share ($.80 credit - $.01 debit).
As detailed below, a potential return-on-investment result is +0.6% absolute return (equivalent to +8.6% annualized
return for the 25 days holding period) if the stock price is in-the-money (i.e. above the $31.00 strike price) and therefore assigned on the July 29th options expiration date.
iShares China Large-Cap ETF (FXI) -- Covered Calls Position Rolled Out
The original net debit limit order buy/write transaction was as follows:
7/5/2022 Bought 500 shares of iShares China Large-Cap ETF shares @ $33.21 per share
7/5/2022 Sold 5 FXI July 15th, 2022 $32.00 Call options @ $1.62 per share
7/15/2022 Bought-to-Close 5 FXI July 15th, 2022 $32.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 5 FXI July 29th, 2022 $31.00 Calls @ $.80 per
share.
A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
Stock Purchase Cost: $15,798.35
= ($33.21 - $1.62) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$1,198.30
= ($1.62 -$.01 + $.80) * 500 shares - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 iShares China Large-Cap ETF shares assigned at $31.00 strike price at expiration): -$1,105.00
+($31.00 - $33.21) * 500 shares
Total Net Profit (If 500 iShares China Large-Cap ETF shares assigned at $31.00 strike price at expiration): +$93.30
= (+$1,198.30 options income +$0.00 dividend income -$1,105.00 capital appreciation)
Absolute Return-on-Investment: +0.6%
= +$93.30/$15,798.35
Annualized Return-on-Investment: +8.6%
= (+$93.30/$15,798.35) * (365/25 days)
Since today is the July 2022 monthly options expiration date, I will post a summary of my results during the past month on this Covered Calls Advisor blog tomorrow morning.
