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Monday, May 1, 2023

Continuation of Covered Calls Position in iShares China Large-Cap ETF

The Covered Calls Advisor Portfolio has a Covered Calls position in iShares China Large-Cap ETF (ticker FXI)  that expired out-of-the-money on its Friday April 21st, 2023 options expiration date.  This morning, when the FXI price was $28.43, I decided to continue this Covered Calls position by rolling-out to the $29.00 strike price at the May 19th, 2023 monthly options expiration date by selling ten Call options at $.47 per share against the 1,000 FXI shares owned.   

As detailed below, two potential return-on-investment results are: (1) +1.8% absolute return-on-investment (equivalent to +6.1% annualized return-on-investment for the 106 days holding period) if the iShares China Large-Cap ETF price is unchanged at today's $28.43 price on the May 19th, 2023 expiration date; and (2) +3.7% absolute return-on-investment (equivalent to +12.7% annualized return-on-investment for the 106 days holding period) if it is in-the-money (i.e. above the $29.00 strike price) on the May 19th, 2023 options expiration date.


iShares China Large-Cap ETF (FXI) -- Covered Calls Position Continued by Rollout

The original Buy/Write transaction was as follows:
2/3/2023 Bought 1,000 shares of iShares China Large-Cap ETF @ $31.10 per share 
2/3/2023 Sold 10 FXI Feb 17th, 2023 $30.00 Call options @ $1.52 per share
2/17/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
3/2/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten March 17th, 2023 $30.00 Call options @ $.59 per share.  The stock price was $29.50 when this transaction occurred.
3/17/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
3/23/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten April 21st, 2023 $30.00 Call options @ $.64 per share.  The stock price was $29.08 when this transaction was made.
4/21/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
5/1/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten May 19th, 2023 $29.00 Call options @ $.47 per share.  The stock price was $28.43 when this transaction was made. 

Two possible overall performance results (including commissions) for this iShares China Large-Cap ETF Covered Calls position are as follows:
FXI Covered Calls Net Investment: $29,586.70
= ($31.10 - $1.52) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$3,193.32
= ($1.52 + $.59 + $.64 + $.47) * 1,000 shares - $26.80 commissions
(b) Distribution Income: +$0.00
(c) Capital Appreciation (If the iShares China Large-Cap ETF price is unchanged at today's $28.43 price on the May 19th, 2023 expiration date): -$2,670.00
+($28.43 current stock price - $31.10 stock purchase price) * 1,000 shares; OR
(c) Capital Appreciation (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 5/19/2023 options expiration date): -$2,100.00
+($29.00 options strike price - $31.10 stock purchase price) * 1,000 shares

1. Total Net Profit (If the iShares China Large-Cap ETF price is unchanged at today's $28.43 price on the May 19th, 2023 expiration date): +$523.32
= (+$3,193.32 options income +$0.00 distribution income -$2,670.00 capital appreciation); OR
2. Total Net Profit (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 5/19/2023 options expiration date): +$1,093.32
= (+$3,193.32 options income +$0.00 distribution income -$2,100.00 capital appreciation)
 
1. Absolute Return-on-Investment (If the iShares China Large-Cap ETF price is unchanged at today's $28.43 price on the 5/19/2023 expiration date): +1.8%
= +$523.32/$29,586.70
Annualized Return-on-Investment (If stock price unchanged at $29.08 at expiration): +6.1%
= (+$523.32/$29,586.70) * (365/106 days); OR
2. Absolute Return-on-Investment (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 5/19/2023 options expiration date): +3.7%
= +$1,093.32/$29,586.70
Annualized Return-on-Investment (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the May 19th options expiration date): +12.7%
= (+$1,093.32/$29,586.70) * (365/78 days)