The position in Charles Schwab Corp (SCHW) was closed today by selling the 1000 shares owned:
Transactions History:
02/21/08 Initial Stock Position -- Bought 1000 SCHW @ $20.10
02/21/08 Initial Call Options -- Sold 10 SCHW Mar08 20 Calls @ $1.05
03/22/08 Mar08 Option Expiration Date – SCHW closed below the strike price at $19.46
03/24/08 1000 SCHW sold at $20.00
The overall performance results (including commissions) for the SCHW transactions were as follows:
Stock Purchase Cost: $20,109.95
($20.10*1000+$9.95 commission)
Net Profit:
(a) Options Income: $1,032.55 (1000*$1.05 - $17.45 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation: -$119.90
= ($20.00-$20.10)*1000 - 2*$9.95 commissions
Total Net Profit: +$912.65
= ($1032.55+$0-$119.90)
SCHW ANNUALIZED ROI: +51.8%
(+$912.65/$20,109.95)*(365/32)
Monday, March 24, 2008
Friday, March 21, 2008
March 2008 Expiration Transactions
The Covered Calls Advisor Portfolio (CCAP) contained a total of 12 positions with March 2008 expirations, with the following results:
- 2 positions (MSFT and HLF) closed in-the-money and the calls were exercised and the stock was called away. The annualized percent return-on-investment(ROI) results for these positions were:
Microsoft +61.7%
Herbalife +72.1%
- 10 positions ended out-of-the-money. Decisions will be made to either sell the stock, or to keep the stock and sell calls to establish Apr08 covered call positions. The related transactions will be made during the upcoming week and the actual transactions will be posted on this blog site on the same day they occur.
Details for the two exercised positions were as follows:
1. Microsoft -- Closed
A covered calls position in MSFT was established in the CCAP on 02/20/08 and the stock closed in-the-money yesterday:
Transactions History:
02/20/08 Initial Stock Position -- Bought 800 MSFT @ $28.15
02/20/08 Initial Call Options -- Sold 8 MSFT Mar08 29 Calls @ $.67
03/22/08 Options Exercised -- STC 800 MSFT @ $29.00
[Note: MSFT stock closed on expiration Thursday (3/20/08) at $29.18]
Performance Results(including commissions):
Stock Purchase Cost: $22,529.95
($28.15*800+$9.95 commission)
Net Profit:
(a) Options Income: +$520.05 ($.67*800-$15.95 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$660.10 [($29.00*800-$9.95)-$22,529.95]
Total Net Profit: +$1,180.15 (+$520.05+$660.10)
MSFT ANNUALIZED RETURN ON INVESTMENT: +61.7%
(+$1,180.15/$22,529.95)*(365/31)
2. Herbalife -- Closed
A covered calls position in HLF was first established in the CCAP on 12/26/07. The stock was retained for writing January, February, and March covered calls. The stock closed in-the-money for Mar08 expiration and the position was closed.
The Transactions History is as follows:
12/26/07 Initial Stock Position -- Bought 500 HLF @ $39.32
12/26/07 Initial Call Options -- Sold 5 HLF Jan08 $40 Calls @ $1.40
01/19/08 Jan08 Options Expiration Date -- HLF closed below the strike price at $39.81
01/29/08 Covered Calls Continuation Transaction -- STO 5 Feb08 $40 Calls @ $1.60
02/16/08 Feb08 Options Expiration Date -- HLF closed below the strike price at $39.46
02/19/08 Covered Calls Continuation Transaction -- STO 5 Mar08 40 Calls @ $3.20
03/22/08 Options Exercised -- STC 500 HLF @ $40.00
[Note: HLF stock closed on expiration Thursday (3/20/08) at $48.00]
Performance Results(including commissions):
Stock Purchase Cost: $19,669.95
($39.32*500+$9.95 commission)
Net Profit:
(a) Options Income: +$3,058.90 (500*$1.40 + 500*$1.60 + 500*$3.20 -3*$13.70)
(b) Dividend Income: $0
(c) Capital Appreciation: +$320.10
= ($40.00-$39.32)*500 - 2*$9.95 commissions
Total Net Profit: +$3,379.00
= ($3,058.90 + $0 + $320.10)
HLF Annualized Return on Investment: +72.1%
(+$3,379.00/$19,669.95)*(365/87)
- 2 positions (MSFT and HLF) closed in-the-money and the calls were exercised and the stock was called away. The annualized percent return-on-investment(ROI) results for these positions were:
Microsoft +61.7%
Herbalife +72.1%
- 10 positions ended out-of-the-money. Decisions will be made to either sell the stock, or to keep the stock and sell calls to establish Apr08 covered call positions. The related transactions will be made during the upcoming week and the actual transactions will be posted on this blog site on the same day they occur.
Details for the two exercised positions were as follows:
1. Microsoft -- Closed
A covered calls position in MSFT was established in the CCAP on 02/20/08 and the stock closed in-the-money yesterday:
Transactions History:
02/20/08 Initial Stock Position -- Bought 800 MSFT @ $28.15
02/20/08 Initial Call Options -- Sold 8 MSFT Mar08 29 Calls @ $.67
03/22/08 Options Exercised -- STC 800 MSFT @ $29.00
[Note: MSFT stock closed on expiration Thursday (3/20/08) at $29.18]
Performance Results(including commissions):
Stock Purchase Cost: $22,529.95
($28.15*800+$9.95 commission)
Net Profit:
(a) Options Income: +$520.05 ($.67*800-$15.95 commission)
(b) Dividend Income: $0
(c) Capital Appreciation: +$660.10 [($29.00*800-$9.95)-$22,529.95]
Total Net Profit: +$1,180.15 (+$520.05+$660.10)
MSFT ANNUALIZED RETURN ON INVESTMENT: +61.7%
(+$1,180.15/$22,529.95)*(365/31)
2. Herbalife -- Closed
A covered calls position in HLF was first established in the CCAP on 12/26/07. The stock was retained for writing January, February, and March covered calls. The stock closed in-the-money for Mar08 expiration and the position was closed.
The Transactions History is as follows:
12/26/07 Initial Stock Position -- Bought 500 HLF @ $39.32
12/26/07 Initial Call Options -- Sold 5 HLF Jan08 $40 Calls @ $1.40
01/19/08 Jan08 Options Expiration Date -- HLF closed below the strike price at $39.81
01/29/08 Covered Calls Continuation Transaction -- STO 5 Feb08 $40 Calls @ $1.60
02/16/08 Feb08 Options Expiration Date -- HLF closed below the strike price at $39.46
02/19/08 Covered Calls Continuation Transaction -- STO 5 Mar08 40 Calls @ $3.20
03/22/08 Options Exercised -- STC 500 HLF @ $40.00
[Note: HLF stock closed on expiration Thursday (3/20/08) at $48.00]
Performance Results(including commissions):
Stock Purchase Cost: $19,669.95
($39.32*500+$9.95 commission)
Net Profit:
(a) Options Income: +$3,058.90 (500*$1.40 + 500*$1.60 + 500*$3.20 -3*$13.70)
(b) Dividend Income: $0
(c) Capital Appreciation: +$320.10
= ($40.00-$39.32)*500 - 2*$9.95 commissions
Total Net Profit: +$3,379.00
= ($3,058.90 + $0 + $320.10)
HLF Annualized Return on Investment: +72.1%
(+$3,379.00/$19,669.95)*(365/87)
Monday, March 10, 2008
Market Meter Changes to Neutral
The Covered Calls Advisor conducts weekly reviews of the six key metrics used to determine its U.S. Market Meter Indicator. Today the indicator has changed from its prior Slightly Bullish rating to a current rating of Neutral.
The current readings for the six metrics are:
1. U.S. Earnings and Bond Yield Spread:
5.93%-3.52%=+2.41% is Bullish.
2. Rest-of-World Earnings and Bond Yield Spread:
7.086%-3.99%=+3.10% is Very Bullish.
3. Real Earnings Growth:
(-1.0% Erngs Growth -2.5% Inflation)=-3.5% is Bearish.
4. Current Vs. Expected P/E Ratios:
(18.6-16.85)/16.85 = +10.4% is Slightly Bullish.
5. Investor Sentiment (Price Momentum):
a. Longer-Term (for Russell 3000):
(74.83-87.79)/87.79=-14.8% is Very Bearish.
b. Shorter-Term (using NYSE & NASDAQ Avg. 30-Day Advance/Decline Oscillators):
Slightly Bullish
The average of the longer-term and the shorter term momentum indicators provides the result for this metric. Thus, the overall Investor Sentiment rating is now Slightly Bearish.
6. Covered Calls Advisor's Gut Feeling: Slightly Bearish
The composite overall average outlook for the six indicators above is NEUTRAL, which is now reflected on the 'U.S. Market Meter' Indicator at the top of the sidebar column of this blog. The meter also states the recommended investing strategy for this assessment: "The Covered Calls Advisor says: The Current Overall Stock Market Outlook is: NEUTRAL. The Corresponding Investing Strategy is: SELL AT-THE-MONEY COVERED CALLS."
By 'at-the-money', this advisor means that the covered call positions in a portfolio of near-month covered calls should now be established on-average with the stock price between 1.0% below and 1.0% above the options strike price.
The six factors combined to result in a Neutral overall market view at this time. The bullish readings resulting from the much higher earnings yields in both the U.S. and worldwide compared with substantially lower current interest rates are offset by the negative short-term future corporate earnings outlook as well as the negative current investor sentiment. For further insights into the definitions of each of the six components of the overall market meter, refer to the following two prior articles:
Link to 'Developing an Overall Market Outlook'
Link to 'Changes in Overall Market Outlook'
The current readings for the six metrics are:
1. U.S. Earnings and Bond Yield Spread:
5.93%-3.52%=+2.41% is Bullish.
2. Rest-of-World Earnings and Bond Yield Spread:
7.086%-3.99%=+3.10% is Very Bullish.
3. Real Earnings Growth:
(-1.0% Erngs Growth -2.5% Inflation)=-3.5% is Bearish.
4. Current Vs. Expected P/E Ratios:
(18.6-16.85)/16.85 = +10.4% is Slightly Bullish.
5. Investor Sentiment (Price Momentum):
a. Longer-Term (for Russell 3000):
(74.83-87.79)/87.79=-14.8% is Very Bearish.
b. Shorter-Term (using NYSE & NASDAQ Avg. 30-Day Advance/Decline Oscillators):
Slightly Bullish
The average of the longer-term and the shorter term momentum indicators provides the result for this metric. Thus, the overall Investor Sentiment rating is now Slightly Bearish.
6. Covered Calls Advisor's Gut Feeling: Slightly Bearish
The composite overall average outlook for the six indicators above is NEUTRAL, which is now reflected on the 'U.S. Market Meter' Indicator at the top of the sidebar column of this blog. The meter also states the recommended investing strategy for this assessment: "The Covered Calls Advisor says: The Current Overall Stock Market Outlook is: NEUTRAL. The Corresponding Investing Strategy is: SELL AT-THE-MONEY COVERED CALLS."
By 'at-the-money', this advisor means that the covered call positions in a portfolio of near-month covered calls should now be established on-average with the stock price between 1.0% below and 1.0% above the options strike price.
The six factors combined to result in a Neutral overall market view at this time. The bullish readings resulting from the much higher earnings yields in both the U.S. and worldwide compared with substantially lower current interest rates are offset by the negative short-term future corporate earnings outlook as well as the negative current investor sentiment. For further insights into the definitions of each of the six components of the overall market meter, refer to the following two prior articles:
Link to 'Developing an Overall Market Outlook'
Link to 'Changes in Overall Market Outlook'
Saturday, March 1, 2008
Returns -- Through February 2008
One-month, year-to-date, and prior year performance results of the Covered Calls Advisor Portfolio (CCAP) are presented below. In each instance, CCAP results are compared against the benchmark portfolio which is the Schwab MarketTrack Balanced Portfolio (SWBGX).
1. One-Month Result (Feb 2008):
At market close on 02/29/2008, the total Covered Calls Advisor Portfolio (CCAP) value was $247,797.60, a $3,912.92 increase in the overall portfolio value compared with $243,884.68 at the end of January (01/31/2008).
CCAP February 2008 Absolute Return = +1.6%
($247,797.60-$243,884.68)/$243,884.68
Benchmark Comparison: Feb 2008 Absolute Return for SWBGX =
-1.7%
($15.96-$16.23)/$16.23
2. 2008 Year-to-Date Results (Jan 1st through Feb 29th, 2008):
CCAP 2008 Year-to-Date Absolute Return = -3.9%
($247,797.60-$257,886.51)/$257,886.51
Benchmark (SWBGX) 2008 Year-to-Date Absolute Return =
-4.9%
($15.96-$16.79)/$16.79
3. Prior Year Results (2007):
The Covered Calls Advisor Portfolio (CCAP) was initiated on September 14th, 2007 with a beginning balance of $250,000. The CCAP balance at year-end (12/31/07) was $257,886.51. Below are the returns of the CCAP for this 2007 timeframe compared with the results of the SWBGX benchmark during the same time period.
CCAP 2007 Absolute Return = +3.2%
($257,886.51-$250,000.00)/$250,000.00
Benchmark (SWBGX) 2007 Absolute Return = +0.7%
($16.79-$16.68)/$16.68
The corresponding annualized return for the 108 days the CCAP existed in 2007 (between Sept 14, 2007 and Dec 31, 2007) was:
CCAP 2007 Annualized Return = +10.7%
[($257,886.51-$250,000.00)/$250,000.00]*(365/108 days)
Benchmark (SWBGX) 2007 Annualized Return = +2.2%
[($16.79-$16.68)/$16.68]*(365/108 days)
This Advisor's Overall Market Meter continues to show that a slightly bullish investment posture is appropriate at this time. The corresponding covered calls investing approach is to write primarily slightly out-of-the-money covered calls.
1. One-Month Result (Feb 2008):
At market close on 02/29/2008, the total Covered Calls Advisor Portfolio (CCAP) value was $247,797.60, a $3,912.92 increase in the overall portfolio value compared with $243,884.68 at the end of January (01/31/2008).
CCAP February 2008 Absolute Return = +1.6%
($247,797.60-$243,884.68)/$243,884.68
Benchmark Comparison: Feb 2008 Absolute Return for SWBGX =
-1.7%
($15.96-$16.23)/$16.23
2. 2008 Year-to-Date Results (Jan 1st through Feb 29th, 2008):
CCAP 2008 Year-to-Date Absolute Return = -3.9%
($247,797.60-$257,886.51)/$257,886.51
Benchmark (SWBGX) 2008 Year-to-Date Absolute Return =
-4.9%
($15.96-$16.79)/$16.79
3. Prior Year Results (2007):
The Covered Calls Advisor Portfolio (CCAP) was initiated on September 14th, 2007 with a beginning balance of $250,000. The CCAP balance at year-end (12/31/07) was $257,886.51. Below are the returns of the CCAP for this 2007 timeframe compared with the results of the SWBGX benchmark during the same time period.
CCAP 2007 Absolute Return = +3.2%
($257,886.51-$250,000.00)/$250,000.00
Benchmark (SWBGX) 2007 Absolute Return = +0.7%
($16.79-$16.68)/$16.68
The corresponding annualized return for the 108 days the CCAP existed in 2007 (between Sept 14, 2007 and Dec 31, 2007) was:
CCAP 2007 Annualized Return = +10.7%
[($257,886.51-$250,000.00)/$250,000.00]*(365/108 days)
Benchmark (SWBGX) 2007 Annualized Return = +2.2%
[($16.79-$16.68)/$16.68]*(365/108 days)
This Advisor's Overall Market Meter continues to show that a slightly bullish investment posture is appropriate at this time. The corresponding covered calls investing approach is to write primarily slightly out-of-the-money covered calls.
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