The Covered Calls Advisor Portfolio (CCAP) covered calls position in the United States Natural Gas Fund (UNG) was closed out by an early exercise yesterday (Thursday).
The transactions history was as follows:
11/18/09 Bought 300 UNG @ $8.96
11/18/09 Sold 3 UNG Dec09 $9.00 Calls @ $.51
12/17/09 Early Exercise -- Sold 300 UNG @ $9.00.
The price of UNG was above $10.00 when the options were exercised yesterday and the stock was called away.
The overall performance results(including commissions) for the UNG transactions were as follows:
Stock Purchase Cost: $2,696.95
= ($8.96*300+$8.95 commission)
Net Profit:
(a) Options Income: +$141.80
= (300*$.51 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $9.00): +$3.05
= ($9.00-$8.96)*300 - $8.95 commissions
Total Net Profit(Stock exercised at $9.00): +$144.85
= (+$141.80 +$0.00 +$3.05)
Absolute Return (Stock Exercised at $9.00: +5.4%
= +$144.85/$2,696.95
Annualized Return: +67.6%
= (+$144.85/$2,696.95)*(365/29 days)
Friday, December 18, 2009
Tuesday, December 15, 2009
Continuation Transaction -- Fluor Corporation
Today, the Covered Calls Advisor Portfolio(CCAP) established a covered calls position in Fluor Corporation (FLR) by selling 3 Jan2010 options against the 300 shares owned in Fluor as follows:
12/15/09 Sell-to-Open (STO) 3 FLR Jan2010 $45.00s @ $1.10
The transactions history to date and the profit potential for the continuation covered calls position in FLR is as follows:
09/22/09 Bought 300 FLR @ $54.93
09/22/09 Sold 3 FLR Oct09 $55.00 Calls @ $1.95
10/17/09 Oct09 Options Expired
The closing price of FLR was $50.24 on expiration Friday.
10/19/09 Sell-to-Open (STO) 3 FLR Nov09 $55.00s @ $.95
The price of FLR was $51.57 today when this transaction was executed.
11/11/09 Buy-to-Close (BTC) 3 FLR Nov09 $55.00s @ $.05
11/11/09 Sell-to-Open (STO) 3 FLR Nov09 $45.00s @ $1.15
Note: Net Credit-Spread upon Roll-Down was $1.10 ($1.15 - $.05)
11/21/09 Nov09 Options Expired
The closing price of FLR was $44.19 on expiration Friday.
12/15/09 Sell-to-Open (STO) 3 FLR Jan2010 $45.00s @ $1.10
Note: The price of FLR was $43.10 today when this transaction was made.
Some possible overall performance results(including commissions) for the FLR transactions would be as follows:
Stock Purchase Cost: $16,487.95
= ($54.93*300+$8.95 commission)
Net Profit:
(a) Options Income: +$1,485.20
= (300*($1.95+$.95-$.05+$1.15+$1.10) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $43.10): -$3,557.95
= ($43.10-$54.93)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $45.00): -$2,987.95
= ($45.00-$54.93)*300 - $8.95 commissions
Total Net Profit(If stock price unchanged at $43.10): -$2,072.75
= (+$1,485.20 +$0.00 -$3,557.95)
Total Net Profit(If stock price exercised at $45.00): -$1,502.75
= (+$1,485.20 +$0.00 -$2,987.95)
Absolute Return if Stock Price Unchanged at $43.10: -12.6%
= -$2,072.75/$16,487.95
Annualized Return If Stock Price Unchanged (ARIU): -39.6%
= (-$2,072.75/$16,487.95)*(365/116 days)
Absolute Return if Exercised at $45.00: -9.1%
= -$1,502.75/$16,487.95
Annualized Return If Exercised (ARIE) -28.7%
= (-$1,502.75/$16,487.95)*(365/116 days)
12/15/09 Sell-to-Open (STO) 3 FLR Jan2010 $45.00s @ $1.10
The transactions history to date and the profit potential for the continuation covered calls position in FLR is as follows:
09/22/09 Bought 300 FLR @ $54.93
09/22/09 Sold 3 FLR Oct09 $55.00 Calls @ $1.95
10/17/09 Oct09 Options Expired
The closing price of FLR was $50.24 on expiration Friday.
10/19/09 Sell-to-Open (STO) 3 FLR Nov09 $55.00s @ $.95
The price of FLR was $51.57 today when this transaction was executed.
11/11/09 Buy-to-Close (BTC) 3 FLR Nov09 $55.00s @ $.05
11/11/09 Sell-to-Open (STO) 3 FLR Nov09 $45.00s @ $1.15
Note: Net Credit-Spread upon Roll-Down was $1.10 ($1.15 - $.05)
11/21/09 Nov09 Options Expired
The closing price of FLR was $44.19 on expiration Friday.
12/15/09 Sell-to-Open (STO) 3 FLR Jan2010 $45.00s @ $1.10
Note: The price of FLR was $43.10 today when this transaction was made.
Some possible overall performance results(including commissions) for the FLR transactions would be as follows:
Stock Purchase Cost: $16,487.95
= ($54.93*300+$8.95 commission)
Net Profit:
(a) Options Income: +$1,485.20
= (300*($1.95+$.95-$.05+$1.15+$1.10) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $43.10): -$3,557.95
= ($43.10-$54.93)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $45.00): -$2,987.95
= ($45.00-$54.93)*300 - $8.95 commissions
Total Net Profit(If stock price unchanged at $43.10): -$2,072.75
= (+$1,485.20 +$0.00 -$3,557.95)
Total Net Profit(If stock price exercised at $45.00): -$1,502.75
= (+$1,485.20 +$0.00 -$2,987.95)
Absolute Return if Stock Price Unchanged at $43.10: -12.6%
= -$2,072.75/$16,487.95
Annualized Return If Stock Price Unchanged (ARIU): -39.6%
= (-$2,072.75/$16,487.95)*(365/116 days)
Absolute Return if Exercised at $45.00: -9.1%
= -$1,502.75/$16,487.95
Annualized Return If Exercised (ARIE) -28.7%
= (-$1,502.75/$16,487.95)*(365/116 days)
Sunday, December 6, 2009
Overall Market Meter -- A Revised Covered Calls Investing Strategy
The "Overall Market Meter" on the right sidebar of this blog reflects the Covered Calls Advisor's current overall stock market outlook, which is currently "SLIGHTLY BULLISH." The meter also shows seven possible market sentiment indicators: Very Bullish, Bullish, Slightly Bullish, Neutral, Slightly Bearish, Bearish, and Very Bearish. To determine which indicator is most representative of this advisor's current outlook, a quantitative-based, multi-factor decision model is used. An explanation of the nine factors used to determine which one of the seven sentiment indicators is most representative of this advisor's "Current Overall Stock Market Outlook" will be the subject of another article on this blog in the near future.
The purpose of this article is to present the Covered Calls Advisor's preferred investing strategy for each of the seven possible indicators. First, let's consider this advisor's primary objective with covered calls investing, namely to "achieve market-beating returns." To accomplish this, an investing strategy should be designed to provide an opportunity to outperform the market for each of the seven market conditions. Fortunately, a well-defined, disciplined covered calls investing strategy provides an opportunity to achieve that goal by investing more aggressively in bull markets (by selling out-of-the-money covered calls), and more cautiously in bear markets (by selling in-the-money covered calls).
The chart below summarizes the Covered Calls Advisor's strategy for each of the seven market outlooks, and also provides a side-by-side comparison showing the original strategy and the revised strategy:
As described in a prior article (link), one of the great things about covered calls investing is that it provides us with three potential sources for profit: options income, dividend income, and capital appreciation. During recent months, this advisor has determined that a slightly more aggressive posture is desirable to become more fully exposed to the capital appreciation profit potential of covered calls. This is achieved through greater out-of-the-money exposure when initially establishing covered calls positions. Two revisions that enable this result are:
(1) The "New Strategy" shifts the moneyness of the strike prices toward a slightly greater out-of-the-money stance when establishing covered calls positions; and
(2) In bearish markets, by substituting some out-of-the-money positions on short (i.e. inverse) equities for what would normally have been in-the-money positions on long equities. For example, the chart demonstrates that when the "Overall Market Outlook" is "Bearish," the corresponding "New Strategy" will be to have 50% of the total portfolio value invested in covered calls that on-average are 1% In-the-Money using long underlying equity positions with the other 50% of the portfolio value invested in covered calls that on-average are 2% Out-of-the-Money using short (i.e. inverse) underlying equities.
If you have comments or questions related to the contents of this article, please feel free to submit them by clicking on the "comments" link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site. Your comments are always welcomed.
Regards and Godspeed,
Jeff
The purpose of this article is to present the Covered Calls Advisor's preferred investing strategy for each of the seven possible indicators. First, let's consider this advisor's primary objective with covered calls investing, namely to "achieve market-beating returns." To accomplish this, an investing strategy should be designed to provide an opportunity to outperform the market for each of the seven market conditions. Fortunately, a well-defined, disciplined covered calls investing strategy provides an opportunity to achieve that goal by investing more aggressively in bull markets (by selling out-of-the-money covered calls), and more cautiously in bear markets (by selling in-the-money covered calls).
The chart below summarizes the Covered Calls Advisor's strategy for each of the seven market outlooks, and also provides a side-by-side comparison showing the original strategy and the revised strategy:
As described in a prior article (link), one of the great things about covered calls investing is that it provides us with three potential sources for profit: options income, dividend income, and capital appreciation. During recent months, this advisor has determined that a slightly more aggressive posture is desirable to become more fully exposed to the capital appreciation profit potential of covered calls. This is achieved through greater out-of-the-money exposure when initially establishing covered calls positions. Two revisions that enable this result are:
(1) The "New Strategy" shifts the moneyness of the strike prices toward a slightly greater out-of-the-money stance when establishing covered calls positions; and
(2) In bearish markets, by substituting some out-of-the-money positions on short (i.e. inverse) equities for what would normally have been in-the-money positions on long equities. For example, the chart demonstrates that when the "Overall Market Outlook" is "Bearish," the corresponding "New Strategy" will be to have 50% of the total portfolio value invested in covered calls that on-average are 1% In-the-Money using long underlying equity positions with the other 50% of the portfolio value invested in covered calls that on-average are 2% Out-of-the-Money using short (i.e. inverse) underlying equities.
If you have comments or questions related to the contents of this article, please feel free to submit them by clicking on the "comments" link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site. Your comments are always welcomed.
Regards and Godspeed,
Jeff
Thursday, December 3, 2009
Continuation Transaction -- Fuqi International Inc.
The Covered Calls Advisor Portfolio(CCAP) position in Fuqi International Inc.(FUQI) was out-of-the-money at Nov09 expiration. Today it was decided to retain the 200 shares of Fuqi International Inc.(FUQI) and to establish a Dec09 covered calls position as follows:
12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35
The transactions history to date and the profit potential for the continuation covered calls position in FUQI is as follows:
10/16/09 Bought 200 FUQI @ $25.45
10/16/09 Sold 2 FUQI Nov09 $26.00 Calls @ $2.00
11/21/09 Nov09 Options Expired
12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35
Note: The price of FUQI was $20.84 today when this transaction was made.
Some possible overall performance results(including commissions) for the FUQI transactions would be as follows:
Stock Purchase Cost: $5,098.95
= ($25.45*200+$8.95 commission)
Net Profit:
(a) Options Income: +$449.10
= (200*($2.00+$.35) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $20.84):
-$930.95 = ($20.84-$25.45)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $22.50): -$598.95
= ($22.50-$25.45)*200 - $8.95 commissions
Total Net Profit(If stock price unchanged at $20.84): -$481.85
= (+$449.10 +$0.00 -$930.95)
Total Net Profit(If stock exercised at $22.50): -$149.85
= (+$449.10 +$0.00 -$598.95)
Absolute Return if Stock Price Unchanged at $20.84: -9.4%
= -$481.85/$5,098.95
Annualized Return If Unchanged (ARIU): -53.9%
= (-$481.85/$5,098.95)*(365/64 days)
Absolute Return if Stock Exercised at $22.50: -2.9%
= -$149.85/$5,098.95
Annualized Return If Exercised (ARIE): -16.8%
= (-$149.85/$5,098.95)*(365/64 days)
12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35
The transactions history to date and the profit potential for the continuation covered calls position in FUQI is as follows:
10/16/09 Bought 200 FUQI @ $25.45
10/16/09 Sold 2 FUQI Nov09 $26.00 Calls @ $2.00
11/21/09 Nov09 Options Expired
12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35
Note: The price of FUQI was $20.84 today when this transaction was made.
Some possible overall performance results(including commissions) for the FUQI transactions would be as follows:
Stock Purchase Cost: $5,098.95
= ($25.45*200+$8.95 commission)
Net Profit:
(a) Options Income: +$449.10
= (200*($2.00+$.35) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $20.84):
-$930.95 = ($20.84-$25.45)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $22.50): -$598.95
= ($22.50-$25.45)*200 - $8.95 commissions
Total Net Profit(If stock price unchanged at $20.84): -$481.85
= (+$449.10 +$0.00 -$930.95)
Total Net Profit(If stock exercised at $22.50): -$149.85
= (+$449.10 +$0.00 -$598.95)
Absolute Return if Stock Price Unchanged at $20.84: -9.4%
= -$481.85/$5,098.95
Annualized Return If Unchanged (ARIU): -53.9%
= (-$481.85/$5,098.95)*(365/64 days)
Absolute Return if Stock Exercised at $22.50: -2.9%
= -$149.85/$5,098.95
Annualized Return If Exercised (ARIE): -16.8%
= (-$149.85/$5,098.95)*(365/64 days)
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