Establish Neutral Tandem Inc. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Neutral Tandem Inc. (TNDM) covered calls. TNDM was one of the covered calls positions that was called away last Friday at Sep2010 options expiration and today it was decided to re-establish a new position for Oct2010 expiration as follows:

Established Neutral Tandem Inc. (TNDM) Covered Calls for Aug2010:
09/22/2010 Bought 500 TNDM @ $12.48
09/22/2010 Sold 5 TNDM Oct2010 $12.50 Calls @ $.63

Neutral Tandem Inc. was founded in 2003 and is the dominant provider of tandem switching services to competitive carriers in the telecom sector (including wireless, wireline, cable telephone and broadband service providers). Its network enables competitive carriers to interconnect and exchange local and long distance voice traffic between their networks without establishing direct switch-to-switch connections. Neutral Tandem serves as an independent (hence its corporate name of "Neutral") intermediary between its own tandem switches and its customers' switches. Its network automatically switches Internet Protocol (IP)-originated or conventional Time Division Multiplexing (TDM) traffic to terminating carriers, using either protocol. Prior to the introduction of Neutral Tandem’s service, the primary method for competitive carriers to exchange traffic was through the use of the Incumbent Local Exchange Carriers’ (ILECs) tandem switches. Neutral Tandem’s approach enables competitive carriers to benefit from an independently-provided network interconnection solution since its network reduces costs, increases network reliability, decreases competitive tension, and adds network diversity and redundancy.

Neutral Tandem is used by nearly every national and regional wireless carrier, cable and Competitive Local Exchange Carrier(CLEC) in the 137 markets in the U.S. (up from 100 at the end of 2008) that they serve. Their network currently carries over seven billion minutes of traffic per month and they plan to add 36 additional markets in 2010. As one analyst insightfully summarizes: "There simply aren’t too many companies in the world with strong earnings power, high returns on invested capital, no debt, solid management, improving margins and a simple business that is hard for competitors to replicate." While Neutral Tandem's stock is already value-priced, the growth potential of its existing network makes the stock seem underpriced on this basis alone. But an even more dramatic growth driver exists in Neutral Tandem's current development of a new Ethernet eXchange service for data transmission. In this regard, I am impressed with TNDM's CEO, and it is very encouraging to listen to him say that "Neutral Tandem's goal is to address the void in the Ethernet market by providing Ethernet service providers with a more efficient and simplified method of interconnecting on a one-to-many basis. Our new Ethernet eXchange platform will help these service providers accelerate revenue in the rapidly growing Ethernet market." In short, Neutral Tandem will be attempting to duplicate what they've done in the voice market in the potentially much larger (and likely higher-margined) Ethernet data market. To this end, the recently announced Tinet acquisition will broaden their offering worldwide and should also significantly accelerate the customer adoption rate and thus the very important development of the network effect. Also positive is the fact that the acquisition will be fully funded with cash and will be accretive to earnings immediately.

The Covered Calls Advisor readily admits that the technical aspects of these technologies are outside my circle of competence. But I've read enough about the technology to convince myself that Neutral Tandem has a significant competitive advantage in their Ethernet quest compared with any potential competitors based simply on the wide U.S. footprint of their switching network sites. This infrastructure would be costly for potential competitors to duplicate and thus is supportive of the notion that Neutral Tandem can continue to be the low-cost network provider in their niches. To this advisor, Neutral Tandem seems like a good investment value based solely on the continued growth of their existing tandem interconnection services as: (1) their footprint expands even further in the U.S.; (2) mobile phone useage minutes continues to grow; and (3) the potential for growth into international markets is realized. Furthermore, if they are successful in their plans to obtain a critical mass of core customers to utilize their new Ethernet eXchange service network (which will begin its operation later this year), the stock appreciation potential is tremendous. Because of the importance of this new initiative to their long-run success and fact that Neutral Tandem is a small cap company, this is considered as a speculative investment.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 16.50 exceeds the minimum purchase threshold of 15.0 points for a new investment. The key value and profitability metrics are strong, and the company's growth potential (as described above), is compelling.





















Note: For expanded view, left click on the spreadsheet above.


Some possible overall performance results(including commissions) for the TNDM transactions would be as follows:
Stock Purchase Cost: $6,248.95
= ($12.48*500+$8.95 commission)

Net Profit:
(a) Options Income: +$302.30
= (500*$.63 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $12.48):
-$8.95 = ($12.48-$12.48)*500 - $8.95 commissions
(c) Capital Appreciation (If exercised at $12.50): +$1.05
= ($12.50-$12.48)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $12.48): +$293.35
= (+$302.30 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $12.50): +$303.35
= (+$302.30 +$0.00 +$1.05)

Absolute Return if Unchanged at $12.48: +4.7%
= +$293.35/$6,248.95
Annualized Return If Unchanged (ARIU) +71.4%
= (+$293.35/$6,248.95)*(365/24 days)

Absolute Return if Exercised at $12.50: +4.9%
= +$303.35/$6,248.95
Annualized Return If Exercised (ARIE) +73.8%
= (+$303.35/$6,248.95)*(365/24 days)

Establish ProShares UltraShort 20+ Year Treasury ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of ProShares UltraShort 20+ Year Treasury ETF (TBT) covered calls. TBT was one of the covered calls positions that was called away last Friday at Sep2010 options expiration and today it was decided to re-establish a new position for the Oct2010 expiration as follows:

Established ProShares UltraShort 20+ Year Treasury ETF (TBT) Covered Calls for Oct2010:
09/22/2010 Bought 300 TBT @ $31.75
09/22/2010 Sold 3 TBT Oct2010 $32.00 Calls @ $.94

TBT seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the Barclays Capital 20+ Year U.S. Treasury index. The fund normally invests at least 80% of assets to investments that, in combination, have economic characteristics that are inverse to those of the index. It also typically invests in taking positions in financial instruments, including derivatives that should have similar daily return characteristics as twice the inverse of the index.

This investment is based on the fact that current long-term treasury yields are near an all-time low -- as such they are likely to revert-to-the-mean and be substantially higher than their current levels in the future. The current high stock-to-bond yield difference in combination with the present, albeit modest, economic recovery should begin to reverse recent downward pressure on rates and begin to push Treasury yields higher during the next several months. Also in this regard, widely published fears of a double-dip recession are excessive. The present relatively high Treasury yield curve as well as the increase in the Conference Board's leading economic index over the past six months portends an extremely low likelihood of a double-dip recession.

Another indicator that the Covered Calls Advisor follows closely with regards to interest rates is the Money Multiplier, which is defined as the M2 Money Supply divided by the Fed's Monetary Base. After a precipitous decline from Fall 2008 to early 2010, this indicator bottomed at 4.05 in February 2010 and has begun to rise again (albeit slowly) to its current level of 4.36. Additionally, M2 has increased at a 3.6% annualized rate during the past 3 months versus a 1.9% increase over the past 12 months. If this increasing velocity trend continues, both overall economic activity and interest rates are likely to also move higher.

The Federal Reserve Board and also Congress will have some influence on the ultimate deflation/inflation outcome. For their part, the Federal Reserve has recently indicated that they might use further quantitative easing to prevent deflation. This advisor believes that the Fed will decide that approach will not be necessary since the pace of this recovery is actually slightly better than that of the past two recessions (See Link). Rather, the Fed will more likely begin to gradually support their higher inflation target. As for Congress, Warren Buffett said it best in his "The Greenback Effect" editorial in the New York Times almost exactly one year ago: "Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes."

In short, for the reasons described above, this advisor believes the interest rates pendulum has now begun a swing back from the past three decades of rate declines, and will soon begin to reverse in the direction of future increases in both inflation and interest rates.

Some readers will ask: Why establish an out-of-the-money position in an inverse ETF instead of simply an in-the-money position in a direct investment (such as TLT)? In short, an out-of-the-money position in the inverse TBT ETF enables for the possibility of capital appreciation in the underlying ETF and thus a substantially higher potential return-on-investment than could be achieved from an in-the-money TLT position (since in-the-money covered calls positions eliminate the possibility of capital appreciation in the underlying equity) if interest rates do in fact trend slightly higher.

Two possible overall performance results(including commissions) for the TBT transactions would be as follows:
Stock Purchase Cost: $9,533.95
= ($31.75*300+$8.95 commission)

Net Profit:
(a) Options Income: +$270.80
= 300*$.94 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If TBT unchanged at $31.75):
-$8.95 = ($31.75-$31.75)*300 - $8.95 commissions
(c) Capital Appreciation (If TBT exercised at $32.00): +$66.05
= ($32.00-$31.75)*300 - $8.95 commissions

Total Net Profit(If TBT unchanged at $31.75): +$261.85
= (+$270.80 +$0.00 -$8.95)
Total Net Profit(If TBT exercised at $32.00): +$336.85
= (+$270.80 +$0.00 +$66.05)

Absolute Return if Unchanged at $31.75: +2.7%
= +$261.85/$9,533.95
Annualized Return If Unchanged (ARIU) +41.8%
= (+$261.85/$9,533.95)*(365/24 days)

Absolute Return if Exercised at $32.00: +3.5%
= +$336.85/$9,533.95
Annualized Return If Exercised (ARIE) +53.7%
= (+$336.85/$9,533.95)*(365/24 days)

Downside Breakeven Price Point: $30.81
Downside Breakeven Protection: 2.7%

Domtar Corp. (UFS), iShares MSCI China ETF (FXI), and Petrobras (PBR) -- Continuation Transactions

This past Friday was expiration Friday for September 2010 options. In the Covered Calls Advisor's most recent blog post, it was noted that of the nine covered calls positions with Sep2010 expirations, six were in-the-money at expiration and were therefore exercised and the stocks were called away, and three positions ended out-of-the-money. The three out-of-money positions were Domtar Corp. (UFS), iShares MSCI China ETF (FXI), and Petrobras (PBR). Today, a decision was made to retain the shares in these three positions and to establish covered calls position with Oct2010 expirations. The transactions history for each position as well as some possible results for each of these investments are as follows:

1. Domtar Corp.(UFS) -- Continuation
The transactions history is as follows:
06/23/2010 Bought 400 UFS @ $55.10
06/23/2010 Sold 4 UFS Jul2010 $60.00 Calls @ $1.10
07/17/2010 Jul2010 Options Expired
Note: The closing price of UFS was $47.77 on expiration Friday.
07/22/2010 Sold 4 UFS Aug2010 $55.00 Calls @ $1.20
Note: The price of UFS was $50.80 today when these options were sold.
08/13/2010 Buy-to-Close (BTC) 4 UFS Aug2010 $55.00 Call Options @ $5.70
08/12/2010 Sell-to-Open (STO) 4 UFS Sep2010 $65.00 Call Options @ $1.85
Note: The price of UFS was $61.38 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 4 UFS Oct2010 $65.00 Call Options @ $2.10
Note: The price of UFS was $63.70 today when these options were sold.

Two possible overall performance results(including commissions) for Domtar Corp.(UFS) transactions would be as follows:
Stock Purchase Cost: $22,048.95
= ($55.10*400+$8.95 commission)

Net Profit:
(a) Options Income: +$160.25
= (400*($1.10+$1.20-$5.70+$1.85+$2.10) - 5*$11.95 commissions)
(b) Dividend Income: +$100.00 =($.25*400) with ex-dividend of 9/13/2010
(c) Capital Appreciation (If UFS unchanged at $63.70): +$3,431.05
= ($63.70-$55.10)*400 - $8.95 commissions
(c) Capital Appreciation (If UFS assigned at $65.00): +$3,951.05
= ($65.00-$55.10)*400 - $8.95 commissions

Total Net Profit(If UFS price unchanged at $63.70): +$3,691.30
= (+$160.25 +$100.00 +$3,431.05)
Total Net Profit(If UFS assigned at $65.00): +$4,211.30
= (+$160.25 +$100.00 +$3,951.05)

Absolute Return (If UFS unchanged at $63.70): +16.7%
= +$3,691.30/$22,048.95
Annualized Return If Unchanged (ARIU): +53.1%
= (+$3,691.30/$22,048.95)*(365/115 days)

Absolute Return (If Assigned at $65.00): +19.1%
= +$4,211.30/$22,048.95
Annualized Return If Exercised (ARIE): +60.6%
= (+$4,211.30/$22,048.95)*(365/115 days)


2. iShares MSCI China ETF (FXI) -- Continuation
The transactions history is as follows:
06/21/2010 Bought 1,100 FXI @ $41.85
06/21/2010 Sold 11 FXI Jul2010 $43.00 Calls @ $.71
7/17/2010 Jul2010 Options Expired
Note: The closing price of FXI was $38.74 on expiration Friday.
07/22/2010 Sold 7 FXI Aug2010 $42.00 Calls @ $.73
07/22/2010 Sold 4 FXI Aug2010 $43.00 Calls @ $.42
Note: The price of FXI was $41.02 today when these options were sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of FXI was $40.54 on expiration Friday.
09/02/2010 Sold 11 FXI Sep2010 $42.00 Call Options @ $.20
Note: The price of FXI was $40.52 today when these options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 11 FXI Oct2010 $43.00 Call Options @ $.62
Note: The price of FXI was $42.19 today when these options were sold.

Some possible overall performance results(including commissions) for the iShares MSCI China ETF (FXI) transactions would be as follows:
Stock Purchase Cost: $46,043.95
= ($41.85*1,100+$8.95 commission)

Net Profit:
(a) Options Income: +$1,631.40
= (1,100*($.71+$.20+$.62) + 700*$.73 + 4008$.40 - ($17.20*2 +$14.20 +$11.95) commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI unchanged at $42.19): +$365.05
= ($42.19-$41.85)*1,100 - $8.95 commissions
(c) Capital Appreciation (If all FXI shares are assigned at $43.00): +$1,256.05 = ($43.00-$41.85)*1,100 - $8.95 commissions

Total Net Profit(If FXI price unchanged at $42.19): +$1,996.45
= (+$1,631.40 +$0.00 +$365.05)
Total Net Profit(If FXI assigned at $43.00): +$2,887.45
= (+$1,631.40 +$0.00 +$1,256.05)

Absolute Return (If FXI unchanged at $42.19): +4.3%
= +$1,996.45/$46,043.95
Annualized Return If Unchanged (ARIU): +13.5%
= (+$1,996.45/$46,043.95)*(365/117 days)

Absolute Return (If Assigned at $43.00): +6.3%
= +$2,887.45/$46,043.95
Annualized Return: +19.6%
= (+$2,887.45/$46,043.95)*(365/117 days)


3. Petrobras (PBR) -- Continuation
The transactions history is as follows:
06/21/2010 Bought 300 PBR @ $39.34
06/21/2010 Sold 3 PBR Jul2010 $40.00 Calls @ $1.05
7/17/2010 Jul2010 Options Expired
Note: The closing price of PBR was $34.51 on expiration Friday.
07/22/2010 Sold 3 PBR Aug2010 $38.00 Calls @ $.55
Note: The price of PBR was $36.52 today when these options were sold.
08/21/2010 Aug2010 Options Expired
Note: The closing price of PBR was $34.42 on expiration Friday.
09/01/2010 Sold 3 PBR Sept2010 $36.00 Call Options @ $.58
Note: The price of PBR was $35.20 today when these call options were sold.
09/17/2010 Sep2010 Options Expired
09/20/2010 Sell-to-Open (STO) 3 PBR Oct2010 $37.00 Call Options @ $.63
Note: The price of PBR was $35.24 today when these options were sold.

Two possible overall performance results(including commissions) for the Petrobras (PBR) transactions would be as follows:
Stock Purchase Cost: $11,810.95
= ($39.34*300+$8.95 commission)

Net Profit:
(a) Options Income: +$798.20
= (300*($1.05+$.55+$.58+$.63) - 4*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PBR unchanged at $35.24): $-1,238.95
= ($35.24-$39.34)*300 - $8.95 commissions
(c) Capital Appreciation (If PBR assigned at $37.00): -$710.95
= ($37.00-$39.34)*300 - $8.95 commissions

Total Net Profit(If PBR price unchanged at $35.24): -$440.75
= (+$798.20 +$0.00 -$1,238.95)
Total Net Profit(If PBR assigned at $37.00): +$87.25
= (+$798.20 +$0.00 -$710.95)

Absolute Return (If PBR unchanged at $35.24): -3.7%
= -$440.75/$11,810.95
Annualized Return If Unchanged (ARIU): -11.6%
= (-$630.55/$11,810.95)*(365/117 days)

Absolute Return (If Assigned at $37.00): +0.7%
= +$87.25/$11,810.95
Annualized Return If Assigned: +2.3%
= (+$87.25/$11,810.95)*(365/117 days)

September 2010 Expiration Transactions

The Covered Calls Advisor Portfolio (CCAP) contained a total of nine covered calls positions with September 2010 expirations, with the following results:

- Six positions (Apple, Best Buy, Cubist Pharmaceuticals, Guess? Inc., Neutral Tandem, and ProShares UltraShort 20+ Year Treasury ETF) closed in-the-money. The calls were exercised and the shares of AAPL, BBY, CBST, GES, TNDM, and TBT were called away. As shown in detail below, the annualized returns for these closed positions were:
(1) Apple Inc.(AAPL) -- +55.1%
(2) Best Buy Corp Inc.(BBY) -- +3.7%
(3) Cubist Pharmaceuticals (CBST) -- +55.3%
(4) Guess? Inc.(GES) -- +161.2%
(5) Neutral Tandem Inc.(TNDM) -- +56.5%
(6) ProShares UltraShort 20+ Year Treasury ETF (TBT) -- -35.4%

- Three positions in the CCAP [Domtar Corp.(UFS), iShares MSCI China ETF (FXI), and Petrobras (PBR)] ended out-of-the-money. Decisions will be made to either sell the equities, or to keep them and sell calls to establish Oct2010 covered call positions. The related transactions will be made this week and the actual transactions will be posted on this blog site on the same day they occur.

Detailed results for the six covered calls positions that were assigned (called away) upon Sep2010 expiration are as follows:

1. Apple Inc.(AAPL) -- Closed
The transactions history was as follows:
02/24/2010 Bought 100 AAPL @ $198.677
02/24/2010 Sold 1 AAPL Mar2010 $210.00 Call @ $1.57
Roll-Up-and-Out Transaction:
03/19/2010 Buy-to-Close (BTC) 1 AAPL Mar2010 $210.00 @ $12.20
03/19/2010 Sell-to-Open (STO) 1 AAPL Apr2010 $230.00s @ $3.40
Note: The price of AAPL was $222.18 today when this debit-spread was transacted.
04/16/2010 Buy-to-Close (BTC) 1 AAPL Apr2010 $230.00 @ $19.00
04/16/2010 Sell-to-Open (STO) 1 AAPL May2010 $250.00 @ $9.40
Note: The price of AAPL was $248.90 today when this debit-spread was transacted.
5/22/2010 May2010 Option Expired
Note: The closing price of AAPL was $242.32 on expiration Friday
6/01/2010 Sold 1 AAPL Jun2010 $260.00 @ $9.50
Note: The price of AAPL was approximately $261.35 when this option was sold.
6/18/2010 Buy-to-Close (BTC) 1 AAPL Jun2010 $260.00 @ $13.90
6/18/2010 Sell-to-Open (STO) 1 AAPL Jul2010 $280.00 @ $7.50
Note: The price of AAPL was $273.88 today when this debit-spread was transacted.
07/17/2010 Jul2010 Option Expired
Note: The closing price of AAPL was $249.90 on expiration Friday.
07/22/2010 Sold 1 AAPL Aug2010 $270.00 Call @ $4.35
Note: The price of AAPL was $258.02 today when this option was sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of AAPL was $249.64 on expiration Friday.
09/01/2010 Sold 1 AAPL Sept2010 $270.00 Call Option @ $.68
Note: The price of AAPL was $251.35 today when this option was sold.
09/18/2010 100 shares of AAPL were in-the-money and the shares were called away (assigned) at $270.00. Note: The closing price of AAPL was $275.37 on expiration Friday.

The performance results(including commissions) for the Apple Inc.(AAPL) transactions were as follows:
Stock Purchase Cost: $19,876.65
= ($198.677*100+$8.95 commission)

Net Profit:
(a) Options Income: -$937.90
= (100*($1.57-$12.20+$3.40-$19.00+$9.40+$9.50-$13.90+$7.50+$4.35+$.68) - 7*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock called away at $270.00): +$7,123.35
= ($270.00-$198.677)*100 - $8.95 commissions

Total Net Profit(Stock assigned at $270.00): +$6,185.45
= (-$937.90 +$0.00 +$7,123.35)

Absolute Return (Stock assigned at $270.00): +31.1%
= +$6,185.45/$19,876.65
Annualized Return: +55.1%
= (+$6,185.45/$19,876.65)*(365/206 days)


2. Best Buy Corp Inc.(BBY) -- Closed
The transactions history was as follows:
06/23/2010 Bought 400 BBY @ $36.08
06/23/2010 Sold 4 BBY Jul2010 $37.00 Calls @ $.82
07/17/2010 Jul2010 Options Expired
Note: The closing price of BBY was $34.33 on expiration Friday.
07/22/2010 Sold 4 BBY Aug2010 $35.00 Calls @ $1.06
Note: The price of BBY was $34.68 today when this option was sold.
08/21/2010 Aug2010 Option Expired
Note: The closing price of BBY was $32.50 on expiration Friday.
09/02/2010 Sold 4 BBY Sep2010 $34.00 Call Options @ $.64
Note: The price of BBY was $33.07 today when these options were sold.
09/18/2010 400 shares of BBY were in-the-money and the shares were called away (assigned) at $34.00. Note: The closing price of BBY was $37.15 on expiration Friday.

The overall performance results(including commissions) for Best Buy Co Inc.(BBY) transactions were as follows:
Stock Purchase Cost: $14,440.95
= ($36.08*400+$8.95 commission)

Net Profit:
(a) Options Income: +$972.15
= 400*($.82+$1.06+$.64) - 3*$11.95
(c) Capital Appreciation (BBY assigned at $34.00): -$840.95
= ($34.00-$36.08)*400 - $8.95 commissions

Total Net Profit(If BBY assigned at $34.00): +$131.20
= (+$972.15 +$0.00 -$840.95)

Absolute Return if BBY Exercised at $34.00: +0.9%
= +$131.20/$14,440.95
Annualized Return If Exercised (ARIE): +3.7%
= (+$131.20/$14,440.95)*(365/89 days)


3. Cubist Pharmaceuticals (CBST) -- Closed
The transactions history for Cubist Pharmaceuticals(CBST) was as follows:
06/25/2010 Bought 300 CBST @ $21.31
06/25/2010 Sold 3 CBST Jul2010 $22.50 Calls @ $.50
07/17/2010 Jul2010 Options Expired
Note: The closing price of CBST was $21.37 on expiration Friday.
07/22/2010 Sold 3 CBST Aug2010 $22.50 Calls @ $.60
Note: The price of CBST was $21.24 today when this option was sold.
08/21/2010 Aug2010 Options Expired
Note: The closing price of CBST was $22.22 on expiration Friday.
09/01/2010 Sold 3 CBST Sept2010 $22.50 Call Options @ $.60
Note: The price of CBST was $22.48 today when these call options were sold.
09/18/2010 300 shares of CBST were in-the-money and the shares were called away (assigned) at $22.50. Note: The closing price of CBST was $23.53 on expiration Friday.

The overall performance results(including commissions) for the Cubist Pharmaceuticals(CBST) transactions was as follows:
Stock Purchase Cost: $6,401.95
= ($21.31*300+$8.95 commission)

Net Profit:
(a) Options Income: +$476.40
= (300*($.50+$.60+$.60) - 3*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock exercised at $22.50): +$348.05
= ($22.50-$21.31)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $22.50): +$824.45
= (+$476.40 +$0.00 +$348.05)

Absolute Return (Stock Assigned at $22.50): +12.9%
= +$824.45/$6,401.95
Annualized Return: +55.3%
= (+$824.45/$6,401.95)*(365/85 days)


4. Guess? Inc.(GES) -- Closed
The transactions history for Guess? Inc.(GES) was as follows:
09/07/2010 Bought 300 GES @ $33.79
09/07/2010 Sold 3 GES Sep2010 $35.00 Calls @ $.50
09/18/2010 300 shares of GES were in-the-money and the shares were called away (assigned) at $35.00. Note: The closing price of GES was $38.11 on expiration Friday.

The overall performance results(including commissions) for the Guess? Inc.(GES) transactions was as follows:
Stock Purchase Cost: $10,145.95
= ($33.79*300+$8.95 commission)

Net Profit:
(a) Options Income: +$138.80
= (300*$.50 - $11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (Stock assigned at $35.00): +$354.05
= ($35.00-$33.79)*300 - $8.95 commissions

Total Net Profit(Stock assigned at $35.00): +$492.85
= (+$138.80 +$0.00 +$354.05)

Absolute Return (Stock Exercised at $35.00): +4.9%
= +$492.85/$10,145.95
Annualized Return: +161.2%
= (+$492.85/$10,145.95)*(365/11 days)


5. Neutral Tandem Inc.(TNDM) -- Closed
The transactions history for Neutral Tandem Inc.(TNDM) was as follows:
07/19/2010 Bought 500 TNDM @ $11.78
07/19/2010 Sold 5 TNDM Aug2010 $12.50 Calls @ $.35
08/21/2010 Aug2010 Option Expired
Note: The closing price of TNDM was $12.09 on expiration Friday.
09/02/2010 Sold 5 TNDM Sep2010 $12.50 Call Options @ $.15
Note: The price of TNDM was $11.61 today when these options were sold.
09/18/2010 500 shares of TNDM were in-the-money and the shares were called away (assigned) at $12.50. Note: The closing price of TNDM was $12.87 on expiration Friday.

The overall performance results(including commissions) for the TNDM transactions was as follows:
Stock Purchase Cost: $5,898.95
= ($11.78*500+$8.95 commission)

Net Profit:
(a) Options Income: +$224.60
= (500*($.35+$.15) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Stock assigned at $12.50): +$351.05
= ($12.50-$11.78)*500 - $8.95 commissions

Total Net Profit(Stock assigned at $12.50): +$575.65
= (+$224.60 +$0.00 +$351.05)

Absolute Return (Stock Assigned at $12.50): +9.8%
= +$575.65/$5,898.95
Annualized Return: +56.5%
= (+$575.65/$5,898.95)*(365/63 days)


6. ProShares UltraShort 20+ Year Treasury ETF (TBT) -- Closed
The transactions history for ProShares UltraShort 20+ Year Treasury ETF (TBT) was as follows:
07/19/2010 Bought 300 TBT @ $35.92
07/19/2010 Sold 3 TBT Aug2010 $38.00 Calls @ $.35
08/21/2010 Aug2010 Option Expired
Note: The closing price of TBT was $31.69 on expiration Friday.
09/02/2010 Sold 3 TBT Sep2010 $33.00 Call Options @ $.55
Note: The price of TBT was $32.04 today when these options were sold.
09/18/2010 300 shares of TBT were in-the-money and the shares were called away (assigned) at $33.00. Note: The closing price of TBT was $33.80 on expiration Friday.

The overall performance results(including commissions) for the TBT transactions were as follows:
Stock Purchase Cost: $10,784.95
= ($35.92*300+$8.95 commission)

Net Profit:
(a) Options Income: +$247.60
= 300*($.35+$.55) - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TBT assigned at $33.00): -$884.95
= ($33.00-$35.92)*300 - $8.95 commissions

Total Net Profit (TBT assigned at $33.00): -$637.35
= (+$247.60 +$0.00 -$884.95)

Absolute Return (TBT Assigned at $33.00): -5.9%
= -$637.35/$10,784.95
Annualized Return: -35.4%
= (-$637.35/$10,784.95)*(365/61 days)