Established New Position in United Continental Holdings Inc.

Today, the Covered Calls Advisor established a new position in United Continental Holdings Inc.(ticker symbol UAL) by selling three Mar2015 Put options at the $63.00 strike price. This is the second short Puts position established with UAL (the prior position is at the $60.00 strike price and also for the Mar2015 options expiration).  Both positions are conservative ones in that they were established with substantial downside protection.

As detailed below, the United Continental investment will yield a +1.4% absolute return in 15 days (which is equivalent to a +34.1% annualized return-on-investment) if UAL closes above the $63.00 strike price on the Mar2015 options expiration date. 

This potential return is excellent given the 6.1% downside protection (from the current $67.11 stock price to the $63.00 strike price) when the position was established.  The implied volatility in the options was high at 45 when this position was established; so the $.92 price per share received when the Puts were sold is very attractive to us option sellers, especially since the level of unknowns between now and the Mar2015 options expiration is relatively low, given that UAL has already announced their 4th quarter earnings results.  With about 30% of airline companies' operating earnings coming from fuel expense, they will likely continue to achieve substantial earnings benefits (compared with last year) for at least the next two quarters from oil prices that are substantially below where they were in the prior year.  Their bookings are stable and their pricing remains strong.  This situation does not appear to be fully appreciated in the price of airlines stocks, including United Continental.    

1.  United Continental Holdings Inc. (UAL) -- New Position
The transaction was as follows:
03/06/2015  Sold 3 UAL 100% cash-secured $63.00 Put options @ $.92
Note: The price of UAL was $67.11 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that both of these positions were established using 100% cash securitization for the three Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $18,900.00
= $63.00*300

Net Profit:
(a) Options Income: +$264.80
= ($.92*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL is above $63.00 strike price at Mar2015 expiration): +$0.00
= ($63.00-$63.00)*300 shares

Total Net Profit (If UAL is above $63.00 strike price at Mar2015 options expiration): +$264.80
= (+$264.80 +$0.00 +$0.00)

Absolute Return (If UAL is above $63.00 strike price at Mar2015 options expiration): +1.4%
= +$264.80/$18,900.00
Annualized Return (If UAL is above $60.00 at expiration): +34.1%
= (+$264.80/$18,900.00)*(365/15 days)

The downside 'breakeven price' at expiration is at $62.08 ($63.00 - $.92), which is 7.5% below the current market price of $67.11.
The 'crossover price' at expiration is $68.03 ($67.11 + $.92).  This is the price above which it would have been more profitable to simply buy-and-hold UAL until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

Established March2015 Short 100% Cash-Secured Puts Position in Pilgrims Pride Corp

Today, the Covered Calls Advisor established a new position in Pilgrims Pride Corp. (Symbol PPC) by selling 3 March 2015 $26.00 Put options.

This position indicates that the Covered Calls Advisor would be very willing to purchase Pilgrims Pride shares at $26.00 (for future covered calls investments) upon the close of business on the March 20th options expiration date if the stock continues to decline to below the $26.00 strike price.  A conservative (4.5% out-of-the-money) short Puts position  was established.  If the stock remains above $26.00 by the market close on March 20th, then the $114.80 profit detailed below (a +1.5% absolute return-on-investment result in only 17 days) will have been achieved.

This transaction and a potential return-on-investment result is:

1.  Pilgrims Pride Corp. (PPC) -- New Position
The transaction was as follows:
03/05/2015 Sold 3  Pilgrims Pride Corp. Mar2015 $26.00 Puts @ $.42
Note: The price of PPC was $27.23 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $7,800.00
= $26.00*300
Note:  the price of  Pilgrims Pride was $27.23 when these Put options were sold.

Net Profit:
(a) Options Income: +$114.80
= ($.42*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PPC is above $26.00 strike price at Mar 20th, 2015 expiration): +$0.00
= ($26.00-$26.00)*300 shares
Total Net Profit (If PPC is above $26.00 strike price upon Mar2015 options expiration): +$114.80
= (+$114.80 +$0.00 +$0.00)

Absolute Return (If PPC is above $26.00 strike price at Mar2015 options expiration): +1.5%
= +$114.80/$7,800.00

Annualized Return (If PPC is above $26.00 at expiration): +31.6%
= (+$114.80/$7,800.00)*(365/17 days)

The downside 'breakeven price' at expiration is at $25.58 ($26.00 - $.42), which is 6.1% below the current market price of $27.23.
The 'crossover price' at expiration is $27.65 ($27.23 + $.42).  This is the price above which it would have been more profitable to simply buy-and-hold  Pilgrims Pride stock until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

Established March2015 Short 100% Cash-Secured Puts Position in United States Steel Corp.

Today, the Covered Calls Advisor established a new position in United States Steel Corp. (Symbol X) by selling 3 March 2015 $21.00 Put options.

This position indicates that the Covered Calls Advisor would be very willing to purchase U.S. Steel shares at $21.00 (for future covered calls investments) upon the close of business on the March 20th options expiration date if the stock continues to decline to below the $21.00 strike price.  A conservative (5.4% out-of-the-money) short Puts position  was established.  If the stock remains above $21.00 by the market close on March 20th, then the $114.80 profit detailed below (a +1.8% absolute return-on-investment result in only 18 days) will have been achieved.

This transaction and a potential return-on-investment result is:

1.  United States Steel Corp. (X) -- New Position
The transaction was as follows:
03/04/2015 Sold 3 United States Steel Corp. Mar2015 $21.00 Puts @ $.42
Note: The price of X was $22.20 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $6,300.00
= $21.00*300
Note:  the price of U.S. Steel was $22.20 when these Put options were sold.

Net Profit:
(a) Options Income: +$114.80
= ($.42*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If X is above $21.00 strike price at Mar 20th, 2015 expiration): +$0.00
= ($21.00-$21.00)*300 shares

Total Net Profit (If X is above $21.00 strike price upon Mar2015 options expiration): +$114.80
= (+$114.80 +$0.00 +$0.00)

Absolute Return (If X is above $21.00 strike price at Mar2015 options expiration): +1.8%
= +$114.80/$6,300.00

Annualized Return (If X is above $21.00 at expiration): +37.0%
= (+$114.80/$6,300.00)*(365/18 days)

The downside 'breakeven price' at expiration is at $20.58 ($21.00 - $.42), which is 7.3% below the current market price of $22.20.
The 'crossover price' at expiration is $22.62 ($22.20 + $.42).  This is the price above which it would have been more profitable to simply buy-and-hold United States Steel stock until March 20th (the Mar2015 options expiration date) rather than selling these Put options.

Established March2015 Short 100% Cash-Secured Puts Position in Delta Air Lines Inc.

Today, the Covered Calls Advisor established a new position in Delta Air Lines Inc. (Symbol DAL) by selling 3 March 2015 $44.00 Put options.

This position indicates that the Covered Calls Advisor would be very willing to purchase Delta shares at $44.00 (for future covered calls investments) upon the close of business on the March 20th options expiration date if the stock continues to decline to below the $44.00 strike price.  If the stock remains above $44.00 by the market close on March 20th, then the $276.80 profit detailed below (a +2.1% absolute return-on-investment result in only 18 days) will have been achieved.

A conservative (2.0% out-of-the-money) short Puts position  was established.  The investment thesis is that for at least the next six months, the cost of oil will continue to be substantially below the prior year levels. 
 
This transaction and a potential return-on-investment result is:

1.  Delta Air Lines Inc. (DAL) -- New Position
The transaction was as follows:
03/04/2015 Sold 3 Delta Air Lines Inc. Mar2015 $44.00 Puts @ $.96
Note: The price of DAL was $44.93 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the three Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $13,200.00
= $44.00*300
Note:  the price of DAL was $44.93 when these Put options were sold.

Net Profit:
(a) Options Income: +$276.80
= ($.96*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If DAL is above $44.00 strike price at Mar 20th, 2015 expiration): +$0.00
= ($44.00-$44.00)*300 shares

Total Net Profit (If DAL is above $44.00 strike price upon Mar2015 options expiration): +$276.80
= (+$276.80 +$0.00 +$0.00)

Absolute Return (If DAL is above $44.00 strike price at Mar2015 options expiration): +2.1%
= +$276.80/$13,200.00

Annualized Return (If DAL is above $44.00 at expiration): +42.5%
= (+$276.80/$13,200.00)*(365/18 days)

The downside 'breakeven price' at expiration is at $43.04 ($44.00 - $.96), which is 4.2% below the current market price of $44.93.
The 'crossover price' at expiration is $45.89 ($44.93 + $.96).  This is the price above which it would have been more profitable to simply buy-and-hold Delta Air Lines stock until March 20th (the Mar2015 options expiration date) rather than selling these Put options.