The Covered Calls Advisor established three short 100% cash-secured Puts positions in iShares China Large-Cap ETF (ticker symbol FXI), VeriFone Systems Inc. (ticker symbol PAY), and VMware Inc. (ticker symbol VMW). All three positions were established with a March 2015 options expiration date.
The Covered Calls Advisor does not use margin, so the detailed
information on these positions and some potential return-on-investment results shown below
reflect the fact that these positions were established using 100% cash
securitization for the Put options sold.
- The iShares China Large-Cap ETF investment will yield a +1.5% absolute
return in 10 days (which is equivalent to a +55.4% annualized
return-on-investment) if FXI closes above the $41.00 strike price on the Mar2015 options expiration date.
- The VeriFone Systems Inc. investment will yield a +1.4% absolute
return in 11 days (which is equivalent to a +48.0% annualized
return-on-investment) if PAY closes above the $32.00 strike price on the Mar2015 options expiration date.
- The VMware Inc. investment will yield a +1.2% absolute
return in 10 days (which is equivalent to a +45.5% annualized
return-on-investment) if VMW closes above the $80.00 strike price on the Mar2015 options expiration date.
The details for each of these positions is as follows:
1. iShares China Large-Cap ETF (FXI) -- New Position
The transaction was as follows:
03/11/2015 Sold 3 FXI Mar2015 $41.00 100% cash-secured Put options @ $.66
Note: The price of FXI was $40.85 when this transaction was executed.
A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $12,300.00
= $41.00*300
Net Profit:
(a) Options Income: +$186.80
= ($.66*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FXI is above $41.00 strike price at Mar2015 expiration): +$0.00
= ($41.00-$41.00)*300 shares
Total Net Profit (If FXI is above $41.00 strike price at Mar2015 options expiration): +$186.80
= (+$186.80 +$0.00 +$0.00)
Absolute Return (If FXI is above $41.00 strike price at Mar2015 options expiration): +1.5%
= +$186.80/$12,300.00
Annualized Return: +55.4%
= (+$186.80/$12,300.00)*(365/10 days)
The
downside 'breakeven price' at expiration is at $40.34 ($41.00 - $.66),
which is 1.5% below the current market price of $40.85.
The
'crossover price' at expiration is $41.51 ($40.85 + $.66). This is the
price above which it would have been more profitable to simply
buy-and-hold FXI until March 20th (the Mar2015 options expiration date)
rather than selling these Put options.
2. VeriFone Systems Inc. (PAY) -- New Position
The transaction was as follows:
03/10/2015 Sold 3 PAY Mar2015 $32.00 100% cash-secured Put options @ $.50
Note: The price of PAY was $33.72 when this transaction was executed.
A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $9,600.00
= $32.00*300
Net Profit:
(a) Options Income: +$138.80
= ($.50*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PAY is above $32.00 strike price at Mar2015 expiration): +$0.00
= ($32.00-$32.00)*300 shares
Total Net Profit (If PAY is above $32.00 strike price at Mar2015 options expiration): +$138.80
= (+$138.80 +$0.00 +$0.00)
Absolute Return (If PAY is above $32.00 strike price at Mar2015 options expiration): +1.4%
= +$138.80/$9,600.00
Annualized Return (If PAY is above $32.00 at expiration): +48.0%
= (+$138.80/$9,600.00)*(365/11 days)
The
downside 'breakeven price' at expiration is at $31.50 ($32.00 - $.50),
which is 6.6% below the current market price of $33.72.
The
'crossover price' at expiration is $34.22 ($33.72 + $.50). This is the
price above which it would have been more profitable to simply
buy-and-hold PAY until March 20th (the Mar2015 options expiration date)
rather than selling these Put options.
3. VMware Inc. (VMW) -- New Position
The transaction was as follows:
03/11/2015 Sold 2 VMW Mar2015 $80.00 100% cash-secured Put options @ $1.05
Note: The price of VMW was $80.82 when this transaction was executed.
A possible overall performance result (including commissions) would be as follows: 100% Cash-Secured Cost Basis: $16,000.00
= $80.00*200
Net Profit:
(a) Options Income: +$199.55
= ($1.05*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If VMW is above $80.00 strike price at Mar2015 expiration): +$0.00
= ($80.00-$80.00)*200 shares
Total Net Profit (If VMW is above $80.00 strike price at Mar2015 options expiration): +$199.55
= (+$199.55 +$0.00 +$0.00)
Absolute Return (If VMW is above $80.00 strike price at Mar2015 options expiration): +1.2%
= +$199.55/$16,000.00
Annualized Return: +45.5%
= (+$199.55/$16,000.00)*(365/10 days)
The
downside 'breakeven price' at expiration is at $78.95 ($80.00 - $1.05),
which is 2.3% below the current market price of $80.82.
The
'crossover price' at expiration is $81.87 ($80.82 + $1.05). This is the
price above which it would have been more profitable to simply
buy-and-hold VMW until March 20th (the Mar2015 options expiration date)
rather than selling these Put options.
4. Alibaba Group Holding Limited (BABA) -- Closed
The transactions were as follows:
01/14/2015 Sold 1 Alibaba Group ADR Feb2015 $95.00 Put @ $3.00
Note: The price of BABA was $98.55 today when this transaction was executed.
02/20/2015 BABA closed below strike price and 100 shares BABA purchased at $95.00 strike price
02/26/2015 Sold 100 Alibaba shares @ $86.83
The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $9,500.00
= $95.00*100
Note: the price of BABA was $98.55 when this Put option was sold.
Net Profit:
(a) Options Income: +$292.30
= ($3.00*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$817.00
= ($86.83-$95.00)*100 shares
Total Net Profit: -$524.70
= (+$292.30 +$0.00 -$817.00)
Absolute Return: -5.5%
= -$524.70/$9,500.00
Annualized Return: -46.9%
= (-$524.70/$9,500.00)*(365/43 days)
Today, a new covered calls position was established in BP Plc ADR (ticker symbol BP). Two hundred shares of BP were purchased at $37.22 and two in-the-money Apr2015 Call options were sold at the $36.00 strike price for $1.92 each.
