Returns -- Through February 2011

1. February 2011 Year-to-Date Results:

The Covered Calls Advisor Portfolio (CCAP) has increased by +3.02% for the two months so far in calendar year 2011. This performance compares with an increase of +5.88% for the benchmark Russell 3000 index for the same two-month period.

CCAP Absolute Return (Jan 1st through Feb 28th, 2011) = +3.02%
($296,692.51-$287,453.75)/$287,453.75

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Feb 28th, 2011) = +5.88%
($79.36-$74.95)/$74.95


2. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) began in September, 2007. The annualized returns achieved each year for 2007 through 2010 compared with the Russell 3000 benchmark were as follows:














As a reminder, the Covered Calls Advisor Portfolio is not identical to the advisor's personal portfolio. However, it does provide a comparable overall portfolio return result since all equities in the CCAP are also held in this advisor's personal portfolio. To ensure comparability, all transaction dates and transaction prices herein are identical to those that were established in the Covered Calls Advisor's personal portfolio. The primary difference between the two accounts is the total number of shares held for each equity. This approach is used to preserve the confidentiality of the total value of the Covered Call Advisor's personal portfolio.

The Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. Here's an example to aid understanding of how the overall portfolio performance is determined:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating remains "SLIGHTLY BULLISH". The corresponding investing strategy is to, on-average, sell 2% out-of-the-money covered calls for the nearest expiration month.

If you have any comments or questions, please feel free to submit them -- they are always welcomed. Click the 'comments' link below. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,
Jeff

Apple Inc, iShares MSCI Emerging Markets ETF, iShares MSCI China ETF, and Sprint Nextel Corp. -- Continuation Transactions

In the Covered Calls Advisor's Feb2011 options expiration blog post, it was noted that of the eleven covered calls positions with Feb2011 expirations, six positions ended out-of-the-money. Today, a decision was made to retain four of these six positions [Apple Inc.(AAPL), iShares MSCI Emerging Markets ETF (EEM), iShares MSCI China ETF(FXI), and Sprint Nextel Corp.(S)] and to establish Mar2011 and Apr2011 covered calls positions. Decisions to either sell the remaining two stock positions or establish covered call positions with them will be made soon and will be posted on this blog the same day the associated transactions occur. The detailed transactions history for each of these four positions as well as some possible results for each of these investments are as follows:

1. Apple Inc.(AAPL) -- Continuation
The transactions history is as follows:
12/20/2010 Bought 100 AAPL @ $321.10
12/21/2010 Sold 1 AAPL Jan2011 $330.00 Call @ $6.10
Note: The call option was sold today when the AAPL stock was trading at $324.10.
01/22/2011 Jan2011 AAPL options expired
Note: The price of AAPL was $326.72 at closing on expiration Friday.
01/24/2011 Sold 1 AAPL Feb2011 $340.00 Call @ $5.50
Note: The price of AAPL was $333.72 when this Call option was sold.
02/19/2011 Feb2011 AAPL options expired
02/28/2011 Sold 1 AAPL Apr2011 $360.00 Call @ $10.80
Note: The price of AAPL was $354.32 when this Call option was sold.

Two possible overall performance results(including commissions) for the Apple Inc.(AAPL) transactions would be as follows:
Stock Purchase Cost: $32,118.95
= ($321.10*100+$8.95 commission)

Net Profit:
(a) Options Income: +$2,210.90
= [100*($6.10+$5.50+$10.80) - 3*$9.70 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $354.32):
+$3,313.05 = ($354.32-$321.10)*100 - $8.95 commissions
(c) Capital Appreciation (If assigned at $360.00): +$3,881.05
= ($360.00-$321.10)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $354.32): +$5,523.95
= (+$2,210.90 +$0.00 +$3,313.05)
Total Net Profit(If stock assigned at $36.00): +$6,091.95
= (+$2,210.90 +$0.00 +$3,881.05)

Absolute Return if Unchanged at $354.32: +17.2%
= +$5,523.95/$32,118.95
Annualized Return If Unchanged (ARIU): +53.7%
= (+$5,523.95/$32,118.95)*(365/117 days)

Absolute Return if Assigned at $360.00: +19.0%
= +$6,091.95/$32,118.95
Annualized Return If Assigned (ARIA): +59.2%
= (+$6,091.95/$32,118.95)*(365/117 days)


2. iShares MSCI Emerging Markets ETF (EEM) -- Continuation
The transactions history is as follows:
10/27/2010 Bought 300 EEM @ $45.55
10/27/2010 Sold 3 EEM Nov2010 $46.00 Calls @ $.99
11/19/2010 Buy-to-Close (BTC) 3 EEM Nov2010 $46.00 Call Options @ $.38
11/19/2010 Sell-to-Open (STO) 3 EEM Dec2010 $47.00 Call Options @ $1.02
12/18/2010 Dec2010 Options Expired
Note: The price of EEM was $46.40 upon Dec2010 options expiration.
12/21/2010 Sold 3 EEM Jan2011 $47.00 Calls @ $.77
Note: The price of EEM was $46.43 when these options were sold.
12/21/2010 Distribution Income $107.83 = $.35942 * 300 shares
12/29/2010 Distribution Income $7.54 = $.02512 * 300 shares
01/22/2011 Jan2011 EEM options expired
Note: The price of EEM was $46.49 at closing on expiration Friday.
01/24/2011 Sold 3 EEM Feb2011 $47.00 Calls @ $.92
Note: The price of EEM was $46.65 when these options were sold.
02/19/2011 Feb2011 EEM options expired
02/28/2011 Sold 3 EEM Mar2011 $46.00 Calls @ $.79
Note: The price of EEM was $45.86 when these Call options were sold.

Two possible overall performance results(including commissions) for the EEM transactions would be as follows:
Stock Purchase Cost: $13,673.95
= ($45.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$1,177.00
= (300*($.99-$.38+$1.02+$.77+$.92+$.79) - 5*$11.20 commissions)
(b) Distribution Income: +$115.37 = $107.83 + $7.54
(c) Capital Appreciation (If EEM price unchanged at $45.86):
+$84.05 = ($45.86-$45.55)*300 - $8.95 commissions
(c) Capital Appreciation (If stock assigned at $46.00): +$126.05
= ($46.00-$45.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $45.86): +$1,376.42
= (+$1,177.00 +$115.37 +$84.05)
Total Net Profit(If stock assigned at $46.00): +$1,418.42
= (+$1,177.00 +$115.37 +$126.05)

Absolute Return if Unchanged at $45.86: +10.1%
= +$1,376.42/$13,673.95
Annualized Return If Unchanged (ARIU): +21.5%
= (+$1,376.42/$13,673.95)*(365/171 days)

Absolute Return if Assigned at $46.00: +10.4%
= +$1,418.42/$13,673.95
Annualized Return If Assigned (ARIA): +22.1%
= (+$1,418.42/$13,673.95)*(365/171 days)


3. 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.
10/14/2010 Buy-to-Close (BTC) 11 FXI Oct2010 $43.00 Call Options @ $2.69
10/14/2010 Sell-to-Open (STO) 11 FXI Nov2010 $47.00 Call Options @ $.85
11/20/2010 Nov2010 Options Expired
Note: The closing price of FXI was $44.66 on expiration Friday.
12/01/2010 Sell-to-Open (STO) 11 FXI Jan2011 $47.00 Call Options @ $.63
Note: The price of FXI was $44.41 today when these options were sold.
12/20/2010 Income Distribution $186.11 = ($.16919 * 1100 shares)
01/22/2011 Jan2011 FXI options expired
Note: The price of FXI was $43.23 at closing on expiration Friday.
01/24/2011 Sold 3 FXI Feb2011 $44.00 Calls @ $.55
Note: The price of FXI was $43.04 when these options were sold.
02/19/2011 Feb2011 FXI options expired
02/28/2011 Sold 11 FXI Apr2011 $44.00 Calls @ $.67
Note: The price of FXI was $42.41 when these Call 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: +$2,235.65
= (1,100*($.71+$.20+$.62-$2.69+$.85+$.63+$.55+$.67) + 700*$.73 + 400*$.40 - ($17.20*6 +$14.20 +$11.95) commissions)
(b) Distribution Income: +$186.11 = ($.16919 * 1100 shares)
(c) Capital Appreciation (If FXI unchanged at $42.41): +$607.05
= ($42.41-$41.85)*1,100 - $8.95 commissions
(c) Capital Appreciation (If all FXI shares are assigned at $44.00): +$2,356.05
= ($44.00-$41.85)*1,100 - $8.95 commissions

Total Net Profit (If FXI price unchanged at $42.41): +$3,028.81
= (+$2,235.65 +$186.11 +$607.05)
Total Net Profit (If FXI assigned at $44.00): +$4,777.81
= (+$2,235.65 +$186.11 +$2,356.05)

Absolute Return (If FXI unchanged at $42.41): +6.6%
= +$3,028.81/$46,043.95
Annualized Return If Unchanged (ARIU): +8.0%
= (+$3,028.81/$46,043.95)*(365/299 days)

Absolute Return (If Assigned at $44.00): +10.4%
= +$4,777.81/$46,043.95
Annualized Return If Assigned (ARIA): +12.7%
= (+$4,777.81/$46,043.95)*(365/299 days)


4. Sprint Nextel Corp.(S) -- Continuation
The transactions history is as follows:
02/03/2011 Bought 1500 S @ $4.32
02/03/2011 Sold 15 S Feb2011 $4.50 Calls @ $.12
02/19/2011 Feb2011 S options expired
02/28/2011 Sold 15 S Apr2011 $4.50 Calls @ $.16
Note: The price of S was $4.37 when these Call options were sold.

Two possible overall performance results(including commissions) for the Sprint Nextel Corp.(S) transactions would be as follows:
Stock Purchase Cost: $6,488.95
= ($4.32*1500+$8.95 commission)

Net Profit:
(a) Options Income: +$379.60
= [1500*($.12+$.16) - 2*$20.20 commissions]
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $4.37):
+$66.05 = ($4.37-$4.32)*1500 - $8.95 commissions
(c) Capital Appreciation (If assigned at $4.50): +$261.05
= ($4.50-$4.32)*1500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $4.37): +$445.65
= (+$379.60 +$0.00 +$66.05)
Total Net Profit(If stock assigned at $4.50): +$640.65
= (+$379.60 +$0.00 +$261.05)

Absolute Return if Unchanged at $4.37: +6.9%
= +$445.65/$6,488.95
Annualized Return If Unchanged (ARIU): +34.8%
= (+$445.65/$6,488.95)*(365/72 days)

Absolute Return if Assigned at $4.50: +9.9%
= +$640.65/$6,488.95
Annualized Return If Assigned (ARIA): +50.1%
= (+$640.65/$6,488.95)*(365/72 days)

Establish China Mobile Ltd ADR Covered Calls

A new covered call position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of China Mobile Ltd ADR (CHL) covered calls. China Mobile is by far the world's largest mobile telecommunications service provider with over 589 million subscribers in China, and it continues to experience significant growth. To put their size in perspective, this is almost twice the total U.S. population as well as approximately three times the total number of wireless subscribers of both Verizon Wireless and AT&T combined.

The transactions were as follows:
02/23/2011 Bought 200 CHL @ $46.479
02/23/2011 Sold 2 CHL Mar2011 $47.50 Calls @ $.60

Because CHL continues rates very highly on the CCAP 'Buy Alerts' spreadsheet (See below that Total Points of 17.36 is above this advisor's required threshold of 16.0), it was decided to establish a covered calls position in CHL with a Mar2011 expiration.





















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


Two possible overall performance results(including commissions) for the China Mobile Ltd ADR (CHL) transactions would be as follows:

Stock Purchase Cost: $9,304.75
= ($46.479*200+$8.95 commission)

Net Profit:
(a) Options Income: +$109.55
= ($.60*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $46.479): -$8.95
= ($46.479-$46.479)*200 - $8.95 commissions
(c) Capital Appreciation (If CHL above $47.50 at Mar2011 expiration): +$195.25
+($47.50-$46.479)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $46.479): +$100.60
= (+$109.55 +$0.00 -$8.95)
Total Net Profit(If stock price above $47.50 at Mar2011 options expiration): +$304.80= (+$109.55 +$0.00 +$195.25)

Absolute Return if Unchanged at $46.479: +1.1%
= +$100.60/$9,304.75
Annualized Return If Unchanged (ARIU): +17.2%
= (+$470.60/$22,000.00)*(365/23 days)

Absolute Return (If stock price above $47.50 at Mar2011 options expiration): +3.3%
= +$304.80/$9,304.75
Annualized Return (If stock price above $47.50 at expiration): +52.0%
= (+$304.80/$9,304.75)*(365/23 days)

The downside breakeven price at expiration is at $45.879 ($46.479 - $.60).
Using the Black-Scholes Options Pricing Model in the Schwab Hypothetical Options Pricing calculator, the resulting probability of making a profit (if held until Mar2011 options expiration) for this China Mobile Ltd ADR (CHL) covered calls position is 58.6%. This compares with a probability of profit of 49.3% for a buy-and-hold of China Mobile (CHL) over the same time period.

Establish iShares MSCI South Korea ETF Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI South Korea ETF (EWY) covered calls as follows:

Established iShares MSCI South Korea ETF (EWY) Covered Calls for Mar2011:
02/22/2011 Bought 300 EWY @ $58.03
02/22/2011 Sold 3 EWY Mar2011 $59.00 Calls @ $1.38
Note: these call options were sold with the price of EWY at $58.53

Two possible overall performance results(including commissions) for the EWY transactions would be as follows:
Stock Purchase Cost: $17,417.95
= ($58.03*300+$8.95 commission)

Net Profit:
(a) Options Income: +$402.80
= (300*$1.38 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EWY unchanged at $58.03): $-8.95
= ($58.03-$58.03)*300 - $8.95 commissions
(c) Capital Appreciation (If EWY assigned at $59.00): +$282.05
= ($59.00-$58.03)*300 - $8.95 commissions

Total Net Profit(If EWY price unchanged at $58.03): +$393.85
= (+$402.80 +$0.00 -$8.95)
Total Net Profit(If EWY assigned at $59.00): +$684.85
= (+$402.80 +$0.00 +$282.05)

Absolute Return (If EWY unchanged at $58.03): +2.3%
= +$393.85/$17,417.95
Annualized Return If Unchanged (ARIU): +34.4%
= (+$393.85/$17,417.95)*(365/24 days)

Absolute Return if Exercised at $59.00: +3.9%
= +$684.85/$17,417.95
Annualized Return If Exercised (ARIE): +59.8%
= (+$684.85/$17,417.95)*(365/24 days)