Returns -- Through June 2012

1. 2012 Year-to-Date Results:

As shown in the "Year-to-Date 2012" line in the chart below, the Covered Calls Advisor Portfolio (CCAP) has increased by 6.69% so far in 2012. This is 1.68 percentage points (+6.69% minus 8.37%) below the Russell 3000 index, which is the benchmark against which the Covered Calls Advisor Portfolio is compared.

The financial results were as follows:
CCAP Absolute Return (Jan 1st through June 30th, 2012) = +6.69%
($313,277.56-$293,634.14)/$293,634.14
Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through June 30th, 2012) = +8.37%
($80.39-$74.18)/$74.18

As a reminder, 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.


2. Prior Years Results:
This Covered Calls Advisor blog began in September 2007. The performance results for 2007 through 2011 is summarized as follows:





This table shows that the Covered Calls Advisor Portfolio has outperformed the Russell 3000 benchmark by a total of 16.94% over the 4.3 years from the start of this blog in Sepember 2007 and the end of 2011. As shown, the corresponding average compound annual return-on-investment outperformance has averaged +3.85% per year. This average is within the Covered Calls Advisor's expected range of +3% to +5% average annual outperformance for long-term results achieved from a well-managed covered calls investing program.

Also 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.

As shown in the right sidebar near the top of this page, the Covered Calls Advisor's current Overall Market Meter rating is "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

Country Value Rankings

About once a quarter, the Covered Calls Advisor calculates the eight factors used to determine the current "Country Value Rankings" for 21 countries. Today's results (shown in the table below), provides a value-oriented and objective framework that assists this advisor to make decisions regarding overweighting and underweighting specific countries and regions in the Covered Calls Advisor's portfolio.

A comprehensive approach to asset allocation extends beyond diversification solely by asset classes (i.e. stocks, bonds, real estate, commodities, etc.). It should also include diversification by global geography. Behavioral finance research has clearly identified the profound tendency of most investors to succumb to "home-country bias". Legendary investor John Templeton was a leader in advocating for developing a globally oriented value investing perspective to achieve investing outperformance.

Note: For expanded view, left click on this spreadsheet






The Country Value Rankings table above is based on a weighted-average ranking system. You will notice that there are eight categories (and one factor for each category) used in the analysis of each country as follows:











The next-to-last column on the Country Value Rankings spreadsheet shows the Weighted Average Summation Total for each country.  The top 5 countries are China, Russia, Hong Kong, South Korea, and Taiwan). Thus, future investments in the Covered Calls Advisor Portfolio (shown in the right sidebar of this blog) will be overweighted in these higher rated countries. It should also be noted that the U.S. is ranked 13th of the 21 countries rated, so U.S.-based companies selected for investment will be those with significant exposure to sales in countries/regions with relatively high expected GDP Growth in 2012.

This Country Value Rankings spreadsheet is detailed in terms of both the methodolgy used and the resources used to capture the information for each country. If you are interested in these details and would like further information or clarification, please share your comments and questions in writing. They are always welcomed. Click the 'comments' link below to post your feedback. If you prefer confidential communications, my email address is listed at the top-right sidebar of this blog.

Hopefully, this information is helpful in your thinking and analysis of your own equities selection methods related to your covered calls investing process!

Regards and Godspeed to All,
Jeff

Establish Valero Energy Corp. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Valero Energy Corp.(VLO) covered calls as follows:

Established Valero Energy Corp.(VLO) Covered Calls for Jul2012:
06/21/2012 Bought 300 VLO @ $22.82
06/21/2012 Sold 3 VLO Jul2012 $24.00 Calls @ $.46

With total capacity of approximately 3.0 million barrels per day, Valero Energy Corp. is the largest petroleum refiner and marketer in the U.S. The company has the industry's most complex and sophisticated refining system. Most of its 16 refineries throughout the U.S., Canada and Aruba are able to process heavy, low-quality crude oil. The company has a growing network of retail outlets in the Great Plains, Southwest and Northeast.


Two possible overall performance results(including commissions) for the Valero Energy Corp.(VLO) transactions would be as follows:

Stock Purchase Cost: $6,854.95
= ($22.82*300+$8.95 commission)

Net Profit:
(a) Options Income: +$126.80
= ($.46*300 shares) - $11.20 commissions
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price unchanged at $22.82): -$8.95
= ($22.82-$22.82)*300 - $8.95 commissions
(c) Capital Appreciation (If VLO above $24.00 at Jul2012 expiration): +$345.05
+($24.00-$22.82)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $22.82): +$117.85
= (+$126.80 +$0.00 -$8.95)
Total Net Profit(If stock price above $24.00 at Jul2012 options expiration): +$471.85
= (+$126.80 +$0.00 +$345.05)

Absolute Return if Unchanged at $22.82: +1.7%
= +$117.85/$6,854.95
Annualized Return If Unchanged (ARIU): +20.2%
= (+$117.85/$6,854.95)*(365/31 days)

Absolute Return (If stock price above $24.00 at Jul2012 options expiration): +6.9%
= +$471.85/$6,854.95
Annualized Return (If stock price above $26.00 at expiration): +81.0%
= (+$471.85/$6,854.95)*(365/31 days)

Continuation Transactions -- Halliburton Co., Market Vectors Russia Index ETF, and Morgan Stanley

Friday was options expiration for June 2012. Today, July 2012 covered calls positions were established by selling calls against long positions in three existing equities in the Covered Calls Advisor Portfolio (CCAP). The detailed transactions history for these positions are shown below. The overall return-on-investment results for each position will be calculated and presented when the positions are closed.


1. Halliburton Co. -- Continuation
03/07/2012 Bought 300 Halliburton Co. Shares @ $34.02
03/08/2012 Sold 3 HAL Mar2012 $35.00 Calls @ $.48
Note: the price of Halliburton was $34.59 today when the calls were sold.
03/18/2012 Mar2012 options expired.
03/19/2012 Sold 3 HAL Apr2012 $35.00 Calls @ $1.18
Note: the price of HAL was $34.90 when these options were sold.
04/22/2012 HAL Apr2012 Call options expired.
04/25/2012 Sold 3 HAL May2012 $35.00 Calls at $.52
Note: the price of HAL was $33.95 when these call options were sold.
05/19/2012 HAL May2012 Call options expired.
05/31/2012 Sold 3 HAL Jun2012 $30.00 Calls at $.93
Note: the price of HAL was $30.04 when these call options were sold.
06/15/2012 Jun2012 options expired.
06/18/2012 Sold 3 HAL Jul2012 $30.00 Calls at $.72
Note: the price of HAL was $29.30 when these call options were sold.

2. Market Vectors Russia Index ETF -- Continuation
The transactions history is as follows:
03/23/2012 Bought 300 RSX @ $30.85 03/23/2012
Sold 3 RSX Apr2012 $31.00 Calls @ $1.10
Note: the price of RSX was $30.95 these call options were sold.
04/22/2012 RSX Apr2012 Call options expired.
04/25/2012 Sold 3 RSX May2012 $31.00 Calls at $.35
Note: the price of RSX was $29.72 when these call options were sold.
05/19/2012 RSX Jun2012 Call options expired.
06/04/2012 Sold 3 RSX Jun2012 $24.00 Calls at $.50
06/15/2012 Jun2012 options expired.
06/18/2012 Sold 3 RSX Jul2012 $27.00 Calls at $.55
Note: the price of RSX was $26.12 when these call options were sold.
 
3. Morgan Stanley -- Continuation
The transactions history is as follows:
04/04/2012 Bought 300 MS @ $18.82
04/04/2012 Sold 3 MS Apr2012 $19.00 Calls @ $.66
Note: the price of MS was $18.87 today when the call options were sold.
04/22/2012 Apr2012 MS options expired.
04/26/2012 Ex-dividend of $15.00 ($.05 per share * 300 shares)
05/01/2012 Sold 3 MS May2012 $18.00 Call Options @ $.32
Note: the price of MS was $17.42 when these options were sold.
05/19/2012 MS Jun2012 Call options expired.
06/04/2012 Sold 3 MS Jun2012 $15.00 Calls at $.32
06/15/2012 Jun2012 options expired.
06/18/2012 Sold 3 MS Jul2012 $15.00 Calls at $.53
Note: the price of MS was $14.20 when these call options were sold.