Today is options expiration Friday for April 2010. The Covered Calls Advisor decided to retain the positions in Apple Inc.(AAPL) and Interdigital Inc(IDCC) so the decision was made to roll-up-and-out to the May2010 expiration. The transactions history as well as some possible results for each position are detailed below:
1. Apple Inc.(AAPL) -- Continuation Transaction
Today, with Apple Inc. stock priced at $248.90 the existing Apr2010 $230.00 covered calls were deep-in-the-money and the time value remaining in the $230.00 covered calls at only $.10 [$19.00-($248.90-$230.00)], a roll-out debit spread transaction was executed as follows:
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: Net Debit Spread upon Roll-Up-and-Out was $9.60 ($19.00 - $9.40)
The transactions history to date for Apple Inc.(AAPL) is 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.
Two possible overall performance results(including commissions) for the Apple Inc. (AAPL) transactions would be as follows:
Stock Purchase Cost: $19,876.65
= ($198.677*100+$8.95 commission)
Net Profit:
(a) Options Income: -$1,712.10
= (100*($1.57-$12.20+$3.40-$19.00+$9.40) - 3*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $248.90):
+$5,013.35 = ($248.90-$198.677)*100 - $8.95 commissions
(c) Capital Appreciation (If exercised at $250.00): +$5,123.35
= ($250.00-$198.677)*100 - $8.95 commissions
Total Net Profit(If stock price unchanged at $248.90): +$3,301.25
= (-$1,712.10 +$0.00 +$5,013.35)
Total Net Profit(If stock price exercised at $250.00): +$3,411.25
= (-$1,712.10 +$0.00 +$5,123.35)
Absolute Return if Unchanged at $248.90: +16.6%
= +$3,301.25/$19,876.65
Annualized Return If Unchanged (ARIU) +69.7%
= (+$3,301.25/$19,876.65)*(365/87 days)
Absolute Return if Exercised at $250.00: +17.2%
= +$3,411.25/$19,876.65
Annualized Return If Exercised (ARIE) +72.0%
= (+$3,411.25/$19,876.65)*(365/87 days)
2. Interdigital Inc.(IDCC) -- Continuation Transaction
With the time value remaining in the IDCC options at only $.06 [$.50-($29.44-$29.00)], a roll-up-and-out credit spread transaction was executed today as follows:
04/16/2010 Buy-to-Close (BTC) 2 IDCC Apr2010 $29.00s @ $.50
04/16/2010 Sell-to-Open (STO) 2 IDCC May2010 $31.00s @ $.65
Note: Net Credit-Spread upon Roll-Up-and-Out was $.15 ($.65 - $.50)
The transactions history to date for Interdigital Inc.(IDCC) is as follows:
03/25/2010 Bought 200 IDCC @ $28.03
03/25/2010 Sold 2 IDCC Apr2010 $29.00 Calls @ $.50
04/16/2010 Buy-to-Close (BTC) 2 IDCC Apr2010 $29.00s @ $.50
04/16/2010 Sell-to-Open (STO) 2 IDCC May2010 $31.00s @ $.65
Note: The price of IDCC was $29.44 today when this credit-spread was transacted.
Some possible overall performance results(including commissions) for the IDCC transactions would be as follows:
Stock Purchase Cost: $5,614.95
= ($28.03*200+$8.95 commission)
Net Profit:
(a) Options Income: +$109.10
= (200*($.50-$.50+$.65 - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.44):
+273.05 = ($29.44-$28.03)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $31.00): +$585.05
= ($31.00-$28.03)*200 - $8.95 commissions
Total Net Profit(If stock price unchanged at $29.44): +$382.15
= (+$109.10 +$0.00 +$273.05)
Total Net Profit(If stock price exercised at $31.00): +$694.15
= (+$109.10 +$0.00 +$585.05)
Absolute Return if Unchanged at $29.44: +6.8%
= +$382.15/$5,614.95
Annualized Return If Unchanged (ARIU) +42.8%
= (+$80.60/$5,614.95)*(365/58 days)
Absolute Return if Exercised at $29.00: +12.4%
= +$694.15/$5,614.95
Annualized Return If Exercised (ARIE) +77.8%
= (+$694.15/$5,614.95)*(365/58 days)
