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Monday, November 18, 2013

Established a 100% Cash-Secured Puts Position in ProShares UltraShort 20+ Year Treasury ETF

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in ProShares UltraShort 20+ Year Treasury ETF (Ticker Symbol TBT) with a Dec2013 expiration and at the $75.00 strike price.  As detailed below, this investment will provide a +2.0% absolute return in 34 days (which is equivalent to a +21.6% annualized return) if TBT closes at or above $75.00 at options expiration on Dec 21st.

Details of this transaction along with a potential return-on-investment result are: 

ProShares UltraShort 20+ Year Treasury ETF (TBT)
The transaction is as follows:
11/18/2013 Sold 3 Dec2013 $75.00 Puts @ $1.51
Note: The price of TBT was $75.65 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 ProShares UltraShort 20+ Year Treasury ETF transaction would be as follows:
100% Cash-Secured Cost Basis: $22,500.00 = $75.00*300
Note:  the price of TBT was $75.00 when these Put options were sold.

Net Profit:
(a) Options Income: +$453.00
= ($1.51*300 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If TBT remains above $75.00 at Dec2013 expiration): +$0.00
= ($75.00-$75.00)*300 shares

Total Net Profit (If TBT is above $75.00 strike price at Dec2013 options expiration):+$453.00 
= (+$453.00 +$0.00 +$0.00)

Absolute Return (If TBT is above $75.00 at Dec2013 options expiration and Put options thus expire worthless): +2.0%
= +$453.00/$22,500.00
Annualized Return (If TBT above $75.00 at expiration): +21.6%
= (+$453.00/$22,500.00)*(365/34 days)

The downside 'breakeven price' at expiration is at $73.49 ($75.00 - $1.51), which is 2.9% below the current market price of $75.65.
The 'crossover price' at expiration is $76.51 ($75.00 + $1.51). This is the price above which it would have been more profitable to simply buy-and-hold the ProShares UltraShort 20+ Year Treasury ETF until Dec 21st (the Dec2013 options expiration date) rather than holding these short Put options.

November 2013 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained seven positions with November 2013 expirations.  The options closed in-the-money for all seven positions (Aetna Inc., Hertz Global Holdings Inc., iShares MSCI China ETF, Noble Corp., 2 positions in ProShares UltraShort 20+ Year Treasury ETF, and Transocean Inc.), so all seven positions were closed out upon Nov2013 options expiration.  This was the optimal result in that the maximum potential return-on-investment (ROI) results were achieved for each investment. 

The annualized ROIs for these closed positions are:
1. Aetna Inc. = +1.6% absolute return (equivalent to +24.0% annualized return for the 24 day holding period)
2. Hertz Global Holdings Inc. = +3.6% absolute return (equivalent to +54.9% annualized return for the 24 day holding period)
3. iShares MSCI China ETF = +1.5% absolute return (equivalent to +23.1% annualized return for the 23 day holding period)

4. Noble Corp. = +5.9% absolute return (equivalent to +33.8% annualized return for the 64 day holding period)
5. ProShares UltraShort 20+ Year Treasury ETF = +4.4% absolute return (equivalent to +35.8% annualized return for the 45 day holding period)
6. ProShares UltraShort 20+ Year Treasury ETF = +2.8% absolute return (equivalent to +33.4% annualized return for the 31 day holding period)

7. Transocean Inc. = +3.3% absolute return (equivalent to +12.0% annualized return for the 100 day holding period)

The detailed transactions history and results for each of the seven closed positions is provided below.  The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established (most likely in the next week).  These transactions will be posted on this blog the same day they occur.

1. Aetna Inc.(AET) -- Closed
The transactions were as follows:
10/24/2013 Bought 300 AET shares @ $61.61
10/24/2013 Sold 3 AET Nov2013 $60.00 Call Options @ $2.65
11/15/2013 3 AET options assigned and 300 shares of AET sold for $60.00
Note: price of AET was $65.08 upon Nov2013 options expiration

The performance result (including commissions) for these Aetna Inc. covered calls was as follows:
Stock Purchase Cost: $18,491.95
= ($61.61*300+$8.95 commission)

Net Profit:
(a) Options Income: +$783.80
= 300*$2.65 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (AET assigned at $60.00) = -$491.95
= ($60.00-$61.61)*300 - $8.95 commissions

Total Net Profit (AET assigned at $60.00): +$291.85
= (+$783.80 +$0.00 -$491.95)

Absolute Return (AET Assigned at $60.00): +1.6%
= +$291.85/$18,491.95
Annualized Return: +24.0%
= (+$291.85/$18,491.95)*(365/24 days)



2. Hertz Global Holdings Inc.(HTZ) -- Closed
The transaction was as follows:
10/24/2013 Sold 7 Hertz (HTZ) Nov2013 $23.00 Put Options @ $.85
Note: the price of HTZ was $23.33 when these Puts were sold.
11/15/2013 7 HTZ Put options expired
Note: price of HTZ was $23.68 upon Nov options expiration
The overall performance result (including commissions) for this HTZ transaction was as follows:
100% Cash-Secured Cost Basis: $16,100.00
= $23.00*700

Net Profit:
(a) Options Income: +$580.80
= ($.85*700 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HTZ above $23.00 at Nov2013 expiration): +$0.00
= ($23.00-$23.00)*700 shares

Total Net Profit (HTZ above $23.00 strike price at Nov2013 options expiration): +$580.80
= (+$580.80 +$0.00 +$0.00)

Absolute Return (HTZ above $23.00 at Nov2013 options expiration and Put options thus expire worthless): +3.6%
= +$580.80/$16,100.00
Annualized Return: +54.9%
= (+$580.80/$16,100.00)*(365/24 days)


3. iShares MSCI China ETF (FXI) -- Closed
The transactions were as follows:
10/25/2013 Bought 600 FXI shares @ $36.40
10/25/2013 Sold 6 FXI Nov2013 $36.00 Call Options @ $.95
11/15/2013 6 FXI Call options in-the-money at Nov2013 expiration and thus 600 FXI shares sold at $36.00
Note: price of FXI was $38.44 at Nov2013 expiration

The overall performance result (including commissions) for these iShares MSCI China ETF covered calls was as follows:
Stock Purchase Cost: $21,848.95
= ($36.40*600+$8.95 commission)

Net Profit:
(a) Options Income: +$566.55
= 600*$.95 - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (FXI assigned at $36.00) = -$248.95
= ($36.00-$36.40)*600 - $8.95 commissions

Total Net Profit (FXI assigned at $36.00): +$317.60
= (+$566.55 +$0.00 -$248.95)

Absolute Return (FXI assigned at $36.00): +1.5%
= +$317.60/$21,848.95
Annualized Return: +23.1%
= (+$317.60/$21,848.95)*(365/23 days)


4. Noble Corp.(NE) -- Closed
The transactions were as follows:
09/13/2013 Bought 300 NE shares @ $38.91
09/13/2013 Sold 3 NE Oct2013 $38.00 Call Options @ $2.10
10/18/2013 Oct2013 options expired
Note: the price of NE was $37.98 upon Oct2013 options expiration
10/21/2013 Sold 3 NE Nov2013 Call options @ $.97
Note: the price of NE was $38.02 when these options were sold.
11/01/2013 Ex-dividend of $.25 per share
11/15/2013 3 NE options were in-the-money at Nov2013 expiration, so the 300 NE shares were sold at $38.00
The overall performance result (including commissions) for these Noble Corp covered calls was as follows:
Stock Purchase Cost: $11,681.95
= ($38.91*300+$8.95 commission)

Net Profit:
(a) Options Income: +$898.60
= 300*($2.10+$.97) - 2*$11.20 commissions
(b) Dividend Income: +$75.00 = $.25 *300 shares
(c) Capital Appreciation (NE assigned at $38.00) = -$281.95
= ($38.00-$38.91)*300 - $8.95 commissions

Total Net Profit (NE assigned at $38.00): +$691.65
= (+$898.60 +$75.00 -$281.95)

Absolute Return (Assignment at $38.00): +5.9%
= +$691.65/$11,681.95
Annualized Return: +33.8%
= (+$691.65/$11,681.95)*(365/64 days)


5. ProShares UltraShort 20+ Year Treasury ETF (TBT) -- Closed
The transaction is as follows:
10/02/2013 Sold 7 Oct2013 $74.00 Puts @ $1.33
Note: The price of TBT was $74.93 when this transaction was executed.
10/18/2013 Oct2013 Put options expired and 700 shares of TBT purchased at $74.00
Note: the price of TBT was $73.78 upon Oct2013 options expiration
10/21/2013 Sold 7 TBT Nov2013 Call options @ $1.98
11/15/2013 7 TBT Nov2013 call options expired in-the-money, so 700 shares sold for $74.00 at Nov2013 options expiration.
Note: TBT was priced at $76.45 at Nov2013 options expiration

The overall performance result (including commissions) for this ProShares UltraShort 20+ Year Treasury ETF position would was as follows:
100% Cash-Secured Cost Basis: $51,800.00 = $74.00*700

Net Profit:
(a) Options Income: +$2,288.60
= ($1.33+$1.98)*700 shares - 2*$14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TBT above $74.00 at Nov2013 expiration): +$0.00
= ($74.00-$74.00)*700 shares

Total Net Profit (TBT closed above $74.00 strike price at Nov2013 options expiration): +$2,288.60
= (+$2,288.60 +$0.00 +$0.00)

Absolute Return (TBT closed above $74.00 at Nov2013 options expiration): +4.4%
= +$2,288.60/$51,800.00
Annualized Return: +35.8%
= (+$2,288.60/$51,800.00)*(365/45 days)


6. ProShares UltraShort 20+ Year Treasury ETF (TBT) -- Closed
The transaction is as follows:
10/17/2013 Sold 3 Nov2013 $74.00 Puts @ $2.10
Note: The price of TBT was $74.00 when this transaction was executed.
11/15/2013 TBT options expired at Nov2013 expiration
Note: the price of TBT was $76.45 upon Nov2013 options expiration date.

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.

The overall performance result (including commissions) for this ProShares UltraShort 20+ Year Treasury ETF transaction was as follows:
100% Cash-Secured Cost Basis: $22,200.00 = $74.00*300
Note: the price of TBT was $74.00 when these Put options were sold.

Net Profit:
(a) Options Income: +$630.00
= ($2.10*300 shares) - $14.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TBT closed above $74.00 at Nov2013 expiration): +$0.00
= ($74.00-$74.00)*300 shares

Total Net Profit (TBT above $74.00 strike price at Nov2013 options expiration):+$630.00
= (+$630.00 +$0.00 +$0.00)

Absolute Return (TBT closed above $74.00 at Nov2013 options expiration and Put options thus expired worthless): +2.8%
= +$630.00/$22,200.00
Annualized Return (TBT closed above $74.00 at expiration): +33.4%
= (+$630.00/$22,200.00)*(365/31 days)


7. Transocean Inc.(RIG) -- Closed
08/08/2013 Bought 200 RIG shares @ $48.76
08/08/2013 Sold 2 RIG Sep2013 $48.00 Call Options @ $1.65
08/21/2013 Ex-dividend of $.56 per share
09/20/2013 2 RIG Sep2013 $48.00 Calls expired 10/17/2013
Sold 2 RIG Nov2013 $47.00 Call Options @ $.75
Note: the price of RIG was $45.82 when these options were sold
11/13/2013 Ex-dividend of $.56 per share
11/15/2013 2 RIG options were in-the-money and 200 RIG shares were sold at the $47.00 strike price
Note: price of RIG was $54.44 upon Nov2013 options expiration.
The overall performance results (including commissions) for this Transocean Inc. (RIG) covered calls position are as follows:
Stock Purchase Cost: $9,760.95
= ($48.76*200+$8.95 commission)

Net Profit:
(a) Options Income: +$459.10
= ($1.65+$.75)*200 shares - 2*$10.45 commissions
(b) Dividend Income: +$224.00 = ($.56 x 2 dividend per share x 200 shares);
(c) Capital Appreciation (stock assigned at $47.00 at Nov2013 expiration): -$360.95
= +($47.00-$48.76)*200 - $8.95 commissions

Total Net Profit (RIG assigned at $47.00 at Nov2013 expiration): +$322.15
= (+$459.10 +$224.00 -$360.95)

Absolute Return (RIG assigned at $47.00 at Nov2013 expiration): +3.3%
= +$322.15/$9,760.95
Annualized Return: +12.0%
= (+$322.15/$9,760.95)*(365/100 days)

Monday, November 4, 2013

Established Three New Positions

Today, three new Dec2013 positions were established by the Covered Calls Advisor as follows:

1. Citigroup Inc. (Ticker Symbol C)
11/01/2013 Bought 400 Citigroup Inc. Shares at $48.72
11/04/2013 Sold 4 Citi Dec2013 $48.00 Call Options at $1.92
Note: the price of Citi was $48.92 when these call options were sold

2. iPath S&P500 VIX Short-Term Futures ETN (VXX) 100% Cash-Secured Put Options
11/04/2013 Sold 7 Dec2013 $14.00 VXX 100% Cash-Secured Put Options @ $1.87
Note: the price of VXX was $12.77 when these options were sold.

3. Noble Corp. (Ticker Symbol NE)
11/04/2013 Sold 3 Dec2013 $37.00 Noble Corp 100% Cash-Secured Put Options @ $1.24
Note: the price of NE was $37.32 when these options were sold