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Thursday, September 25, 2014

Established Covered Calls Position -- Halliburton Co.


Today, a new covered calls position was established in Halliburton Co.  (Ticker Symbol HAL).  This Halliburton position was established at the $63.50 strike price and with an Oct2014 options expiration.  As shown below, this investment will provide a +2.0% absolute return in 24 days (which is equivalent to a +30.2% annualized return) if Halliburton stock closes at or above $63.50 at options expiration on Oct 18th.
The details of the associated transactions and a potential return-on-investment result are as follows:

1. Halliburton Co. (HAL)
The transactions were as follows:
09/25/2014 Bought 300 HAL shares @ $64.10
09/25/2014 Sold 3 HAL Oct2014 $63.50 Call Options @ $1.94
Note: the price of HAL was $64.10 today when these options were sold.

A possible overall performance result (including commissions) for these Halliburton covered calls is as follows:
Stock Purchase Cost: $19,238.95
= ($64.10*300+$8.95 commission)

Net Profit:
(a) Options Income: +$570.80
= 300*$1.94 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HAL assigned at $63.50) = -$188.95
= ($63.50-$64.10)*300 - $8.95 commissions

Total Net Profit (If HAL assigned at $63.50): +$381.85
= (+$570.80 +$0.00 -$188.95)

Absolute Return if Assigned (at $63.50): +2.0%
= +$381.85/$19,238.95
Annualized Return If Assigned (ARIA): +30.2%
= (+$381.85/$19,238.95)*(365/24 days)