For the other three positions (Devon Energy Corp., Quanta Services Inc, and Twenty-First Century Fox), the price of the equities closed below their strike prices so the options expired worthless and the long shares were retained in the Portfolio. Today, covered calls were established for two of these companies (Quanta Services and Twenty-First Century Fox) by selling July 21st, 2017 Call options against the stock holdings. As detailed below, the results if the stocks are assigned upon expiration are:
- Quanta Services Inc. -- A +1.9% absolute return (equivalent to +17.6% annualized return-on-investment) over 40 days
- Twenty-First Century Fox Inc. -- A +3.1% absolute return (equivalent to +15.4% annualized return-on-investment) over 74 days
1. Quanta Services Inc. (PWR) -- Continuing Covered Calls Position
05/08/2017 Sold 6 PWR Jun2017 $33.00 100% cash-secured Put options @ $.65
Note: the price of PWR was $34.27 today when this transaction was executed.
06/16/2017 6 PWR Jun2017 Put options expired and 600 shares of PWR were purchased at $33.00 strike price
Note: the price of PWR was $32.10 upon the market close last Friday at Jun2017 expiration
06/19/2017 Sold 6 PWR July 21, 2017 $33.00 Call options @ $.55
Note: the price of PWR was $32.28 when these Call options were sold
Two possible overall performance results (including commissions) would be as follows:
Cost Basis: $19,804.95
= $33.00*600 + $4.95 commission
Net Profit:
(a) Options Income: +$702.30
= ($.65 + $.55) *600 shares - 2*$8.85 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PWR stock is unchanged at $32.28 at July 21, 2017 expiration): -$432.00
= ($32.28-$33.00)*600 shares; or
(c) Capital Appreciation (If PWR is above $33.00 strike price at July 21, 2017 expiration): +$0.00
= ($33.00-$33.00)*600 shares
1. Total Net Profit (If Quanta Services stock price is unchanged at $32.28 at July 21, 2017 options expiration): +$381.15; or
= (+$381.15 options income +$0.00 dividend income +$0.00 capital appreciation)
2. Total Net Profit (If Quanta Services stock price is above $33.00 strike price at July 21, 2017 options expiration): +$381.15
= (+$381.15 options income +$0.00 dividend income +$0.00 capital appreciation)
1. Absolute Return (If PWR is above $33.00 strike price at Jun2017 options expiration): +1.9%
= +$381.15/$19,800.00
Annualized Return: +17.6%
= (+$381.15/$19,800.00)*(365/40 days); or
2. Absolute Return (If PWR is above $33.00 strike price at Jun2017 options expiration): +1.9%
= +$381.15/$19,800.00
Annualized Return: +17.6%
= (+$381.15/$19,800.00)*(365/40 days)
2. Twenty-First Century Fox Inc. (FOXA) -- Continuing Covered Calls Position
05/08/2017 Sold 10 FOXA Jun2017 $28.00 100% cash-secured Put options @ $.65
Note: the price of FOXA stock was $28.88 today when this transaction was executed.
06/16/2017 10 FOXA Jun2017 Put options expired and 1,000 shares of FOXA were purchased at $28.00 strike price
Note: the price of FOXA was $27.45 upon the market close last Friday at Jun2017 expiration
06/19/2017 Sold 10 FOXA July 21, 2017 $27.00 Call options @ $1.25
Note: the price of FOXA was $27.76 when these Call options were sold
A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $28,004.95
= $28.00*1,000 + $4.05 commission
Net Profit:
(a) Options Income: +$1,877.10
= ($.65 +$1.25) *1,000 shares - 2*$11.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FOXA is above $27.00 strike price at July 21, 2017 expiration): -$1,000.00
= ($27.00-$28.00)*1,000 shares
Total Net Profit: +$877.10
= (+$1,877.10 options income +$0.00 dividend income -1,000.00 capital appreciation)
Absolute Return: +3.1%
= +$877.10/$28,004.95
Annualized Return: +15.4%
= (+$877.10/$28,004.95)*(365/74 days)
