Last Friday, the November 17th, 2017 Covered Calls positions in Citigroup Inc. (ticker symbol C) and Freeport-McMoRan Inc. (ticker FCX) expired with the stock prices below their strike prices. So, their Call options expired and their stock shares were ...

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Covered Calls Advisor - 5 new articles

Covered Calls Positions Continued in Citigroup Inc. and Freeport-McMoRan Inc.

Last Friday, the November 17th, 2017 Covered Calls positions in Citigroup Inc. (ticker symbol C) and Freeport-McMoRan Inc. (ticker FCX) expired with the stock prices below their strike prices.  So, their Call options expired and their stock shares were retained in the Covered Calls Advisor's Portfolio.  This morning, the Covered Calls Advisor continued both Covered Calls positions by selling December 15th, 2017 Call options against both long stock positions.

Some potential return-on-investment results for each position are:  

  • Citigroup Inc. -- A +2.0% absolute return in 53 days (equivalent to a +13.9% annualized return-on-investment if stock price unchanged at $71.86 at the December 15th expiration; OR a +2.9% absolute return in 53 days (equivalent to a +20.0% annualized return if Citi stock closes above the $72.50 strike price on the December 15th expiration date.
  • Freeport-McMoRan Inc. -- A+6.2% absolute return in 42 days (equivalent to a +53.6% annualized return if FCX stock remains above the $14.00 strike price on the December 15th expiration date.
The transactions to-date and potential return-on-investment results for both positions are detailed below. 

1. Citigroup Inc.(C) -- Covered Calls Position Continued
The transactions to-date are as follows:
10/23/2017 Bought 400 shares of Citigroup stock @ $73.76 per share 
10/23/2017 Sold 4 Citigroup Nov 17th, 2017 $72.50 Call options @ $1.97 per share
Note: this was a simultaneous Buy/Write transaction
11/17/2017 4 Citi Nov. 17th Call options expired and 400 shares of Citi stock were retained in the Covered Calls Advisor Portfolio
Note: the price of Citi stock was $71.33 upon the options expiration.
11/20/2017 Continuation of Citi Covered Calls position by selling 4 Dec 15th, 2017 Call options at the $72.50 strike @ $1.09 per share
Note: Citi stock was at $71.86 when this transaction occurred

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $28,723.63
= ($73.76 - $1.97)* 400 shares + $7.63 commission

Net Profit Components:
(a) Options Income: +$1,216.37
= ($1.97 + $1.09) * 400 shares -$7.63 commission
(b) Dividend Income: +$128.00
= $.32 per share * 400 shares 
(c) Capital Appreciation (If Citi stock price is unchanged at current $71.86 at Dec 15th expiration): -$764.95
= ($71.86 -$73.76)* 400 shares - $4.95 commission; OR
(c) Capital Appreciation (If Citi stock closes above $72.50 strike price at expiration) : -$508.95
= ($72.50 -$73.76)* 400 shares - $4.95 commission

Two Potential Total Net Profits:
(a) If Citi stock price is unchanged at current $71.86 at Dec 15th expiration: +$579.42
= (+$1,216.37 options income +$128.00 dividend income -$764.95 capital appreciation); OR
(b) If Citi stock price is above $72.50 strike price at Dec 15th expiration) +$835.42
= (+$1,216.37 options income +$128.00 dividend income -$508.95 capital appreciation)

Two Potential Return-on-Investment Results:
(a) If Citi stock price is unchanged at current $71.86 at Dec 15th expiration:
Absolute Return : +2.0%
= +$579.42/$28,723.63
Equivalent Annualized Return: +13.9%
= (+$579.42/$28,723.63)*(365/53 days); OR
(b) If Citi stock price is above $72.50 strike price at Dec 15th expiration:
Absolute Return : +2.9%
= +$835.42/$28,723.63
Equivalent Annualized Return: +20.0%
= (+$835.42/$28,723.63)*(365/53 days)


2. Freeport-McMoRan Inc. (FCX) -- Covered Calls Position Continued
The implied volatility of the Call options was 34.2 when this position was originally established and 33.8 when the Dec 15th Calls were sold today.  There are no ex-dividend dates or earnings reports scheduled prior to the December 15th options expiration date.

The transactions were as follows:
11/03/2017 Bought 1,000 shares of Freeport-McMoRan stock @ $14.11 per share 
11/03/2017 Sold 10 FCX November 17th, 2017 $14.00 Call options @ $.44 per share
Note: this was a simultaneous Buy/Write transaction with excellent options liquidity at 38,263 open interest.
11/17/2017 10 FCX Nov. 17th Call options expired and 1,000 shares of Freeport McMoRan stock were retained in the Covered Calls Advisor Portfolio
Note: the price of FCX stock was $13.86 upon the options expiration.
11/20/2017 Continuation of FCX Covered Calls position by selling 10 Dec 15th, 2017 Call options at the $14.00 strike @ $.53 per share
Note: Freeport-McMoRan stock was at $14.03 when this transaction occurred

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $13,681.65
= ($14.11 - $.44)* 1,000 shares + $11.65 commissions

Net Profit Components:
(a) Options Income: +$958.35
= ($.44 + $.53)* 1,000 shares - $11.65 commission
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If FCX stock is above $14.00 strike price at Dec 15th expiration): -$114.95
= ($14.00 -$14.11)* 1,000 shares - $4.95 commission

Total Net Profit: +$843.40
= (+$958.35 options income +$0.00 dividend income -$114.95 capital appreciation)

Absolute Return: +6.2%
= +$843.40/$13,681.65
Equivalent Annualized Return: +53.6%
= (+$843.40/$13,681.65)*(365/42 days)
      



Closed Postion in Wynn Resorts Ltd.

Last Friday, the November 17th, 2017 Covered Calls position in Wynn Resorts Ltd. (ticker symbol WYNN) expired with the stock price at $152.28, below the $152.50 strike price -- so the Call options expired and the 100 shares were retained in the Covered Calls Advisor's Portfolio.  The stock moved higher this morning at the market opening and the position was closed out by selling the 100 shares at $154.71.  As detailed below, this weekly Covered Calls position achieved a return-on-investment result of +2.1% absolute return in 6 days (equivalent to a +130.5% annualized return-on-investment).

Wynn Resorts Ltd. (WYNN) -- New Covered Calls Position
The transactions were as follows:
11/14/2017 Bought 100 shares of Wynn Resorts stock @ $153.90 per share 
11/14/2017 Sold 1 WYNN Nov. 17th, 2017 $152.50 Call option @ $2.00 per share
Note: this was a simultaneous Buy/Write transaction with relatively good options liquidity of 1,754 open interest contracts.  The implied volatility of the Call options was 17.9 when this position was established.
11/17/2017 The WYNN 11/17/2017 $152.50 Call option expired and the 100 shares of stock was retained.  Note: the price of the stock was $152.28 upon the options expiration.
11/20/2017 Sold 100 WYNN shares at $154.71.  

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $15,195.62
= ($153.90 - $2.00)* 100 shares + $5.62 commissions

Net Profit Components:
(a) Options Income: +$200.00
= ($2.00* 100 shares)
(b) Dividend Income: +$50.00
= $.50/share * 100 shares 
(c) Capital Appreciation: -$76.05
= ($154.71 -$153.90)* 100 shares - $4.95 commission

Total Net Profit: +$326.05
= (+$200.00 options income +$50.00 dividend income +$76.05 capital appreciation)

Absolute Return: +2.1%
= +$326.05/$15,195.62
Equivalent Annualized Return: +130.5%
= (+$326.05/$15,195.62)*(365/6 days)

      



November 17th, 2017 Option Expiration Results

The Covered Calls Advisor Portfolio had seven positions with November 17th, 2017 options expirations.  As posted this past Friday on this blog, two in-the-money Covered Calls positions (Best Buy Inc. and Devon Energy Corp.) were continued by rolling them out to the December 15th expiration at the same strike price they had for the November 17th expiration.

Of the remaining five positions, two (Alibaba Group Holding Ltd. and CVS Health Corporation) closed in-the-money, so the maximum possible return-on-investment result was achieved.  Details of the transactions and results for each of these positions was:

  • Alibaba Group Holding Ltd.:  +2.2% absolute return (+31.2% annualized return) in 26 days
  • CVS Health Corporation:  +2.4% absolute return (+24.0% annualized return) in 36 days 
The cash now available in the Covered Calls Advisor Portfolio from the closing of these two positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

The remaining three positions (Citigroup Inc., Freeport McMoRan Inc., and Wynn Resorts Ltd.) closed yesterday with their stock price below their strike prices, so those shares will remain in the Covered Calls Advisor Portfolio (see holdings in right sidebar) until they are either sold or a continuation Covered Calls position is established. 

The details for each of the closed positions is as follows:


1. Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position Closed
The implied volatility of the Call options was 39.5 when this position was established.  This is a very high level which in large part is due to the uncertainty associated with the earnings report on Nov 2nd and its annual Singles Day sale on Nov 11th.

The transactions were as follows:
10/23/2017 Bought 300 shares of Alibaba stock @ $174.13 per share 
10/23/2017 Sold 3 Alibaba November 17th, 2017 $165.00 Call options @ $12.73 per share
Note: this was a simultaneous Buy/Write transaction
11/17/2017 3 BABA Call options assigned and 300 shares sold @ $165.00 strike price.
Note: the price of Alibaba stock was $185.13 at options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $48,426.96
= ($174.13 - $12.73)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$3,819.00
= ($12.73* 300 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock was above $165.00 strike price at Nov 17th expiration): -$2,743.95
= ($165.00 -$174.13)* 300 shares - $4.95 commission

Total Net Profit: +$1,075.05
= (+$3,819.00 options income +$0.00 dividend income -$2,743.95 capital appreciation)

Absolute Return: +2.2%
= +$1,075.05/$48,426.96
Equivalent Annualized Return: +31.2%
= (+$1,075.05/$48,426.96)*(365/26 days)



2. CVS Health Corporation (CVS) -- Covered Calls Position Closed
The transactions were as follows:
10/13/2017 Bought 300 shares of CVS stock @ $72.84 per share 
10/13/2017 Sold 3 CVS Nov 17th, 2017 $70.00 Call options @ $3.99 per share
Note: this was a simultaneous Buy/Write transaction
10/23/2017 Ex-dividend of $150.00
= $.50 per share x 300 shares
11/17/2017 3 CVS Call options assigned and 300 shares sold @ $70.00 strike price.
Note: the price of CVS stock was $70.68 at options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $20,661.96
= ($72.84 - $3.99)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$1,197.00
= ($3.99 * 300 shares)
(b) Dividend Income: +$150.00
= $.50 per share * 300 shares 
(c) Capital Appreciation (If CVS is above $70.00 strike price at Nov 17th expiration): -$856.95
= ($70.00 -$72.84)* 300 shares - $4.95 commission

Total Net Profit: +$490.05
= (+$1,197.00 options income +$150.00 dividend income -$856.95 capital appreciation)

Absolute Return: +2.4%
= +$490.05/$20,661.96
Equivalent Annualized Return: +24.0%
= (+$490.05/$20,661.96)*(365/36 days)
      



Established Covered Calls Position in The Coca-Cola Company

Today, a new Covered Calls position was established in The Coca-Cola Company (ticker KO) at the $45.00 strike price and for the December 15th, 2017 options expiration date.

As detailed below, a potential return-on-investment is +1.4% absolute return in 29 days (equivalent to a +17.7% annualized return-on-investment).  This return includes a $.37 per share quarterly ex-dividend on November 30th plus a potential time value (i.e. extrinsic value) profit of $.27 [$.69 options income - ($45.42 stock cost - $45.00 strike price)]. 


The Coca-Cola Company (KO) -- New Covered Calls Position

The transactions were as follows:
11/17/2017 Bought 400 shares of The Coca-Cola Company stock @ $45.42 per share 
11/17/2017 Sold 4 Coca-Cola Dec 15th, 2017 $45.00 Call options @ $.69 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $17,899.63
= ($45.42 - $.69)* 400 shares + $7.63 commission

Net Profit Components:
(a) Options Income: +$276.00
= ($.69* 400 shares)
(b) Dividend Income: +$148.00
= $.37 per share * 400 shares 
(c) Capital Appreciation (If Coca-Cola stock is above $45.00 strike price at Dec 15th expiration): -$172.95
= ($45.00 -$45.42)* 400 shares - $4.95 commission

Total Net Profit: +$251.05
= (+$276.00 options income +$148.00 dividend income -$172.95 capital appreciation)

Absolute Return: +1.4%
= +$251.05/$17,899.63
Equivalent Annualized Return: +17.7%
= (+$251.05/$17,899.63)*(365/29 days)

The downside 'breakeven price' at expiration is at $44.36 ($45.42 stock price - $.69 options income - $.37 dividend income), which is 2.3% below the current market price of $45.42.
      


Rolled Out Covered Calls Position in Devon Energy Corp.

This afternoon, with today's (i.e. Nov 17th, 2017) $36.00 strike price Covered Calls position in Devon Energy well in-the-money, the Covered Calls Advisor decided continue with this Covered Calls position that was first established six months ago.  The current position was rolled out to the Dec 15th Covered Calls at the identical $36.00 strike price.  This was done with only about $.02 time value remaining in the November Call options and a net credit in the rollout of $.41 per share was achieved ($3.14 income for December Calls sold minus $2.73 debit for Nov. 17th Calls bought-to-close).  Based on the Covered Calls Advisor's current market overall Neutral sentiment, a moderately in-the-money position was established.

As detailed below, a potential return-on-investment result for this Devon Energy position is +12.8% absolute return for 204 days (equivalent to a +22.9% annualized return-on-investment).  


Devon Energy Corp. (DVN) -- Continuation Covered Calls Position

The transactions to-date have been as follows:
05/25/2017  Bought 500 Devon Energy Corp. shares @ $37.45
05/25/2017 Sold 5 DVN June 16, 2017 $36.00 Call options @ $2.10
Note: this was a simultaneous buy/write transaction.
06/13/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
06/16/2017 5 DVN June 16th, 2017 Call options expired
Note: the price of DVN stock closed at $31.76 upon the June 16th options expiration date.
07/03/2017 Sold 5 DVN July 21, 2017 $33.00 Call options @ $.87 per share
07/21/2017 5 DVN Call options expired
07/26/2017 Sold 5 DVN Aug 18, 2017 $35.00 Call options @ $.65 per share
08/18/2017 5 DVN Call options expired
Note: the price of DVN stock was $30.40 upon expiration of the Aug 18th Call options
09/14/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
09/14/2017 Sold 5 DVN October 20th, 2017 $35.00 Call options @ $.89 per share
Note: the price of DVN stock was $34.12 today when the Oct 20th Call options were sold
10/20/2017 5 DVN Call options expired
Note: the price of DVN stock was $34.92 upon expiration of the Oct 20th Call options
10/27/2017 Sold 5 DVN November 17th, 2017 $36.00 Call options @ $.93 per share
Note: the price of DVN stock was $35.66 today when the Nov 17th Call options were sold
11/17/2017 Bought-to-Close 5 DVN Nov 17th $36.00 Call options @ $2.73
11/17/2017 Sold-to-Open 5 DVN Dec 15th, 2017 $36.00 Call options @ $3.14
12/14/2017 Upcoming Ex-Dividend of $.06 per share

A possible overall performance result (including commissions) would be as follows:
Cost Basis of Original Covered Calls Position Established in DVN: $17,679.95
= ($37.45 - $2.10)*500 + $4.95 commission

Net Profit Components:
(a) Options Income: +$2,904.90
= ($2.10 + $.87 + $.65 + $.89 +$.93 -$2.73 +$3.14) *500 shares - 6*$3.35 commissions
(b) Dividend Income: +$90.00
= ($.06 + $.06 + $.06) * 500 shares
(c) Capital Appreciation (If DVN is above $36.00 strike price at the Dec 15th, 2017 expiration): -$729.95
= ($36.00-$37.45)*500 shares - $4.95 commissions

Total Net Profit (If DVN stock is above $36.00 strike price at Dec 15, 2017 options expiration): +$2,264.95
= (+$2,904.90 options income +$90.00 dividends -$729.95 capital appreciation)

Absolute Return: +12.8%
= +$2,264.95/$17,679.95
Annualized Return: +22.9%
= (+$2,264.95/$17,679.95)*(365/204 days)
      


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