Monday, March 31, 2008

The Monetary System

To better understand the current credit crisis and the actions of the Fed, I started researching our monetary system. In the process I stumbled upon a website titled "Money: What It Is, How It Works", which provides a series of articles on such topics as Understanding Money, The Banking System, Financial Markets, Government Finance, Policy Issues, and more. I highly recommend this website if you want a better understanding of how our monetary system works.

Tuesday, March 25, 2008

USB - New Position

A new dividend position was established today on USB. The following is the trade information, including IB commissions:

25-Mar-08 - Initial Stock Position - BTO 100 USB @ 34.94
25-Mar-08 - Initial Call Option - STO 1 May08 35.00 Call @ 1.39
15-Apr-08 - Dividend Received - DIV 100 Dividend @ 0.43

Summary without the dividend if called early on Ex-Dividend date:

Stock Investment: $3,494.00
Income Generated: $139.00
Percent Income Generated: 3.98%
Annualized Income Generated: 726.03%
Net Profit If Called: $145.00
Percent Return If Called: 4.15%
Annualized Return If Called: 757.37%
Days Held: 2 days

Summary with the dividend if called at option expiration:

Stock Investment: $3,494.00
Income Generated: $181.50
Percent Income Generated: 5.19%
Annualized Income Generated: 36.46%
Net Profit If Called: $187.50
Percent Return If Called: 5.37%
Annualized Return If Called: 37.67%
Days Held to Expiration: 52 days

Dividend Information:

Ex-Dividend Date: 03/27/08
Dividend Pay Date: 04/15/08
Dividend Rate: $1.70
Dividend Yield: $4.90

BBT - New Position

A new dividend position was established today on BBT. The following is the trade information, including IB commissions:

25-Mar-08 - Initial Stock Position - BTO 100 BBT @ 35.26
25-Mar-08 - Initial Call Option - STO 1 Apr08 35.00 Call @ 1.68
01-May-08 - Dividend Received - DIV 100 Dividend @ 0.46

Summary without the dividend if called early on Ex-Dividend date:

Stock Investment: $3,526.00
Income Generated: $168.00
Percent Income Generated: 4.76%
Annualized Income Generated: 108.69%
Net Profit If Called: $142.00
Percent Return If Called: 4.03%
Annualized Return If Called: 91.87%
Days Held: 16 days

Summary with the dividend if called at option expiration:

Stock Investment: $3,526.00
Income Generated: $214.00
Percent Income Generated: 6.07%
Annualized Income Generated: 92.30%
Net Profit If Called: $188.00
Percent Return If Called: 5.33%
Annualized Return If Called: 81.09%
Days Held to Expiration: 24 days

Dividend Information:

Ex-Dividend Date: 04/10/08
Dividend Pay Date: 05/01/08
Dividend Rate: $1.84
Dividend Yield: 5.20%

ABT - New Position

A new dividend position was established today on ABT. The following is the trade information, including IB commissions:

25-Mar-08 - Initial Stock Position - BTO 100 ABT @ 54.84
25-Mar-08 - Initial Call Option - STO 1 Apr08 55.00 Call @ 1.41
15-May-08 - Dividend Received - DIV 100 Dividend @ 0.36

Summary without the dividend if called early on Ex-Dividend date:

Stock Investment: $5.484.00
Income Generated: $141.00
Percent Income Generated: 2.57%
Annualized Income Generated: 55.20%
Net Profit If Called: $157.00
Percent Return If Called: 2.86%
Annualized Return If Called: 61.47%
Days Held: 17 days

Summary with the dividend if called at option expiration:

Stock Investment: $5.484.00
Income Generated: $177.00
Percent Income Generated: 3.23%
Annualized Income Generated: 49.09%
Net Profit If Called: $193.00
Percent Return If Called: 3.52%
Annualized Return If Called: 53.52%
Days Held to Expiration: 24 days

Dividend Information:

Ex-Dividend Date: 04/11/08
Dividend Pay Date: 05/15/08
Dividend Rate: $1.44
Dividend Yield: 2.60%

TGT - Adjustment

The following adjustment was made today on TGT:

25-Mar-08 - Continued Trade - STO 1 Apr08 55.00 Call @ 1.31 -

Current Position Summary:

Stock Investment: $5,937.00
Income Generated: $939.00
Percent Income Generated: 15.82%
Annualized Income Generated: 40.65%
Net Profit If Called: $502.00
Percent Return If Called: 8.46%
Annualized Return If Called: 21.73%
Days Held to Expiration: 142 days

Trade History:

28-Nov-07 - Initial Stock Position - BTO 100 TGT @ 59.37 -
28-Nov-07 - Initial Call Option - STO 1 Dec07 55.00 Call @ 5.66 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb07 55.00 Call @ 0.84 - Expired
21-Feb-08 - Continued Trade - STO 1 Mar08 55.00 Call @ 1.44 - Expired
10-Mar-08 - Dividend Received - DIV 100 Dividend @ 0.14 -
25-Mar-08 - Continued Trade - STO 1 Apr08 55.00 Call @ 1.31 -

SNDK - Adjustment

The following adjustment was made today on SNDK:

25-Mar-08 - Interim Trade - STO 2 May08 25.00 Call @ 0.74 -

Current Position Summary:

Stock Investment: $10,854.00
Income Generated: $3,798.50
Percent Income Generated: 35.00%
Annualized Income Generated: 16.96%
Net Profit If Called: -$2,055.50
Percent Return If Called: -18.94%
Annualized Return If Called: -9.18%
Days Held to Expiration: 753 days

Trade History:

24-Apr-06 - Initial Stock Position - BTO 100 SNDK @ 59.56 -
24-Apr-06 - Initial Call Option - STO 1 Jul06 57.50 Call @ 7.09 - Closed
06-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Jul06 57.50 Call @ -0.16 -
06-Jul-06 - Dollar Cost Averaging - BTO 100 SNDK @ 48.98 -
06-Jul-06 - Combined Cost Basis - $10,854.00 200 @ 54.27 -
06-Jul-06 - Continued Trade - STO 2 Oct06 55.00 Call @ 3.39 - Expired
23-Oct-06 - Continued Trade - STO 2 Jan07 55.00 Call @ 2.14 - Closed
19-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 55.00 Call @ -0.16 -
19-Dec-06 - Continued Trade - STO 2 Feb07 50.00 Call @ 1.69 - Closed
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Interim Trade - STO 2 Apr07 45.00 Call @ 1.39 - Expired
27-Apr-07 - Interim Trade - STO 2 May07 45.00 Call @ 0.84 - Expired
21-May-07 - Interim Trade - STO 2 Jun07 45.00 Call @ 0.98 - Closed
15-Jun-07 - Buy Back & Roll Out/Up - BTC 2 Jun07 45.00 Call @ -1.46 -
15-Jun-07 - Continued Trade - STO 2 Oct07 50.00 Call @ 2.60 - Expired
22-Oct-07 - Continued Trade - STO 2 Nov07 45.00 Call @ 1.64 - Expired
20-Nov-07 - Continued Trade - STO 2 Dec07 40.00 Call @ 0.67 - Expired
14-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 0.85 - Expired
21-Feb-08 - Interim Trade - STO 2 Mar08 30.00 Call @ 0.24 - Expired
25-Mar-08 - Interim Trade - STO 2 May08 25.00 Call @ 0.74 -

PLCM - Adjustment

The following adjustment was made today on PLCM:

25-Mar-08 - Continued Trade - STO 1 May08 25.00 Call @ 0.74 -

Current Position Summary:

Stock Investment: $3,164.00
Income Generated: $576.00
Percent Income Generated: 18.20%
Annualized Income Generated: 24.61%
Net Profit If Called: -$88.00
Percent Return If Called: -2.78%
Annualized Return If Called: -3.76%
Days Held to Expiration: 270 days

Trade History:

20-Aug-07 - Initial Stock Position - BTO 100 PLCM @ 31.64 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 30.00 Call @ 2.55 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 30.00 Call @ 0.34 - Expired
22-Oct-07 - Continued Trade - STO 1 Nov07 30.00 Call @ 0.79 - Expired
20-Nov-07 - Continued Trade - STO 1 Dec07 30.00 Call @ 0.27 - Expired
14-Jan-08 - Interim Trade - STO 1 Feb08 25.00 Call @ 0.78 - Expired
21-Feb-08 - Interim Trade - STO 1 Mar08 25.00 Call @ 0.29 - Expired
25-Mar-08 - Continued Trade - STO 1 May08 25.00 Call @ 0.74 -

PFE - Adjustment

The following adjustment was made today on PFE:

25-Mar-08 - Continued Trade - STO 2 Jun08 22.50 Call @ 0.24 -

PFE call options have very little premiums so I had to go out to Jun in order to get anything worthwhile. This also takes me past the next ex-dividend date so I should get another dividend on Jun 5th.

Current Position Summary:

Stock Investment: $4,565.00
Income Generated: $369.20
Percent Income Generated: 8.09%
Annualized Income Generated: 19.95%
Net Profit If Called: $304.20
Percent Return If Called: 6.66%
Annualized Return If Called: 16.43%
Days Held to Expiration: 148

Trade History:

24-Jan-08 - Initial Stock Position - BTO 200 PFE @ 22.83 -
24-Jan-08 - Initial Call Option - STO 2 Mar08 22.50 Call @ 0.96 - Expired
04-Mar-08 - Dividend Received - DIV 200 Dividend @ 0.32 -
25-Mar-08 - Continued Trade - STO 2 Jun08 22.50 Call @ 0.24 -
05-Jun-08 - Dividend Received - DIV 200 Dividend @ 0.32 -

PFCB - Adjustment

TThe following adjustment was made today on PFCB:

25-Mar-08 - Continued Trade - STO 1 Apr08 35.00 Call @ 0.34 -

Current Position Summary:

Stock Investment: $3,578.00
Income Generated: $464.00
Percent Income Generated: 12.97%
Annualized Income Generated: 19.56%
Net Profit If Called: $386.00
Percent Return If Called: 10.79%
Annualized Return If Called: 16.27%
Days Held to Expiration: 242 days

Trade History:

20-Aug-07 - Initial Stock Position - BTO 100 PFCB @ 35.78 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 35.00 Call @ 2.30 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 35.00 Call @ 0.39 - Expired
25-Oct-07 - Continued Trade - STO 1 Jan08 35.00 Call @ 0.22 - Expired
24-Jan-08 - Interim Trade - STO 1 Feb08 30.00 Call @ 0.65 - Expired
21-Feb-08 - Interim Trade - STO 1 Mar08 30.00 Call @ 0.74 - Expired
25-Mar-08 - Continued Trade - STO 1 Apr08 35.00 Call @ 0.34 -

NTES - Adjustment

The following adjustment was made today on NTES:

25-Mar-08 - Continued Trade - STO 4 May08 20.00 Call @ 0.48 -

Current Position Summary:

Stock Investment: $9,694.00
Income Generated: $4,433.40
Percent Income Generated: 45.73%
Annualized Income Generated: 21.18%
Net Profit If Called: $2,739.40
Percent Return If Called: 28.26%
Annualized Return If Called: 13.09%
Days to Expiration: 788 days

Trade History:

20-Mar-06 - Initial Stock Position - BTO 100 NTES @ 96.94 - 4-1 Split
20-Mar-06 - Initial Call Option - STO 1 Jun06 85.00 Call @ 15.29 - 4-1 Split
28-Mar-06 - Split Stock Position - SPLT 400 NTES @ 24.24 -
28-Mar-06 - Split Call Option - SPLT 4 Jun06 21.25 Call @ 3.82 - Expired
26-Jun-06 - Continued Trade - STO 4 Jan07 22.50 Call @ 3.19 - Closed
23-Oct-06 - Buy Back & Roll Out/Down - BTC 4 Jan07 22.50 Call @ -0.16 -
23-Oct-06 - Continued Trade - STO 4 Jan07 18.75 Call @ 0.69 - Closed
17-Jan-07 - Buy Back & Roll Out/Up - BTC 4 Jan07 18.75 Call @ -0.41 -
17-Jan-07 - Continued Trade - STO 4 Mar07 20.00 Call @ 0.99 - Expired
19-Mar-07 - Interim Trade - STO 4 Apr07 20.00 Call @ 0.19 - Expired
23-Apr-07 - Interim Trade - STO 4 May07 20.00 Call @ 0.19 - Expired
21-May-07 - Interim Trade - STO 4 Jun07 20.00 Call @ 0.34 - Expired
19-Jun-07 - Interim Trade - STO 4 Sep07 20.00 Call @ 0.32 - Expired
24-Sep-07 - Continued Trade - STO 4 Dec07 20.00 Call @ 0.67 - Expired
24-Jan-08 - Continued Trade - STO 4 Mar08 20.00 Call @ 0.74 - Expired
25-Mar-08 - Continued Trade - STO 4 May08 20.00 Call @ 0.48 -

MCO - Adjustment

The following adjustment was made today on MCO:

25-Mar-08 - Interim Trade - STO 2 May08 45.00 Call @ 0.54 -

Current Position Summary:

Stock Investment: $10,649.00
Income Generated: $1,054.40
Percent Income Generated: 9/90%
Annualized Income Generated: 11.19%
Net Profit If Called: -$594.60
Percent Return If Called: -5.58%
Annualized Return If Called: -6.31%
Days Held to Expiration: 323 days

Trade History:

28-Jun-07 - Initial Stock Position - BTO 100 MCO @ 62.41 -
28-Jun-07 - Initial Call Option - STO 1 Jul07 60.00 Call @ 3.49 - Expired
25-Jul-07 - Continued Trade - STO 1 Aug07 60.00 Call @ 1.54 - Expired
20-Aug-07 - Interim Trade - STO 1 Sep07 55.00 Call @ 0.89 - Expired
10-Sep-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
24-Sep-07 - Interim Trade - STO 1 Oct07 55.00 Call @ 0.24 - Expired
25-Oct-07 - Dollar Cost Averaging - BTO 100 MCO @ 44.08 -
25-Oct-07 - Combined Cost Basis - $10,649.00 200 @ 53.25 -
25-Oct-07 - Continued Trade - STO 2 Dec07 55.00 Call @ 0.29 - Expired
10-Dec-07 - Dividend Received - DIV 200 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 2 Feb08 40.00 Call @ 0.89 - Expired
21-Feb-08 - Interim Trade - STO 2 Mar08 45.00 Call @ 0.24 - Expired
10-Mar-08 - Dividend Received - DIV 200 Dividend @ 0.10 -
25-Mar-08 - Interim Trade - STO 2 May08 45.00 Call @ 0.54 -

LM - Adjustment

The following adjustment was made today on LM:

25-Mar-08 - Interim Trade - STO 1 Apr08 65.00 Call @ 0.68 -

Current Position Summary:

Stock Investment: $9,109.00
Income Generated: $1,091.00
Percent Income Generated: 11.98%
Annualized Income Generated: 16.43%
Net Profit If Called: -$1,518.00
Percent Return If Called: -16.66%
Annualized Return If Called: -22.87%
Days Held to Expiration: 266 days

Trade History:

27-Jul-07 - Initial Stock Position - BTO 100 LM @ 91.09 -
27-Jul-07 - Initial Call Option - STO 1 Aug07 90.00 Call @ 3.49 - Expired
20-Aug-07 - Continued Trade - STO 1 Sep07 90.00 Call @ 2.09 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 90.00 Call @ 0.47 - Expired
15-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.24 -
25-Oct-07 - Continued Trade - STO 1 Dec07 85.00 Call @ 2.09 - Expired
31-Dec-07 - Dividend Received - DIV 100 Dividend @ 0.24 -
07-Jan-08 - Interim Trade - STO 1 Feb08 80.00 Call @ 0.97 - Expired
21-Feb-08 - Interim Trade - STO 1 Mar08 75.00 Call @ 0.64 - Expired
25-Mar-08 - Interim Trade - STO 1 Apr08 65.00 Call @ 0.68 -

GGC - Adjustment

The following adjustment was made today on GGC:

25-Mar-08 - Interim Trade - STO 3 May08 10.00 Call @ 0.29 -

Current Position Summary:

Stock Investment: $4,269.00
Income Generated: $716.55
Percent Income Generated: 16.78%
Annualized Income Generated: 13.61%
Net Profit If Called: -$552.45
Percent Return If Called: -12.94%
Annualized Return If Called: -10.50%
Days Held to Expiration: 450 days

Trade History:

21-Feb-07 - Initial Stock Position - BTO 100 GGC @ 20.54 -
21-Feb-07 - Initial Call Option - STO 1 May07 20.00 Call @ 2.13 - Expired
10-Apr-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
21-May-07 - Continued Trade - STO 1 Jun07 20.00 Call @ 0.29 - Expired
19-Jun-07 - Continued Trade - STO 1 Nov07 20.00 Call @ 1.39 - Closed
10-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
10-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
02-Nov-07 - Buy Back & Roll Down - BTC 1 Nov07 20.00 Call @ -0.06 -
02-Nov-07 - Dollar Cost Averaging - BTO 200 GGC @ 11.08 -
02-Nov-07 - Combined Cost Basis - $4,269.00 300 @ 14.23 -
02-Nov-07 - Interim Trade - STO 3 Dec07 12.50 Call @ 0.39 - Expired
10-Jan-08 - Dividend Received - DIV 300 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 3 Mar08 7.50 Call @ 0.29 - Expired
25-Mar-08 - Interim Trade - STO 3 May08 10.00 Call @ 0.29 -

FTEK - Adjustment

The following adjustment was made today on FTEK:

25-Mar-08 - Interim Trade - STO 1 May08 22.50 Call @ 0.74 -

Current Position Summary:

Stock Investment: $2,839.00
Income Generated: $481.00
Percent Income Generated: 16.94%
Annualized Income Generated: 18.63%
Net Profit If Called: -$108.00
Percent Return If Called: -3.80%
Annualized Return If Called: -4.18%
Days Held to Expiration: 332 days

Trade History:

19-Jun-07 - Initial Stock Position - BTO 100 FTEK @ 28.39 -
19-Jun-07 - Initial Call Option - STO 1 Dec07 30.00 Call @ 3.29 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb08 25.00 Call @ 0.34 - Expired
21-Feb-08 - Interim Trade - STO 1 Mar08 22.50 Call @ 0.44 - Expired
25-Mar-08 - Interim Trade - STO 1 May08 22.50 Call @ 0.74 -

DHI - Adjustment

The following adjustment was made today on DHI:

25-Mar-08 - Interim Trade - STO 3 May08 20.00 Call @ 0.39 -

Current Position Summary:

Stock Investment: $8,777.00
Income Generated: $1,799.95
Percent Income Generated: 20.51%
Annualized Income Generated: 7.35%
Net Profit If Called: -$977.05
Percent Return If Called: -11.13%
Annualized Return If Called: -3.99%
Days Held to Expiration: 1018

Trade History:

01-Aug-05 - Initial Stock Position - BTO 100 DHI @ 40.18 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 40.00 Call @ 1.29 - Expired
19-Aug-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
22-Aug-05 - Continued Trade - STO 1 Oct05 40.00 Call @ 0.54 - Closed
05-Oct-05 - Buy Back & Roll Out/Down - BTC 1 Oct05 40.00 Call @ -0.11 -
24-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 0.49 - Closed
31-Oct-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
18-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -0.31 -
21-Nov-05 - Continued Trade - STO 1 Dec05 40.00 Call @ 0.34 - Expired
09-Jan-06 - Continued Trade - STO 1 Jan06 40.00 Call @ 0.49 - Expired
23-Jan-06 - Continued Trade - STO 1 Feb06 40.00 Call @ 0.69 - Expired
10-Feb-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
21-Feb-06 - Continued Trade - STO 1 Apr06 40.00 Call @ 0.44 - Closed
23-Mar-06 - Buy Back & Roll Out - BTC 1 Apr06 40.00 Call @ -0.11 -
23-Mar-06 - Continued Trade - STO 1 Aug06 40.00 Call @ 0.94 -
19-May-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
23-May-06 - Buy Back & Roll Out/Down - BTC 1 Aug06 40.00 Call @ -0.11 - Closed
23-May-06 - Dollar Cost Averaging - BTO 100 DHI @ 26.89 -
23-May-06 - Combined Cost Basis - $6,706.00 200 @ 33.53 -
23-May-06 - Continued Trade - STO 2 Jan07 35.00 Call @ 1.04 -
25-Jul-06 - Buy Back & Roll Down - BTC 2 Jan07 35.00 Call @ -0.16 - Closed
25-Jul-06 - Dollar Cost Averaging - BTO 100 DHI @ 20.70 -
25-Jul-06 - Combined Cost Basis - $8,777.00 300 @ 29.26 -
25-Jul-06 - Interim Trade - STO 3 Jan07 25.00 Call @ 0.99 - Closed
01-Nov-06 - Dividend Received - DIV 300 Dividend @ 0.15 -
19-Dec-06 - Buy Back & Roll Up - BTC 3 Jan07 25.00 Call @ -2.36 -
19-Dec-06 - Continued Trade - STO 3 Jan08 30.00 Call @ 2.74 - Expired
09-Feb-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
18-May-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
27-Aug-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
16-Nov-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
24-Jan-08 - Interim Trade - STO 3 Feb08 15.00 Call @ 0.69 - Expired
20-Feb-08 - Dividend Received - DIV 300 Dividend @ 0.15 -
21-Feb-08 - Interim Trade - STO 3 Mar08 17.50 Call @ 0.39 - Expired
25-Mar-08 - Interim Trade - STO 3 May08 20.00 Call @ 0.39 -

CRI - Adjustment

The following adjustment was made today on CRI:

25-Mar-08 - Interim Trade - STO 1 Apr08 17.50 Call @ 0.24 -

Current Position Summary:

Stock Investment: $2,654.00
Income Generated: $441.00
Percent Income Generated: 16.62%
Annualized Income Generated: 19.95%
Net Profit If Called: -$463.00
Percent Return If Called: -17.45%
Annualized Return If Called: -20.95%
Days Held to Expiration: 304 days

Trade History:

19-Jun-07 - Initial Stock Position - BTO 100 CRI @ 26.54 -
19-Jun-07 - Initial Call Option - STO 1 Sep07 25.00 Call @ 2.99 - Expired
24-Sep-07 - Interim Trade - STO 1 Dec07 22.50 Call @ 0.69 - Expired
14-Jan-08 - Interim Trade - STO 1 Mar08 20.00 Call @ 0.49 - Expired
25-Mar-08 - Interim Trade - STO 1 Apr08 17.50 Call @ 0.24 -

CHS - Adjustment

The following adjustment was made today on CHS:

25-Mar-08 - Interim Trade - STO 3 May08 10.00 Call @ 0.29 -

Current Position Summary:

Stock Investment: $5,042.00
Income Generated: $638.70
Percent Income Generated: 12.67%
Annualized Income Generated: 13.93%
Net Profit If Called: -$1,403.30
Percent Return If Called: -27.83%
Annualized Return If Called: -30.60%
Days Held to Expiration: 332 days

Trade History:

19-Jun-07 - Initial Stock Position - BTO 100 CHS @ 25.11 -
19-Jun-07 - Initial Call Option - STO 1 Nov07 25.00 Call @ 2.61 - Closed
24-Oct-07 - Buy Back - BTC 1 Nov07 25.00 Call @ -0.04 -
24-Oct-07 - Dollar Cost Averaging - BTO 200 CHS @ 12.66 -
24-Oct-07 - Combined Cost Basis - $5,042.00 300 @ 16.81 -
24-Oct-07 - Interim Trade - STO 3 Dec07 15.00 Call @ 0.39 - Expired
24-Jan-08 - Interim Trade - STO 3 Mar08 10.00 Call @ 0.59 - Expired
25-Mar-08 - Interim Trade - STO 3 May08 10.00 Call @ 0.29 -

Saturday, March 22, 2008

WMT - Closed

The WMT Mar08 50.00 Call was exercised on Thu and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.

Covered Call Results

Stock Investment: $10,045.00
Income Generated: $662.00
Net Profit: $384.00
Percent Return: 3.30%
Annualized Return: 3.72%
Duration of Trade: 332 days

Buy & Hold Comparison

Opening Price: $50.23
Closing Price: $53.22
P/L per Share: $2.99
Shares: 200
Dividends: $0.66
Net Profit: $730.00
Percent Return: 7.27%
Annualized Return: 7.99%
Duration of Trade: 332 days

Trade History:

23-Apr-07 - Initial Stock Position - BTO 100 WMT @ 49.26 -
23-Apr-07 - Continued Trade - STO 1 May07 52.50 Call @ 0.10 - Expired
21-May-07 - Interim Trade - STO 1 Jun07 47.50 Call @ 0.59 - Closed
04-Jun-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 47.50 Call @ -3.81 -
04-Jun-07 - Dollar Cost Averaging - BTO 100 WMT @ 51.19 -
04-Jun-07 - Combined Cost Basis - $10,045.00 200 @ 50.23 -
04-Jun-07 - Continued Trade - STO 2 Dec07 52.50 Call @ 2.54 -
04-Jun-07 - Dividend Received - DIV 100 Dividend @ 0.22 -
04-Sep-07 - Dividend Received - DIV 200 Dividend @ 0.22 -
24-Oct-07 - Buy Back & Roll Down - BTC 2 Dec07 52.50 Call @ -0.11 -
24-Oct-07 - Interim Trade - STO 2 Dec07 47.50 Call @ 0.49 - Closed
11-Dec-07 - Buy Back & Roll Up - BTC 2 Dec07 47.50 Call @ -2.46 -
02-Jan-08 - Dividend Received - DIV 200 Dividend @ 0.22 -
11-Dec-07 - Continued Trade - STO 2 Mar08 50.00 Call @ 2.46 - Exercised
20-Mar-08 - Option Exercised - EX 2 Mar08 50.00 Call @ 50.00 -

WFC - Closed

The WFC Mar08 30.00 Call was exercised on Thu and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.

Covered Call Results

Stock Investment: $3,013.00
Income Generated: $349.00
Net Profit: $336.00
Percent Return: 11.15%
Annualized Return: 72.69%
Duration of Trade: 56 days

Buy & Hold Comparison

Opening Price: $30.12
Closing Price: $32.54
P/L per Share: $2.41
Shares: 100
Dividends: $0.31
Net Profit: $272.00
Percent Return: 9.03%
Annualized Return: 58.84%
Duration of Trade: 56 days

Trade History:

24-Jan-08 - Initial Stock Position - BTO 100 WFC @ 30.13 -
24-Jan-08 - Initial Call Option - STO 1 Feb08 30.00 Call @ 1.34 - Expired
21-Feb-08 - Continued Trade - STO 1 Mar08 30.00 Call @ 1.84 - Exercised
01-Mar-08 - Dividend Received - DIV 100 Dividend @ 0.31 -
20-Mar-08 - Option Exercised - EX 1 Mar08 30.00 Call @ 30.00 -

PAYX - Closed

The PAYX Mar08 32.50 Call was exercised on Thu and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.

Covered Call Results

Stock Investment: $3,329.00
Income Generated: $214.00
Net Profit: $135.00
Percent Return: 4.06%
Annualized Return: 26.43%
Duration of Trade: 56 days

Buy & Hold Comparison

Opening Price: $33.29
Closing Price: $32.98
P/L per Share: -$0.31
Shares: 100
Dividends: $0.30
Net Profit: -$1.00
Percent Return: -0.03%
Annualized Return: -0.20%
Duration of Trade: 56 days

Trade History:

24-Jan-08 - Initial Stock Position - BTO 100 PAYX @ 33.29 -
24-Jan-08 - Initial Call Option - STO 1 Mar08 32.50 Call @ 1.84 - Exercised
15-Feb-08 - Dividend Received - DIV 100 Dividend @ 0.30 -
20-Mar-08 - Option Exercised - EX 1 Mar08 32.50 Call @ 32.50 -

Sunday, March 16, 2008

More on the DIA/DXD Hedged Covered Call

This blog is mainly about covered calls. Other option strategies and synthetic relationships aren't normally discussed here. However, I felt that I needed to explain the true nature of the DIA/DXD hedged covered call strategy I posted earlier so that you can fully understand the risks involved.

Selling covered calls on the DIA/DXD pair is synthetically equivalent to a short strangle on DIA and therefore has the same risk profile.

Let's break this down. First of all, you should know that a covered call is synthetically equivalent to selling a naked or cash secured put. So, this trade, in it's simplest form, is the sale of two naked puts, one on DIA and one on DXD. However, DXD is the equivalent of a short position on DIA, so the naked put on DXD is actually equivalent to a naked call on DIA. So, what we now have is a naked call on DIA and a naked put on DIA, or a short strangle. The maximum profit zone is between the strikes, and the risk is above the strike of the call and below the strike of the put, plus/minus the option premium received.

The DIA/DXD double covered call in my previous paper trade example, which I sold at 5% OTM on DIA and 10% OTM on DXD, is equivalent to a short strangle on DIA that's +/-5% OTM. For example, short the DIA 127 call at $1.16 and short the DIA 115 put at $1.44. The risk is therefore, above 129.60 (127.00+1.16+1.44) and below 112.40 (115.00-1.16-1.44). This trade only profits if DIA stays within this range, and the maximum profit of $260 is achieved if DIA stays between 115 and 127. A loss will occur if DIA rises above 129.60 or falls below 112.40. A picture is worth a thousand words, so here's a risk graph:



Now you can't trade a short strangle in an IRA account, since you need margin in order to sell the naked call part of the position. So, selling covered calls, or naked puts, on the DIA/DXD pair is the only way that I know of to trade a short strangle on DIA in an IRA account. I chose to sell far OTM calls in order to increase the profit zone (i.e. the range of prices DIA can move) and still maintain an annualized cash return of 12% or more. This also reduces the risk of assignment and should require less adjustments. The closer to the money you sell the calls, the smaller the profit zone and the larger the risk/reward and potential for adjustments.

So, although this might look like easy money, since you have a hedged stock position, there are risks involved. Understanding this risk is important, and hopefully this article has provided you with that understanding.

Wednesday, March 12, 2008

DIA/DXD Hedged Covered Call Paper Trade

One of the members of the JustCoveredCalls Yahoo Group started a discussion on an interesting covered call strategy. The strategy involves using a hedged position in two ETF's, DIA, Diamonds Trust, which tracks the performance of the Dow Jones Industrial Average index, and DXD, UltraShort Dow30 ProShares, which tracks twice the inverse of the daily performance of the Dow Jones Industrial Average index and trades at about half the price of DIA.

The purpose of trading the DIA/DXD pair is to hedge the position so that no matter which way the market goes the net change for this pair will be as close to zero as possible.

Let's take a simple example and say that DIA is at $100 and DXD is at $50. Now, if DIA goes down by $10 or -10%, in order for DXD to hedge this position it must go up by $10 or +20%. So, because DXD is half the price of DIA, it must to go up/down by twice the percentage change of DIA in order to change by the same amount to hedge the position.

So, you might ask, how can we make money if the returns of DIA/DXD offset each other? Well, one answer is that both DIA/DXD pay a nice dividend, 2.30%/3.46% respectively, and the other answer is by selling covered calls on both positions each month. The stock positions should offset, but we get to keep the dividends and the option premiums.

In order to test this theory I've started the following paper trade. I bought 100 shares each of DIA/DXD and sold strikes that were 5%/10% OTM. Why 5%/10% OTM? Well, one reason is that I don't want these positions called away. This is going to be a perpetual position. The other reason is because 5%/10% represents the maximum up/down monthly percent change in DIA/DXD since the inception of DXD on 7/13/06. The goal is to have DIA/DXD close below their respective strike prices at expiration so the entire option premium is kept.

The following is the trade information, including IB commissions, using today's closing prices:

DIA Position

12-Mar-08 - Initial Stock Position - BTO 100 DIA @ 121.41
12-Mar-08 - Initial Call Option - STO 1 Apr08 127.00 Call @ 1.16

Stock Investment: $12,141.00
Income Generated: $116.00
Percent Income Generated: 0.96%
Annualized Income Generated: 9.43%
Days Held: 37 days

DXD Position

12-Mar-08 - Initial Stock Position - BTO 100 DXD @ 58.86
12-Mar-08 - Initial Call Option - STO 1 Apr08 63.00 Call @ 1.44

Stock Investment: $5,866.00
Income Generated: $144.00
Percent Income Generated: 2.45%
Annualized Income Generated: 24.13%
Days Held: 37 days

Combined Position

Stock Investment: $18,027.00
Income Generated: $260.00
Percent Income Generated: 1.44%
Annualized Income Generated: 14.23%
Days Held: 37 days

I didn't include the dividends in these returns so they should actually be a bit better. I also didn't show the return if called, since the intention is to not have either side called away.

I'll continue this trade for a few months to see how it performs and will post the adjustments and results.

Wednesday, March 5, 2008

Current Portfolio Holdings

To make it easier for readers to see my current portfolio holdings I added them to the sidebar of this blog with links to Morningstar. The individual trade information can be found under the Trades category or you can search on the stock symbol at the top of the page.