BHP - Adjustment

The following adjustment was made Friday on BHP Billiton (BHP):

19-Jun-09 - Option Exercised - EX 2 Jun09 45.00 Call @ 45.00 -
19-Jun-09 - Cash to Secure Put - CSP 200 BHP @ 47.50 -
19-Jun-09 - Combined Cost Basis - $13,254.00 200 @ 66.27 -
19-Jun-09 - Initial Put Position - STO 2 Jul09 47.50 Put @ 0.48 -

The Jun09 45.00 call was deep ITM and was going to be exercised after the market closed, since this was expiration Friday. In order to roll out the calls for a net credit, I would have had to average down another 100 or 200 shares, which meant an additional $5,624 or $10,248 investment. I didn't want to increase my investment in BHP by that much so I decided to try a new strategy. I would allow both calls to be exercised and then re-enter the 200 share position by selling 2 cash secured puts, in lieu of averaging down. So, in anticipation of having both Jun09 45.00 calls exercised and receiving $9,000 from the sale of 200 shares, I sold 2 Jul09 47.50 puts, secured by $9,500 in cash. This resulted in an additional investment of only $500, which was significantly less than the cost of averaging down and increased my cost basis from $12,754 to $13,254. If the Jul09 puts are assigned I'll own 200 shares of BHP again and will continue to sell calls. If not assigned, I'll continue selling puts.

Current Position Summary:

Stock Investment: $13,254.00
Income Generated: $2,630.20
Percent Income Generated: 19.84%
Annualized Income Generated: 21.75%
Net Profit If Called: -$1,123.80
Percent Return If Called: -8.48%
Annualized Return If Called: -9.29%
Days Held to Expiration: 333 days

Trade History:

18-Aug-08 - Initial Stock Position - BTO 100 BHP @ 65.11 -
18-Aug-08 - Initial Call Option - STO 1 Sep08 65.00 Call @ 3.00 - Expired
22-Sep-08 - Continued Trade - STO 1 Oct08 65.00 Call @ 3.30 - Expired
23-Sep-08 - Second Stock Position - BTO 100 BHP @ 62.43 -
23-Sep-08 - Combined Cost Basis - $12,754.00 200 @ 63.77 -
23-Sep-08 - Initial Call Option - STO 1 Oct08 60.00 Call @ 5.10 - Expired
25-Sep-08 - Dividend Received - DIV 100 Dividend @ 0.82 -
20-Oct-08 - Interim Trade - STO 2 Nov08 45.00 Call @ 1.19 - Expired
24-Nov-08 - Interim Trade - STO 2 Dec08 37.50 Call @ 1.57 - Closed
15-Dec-08 - Buy Back and Roll Out/Up - BTC 2 Dec08 37.50 Call @ -4.41 -
15-Dec-08 - Interim Trade - STO 2 May09 45.00 Call @ 6.39 - Closed
17-Mar-09 - Dividend Received - DIV 200 Dividend @ 0.82 -
04-May-09 - Buy Back and Roll Out - BTC 2 May09 45.00 Call @ -7.01 -
04-May-09 - Interim Trade - STO 2 Jun09 45.00 Call @ 7.99 - Exercised
19-Jun-09 - Option Exercised - EX 2 Jun09 45.00 Call @ 45.00 -
19-Jun-09 - Cash to Secure Put - CSP 200 BHP @ 47.50 -
19-Jun-09 - Combined Cost Basis - $13,254.00 200 @ 66.27 -
19-Jun-09 - Initial Put Position - STO 2 Jul09 47.50 Put @ 0.48 -