KCI - Closed

The KCI Feb08 50.00 Call was exercised on Fri 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: $10,970.00
Income Generated: $1,535.70
Net Profit: $565.70
Percent Return: 5.16%
Annualized Return: 2.03%
Duration of Trade: 928 days

Buy & Hold Comparison

Opening Price: $59.83
Closing Price: $51.37
P/L per Share: -$8.46
Shares: 200
Dividends: $0.00
Net Profit: -$1,692.00
Percent Return: -14.14%
Annualized Return: -5.56%
Duration of Trade: 928 days

Trade History:

01-Aug-05 - Initial Stock Position - BTO 100 KCI @ 59.83 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 60.00 Call @ 1.69 - Expired
22-Aug-05 - Continued Trade - STO 1 Sep05 60.00 Call @ 1.29 - Expired
19-Sep-05 - Continued Trade - STO 1 Oct05 60.00 Call @ 0.54 - Closed
06-Oct-05 - Buy Back & Roll Out - BTC 1 Oct05 60.00 Call @ -0.11 -
25-Oct-05 - Continued Trade - STO 1 Nov05 60.00 Call @ 0.44 - Closed
28-Oct-05 - Buy Back & Roll Down - BTC 1 Nov05 60.00 Call @ -0.11 -
28-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 2.04 - Closed
14-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -4.11 -
23-Nov-05 - Interim Trade - STO 1 Jan06 45.00 Call @ 0.69 - Expired
23-Jan-06 - Interim Trade - STO 1 Feb06 45.00 Call @ 0.39 - Expired
21-Feb-06 - Interim Trade - STO 1 Mar06 45.00 Call @ 0.09 - Expired
20-Mar-06 - Interim Trade - STO 1 Sep06 45.00 Call @ 4.59 - Expired
18-Sep-06 - Interim Trade - STO 1 Dec06 35.00 Call @ 0.94 - Closed
05-Dec-06 - Buy Back & Roll Out/Up - BTC 1 Dec06 35.00 Call @ -3.69 -
05-Dec-06 - Interim Trade - STO 1 Jun07 40.00 Call @ 4.00 - Closed
23-May-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 40.00 Call @ -10.21 -
23-May-07 - Dollar Cost Averaging - BTO 100 KCI @ 49.87 -
23-May-07 - Combined Cost Basis - $10,970.00 200 @ 54.85 -
23-May-07 - Interim Trade - STO 2 Jan08 50.00 Call @ 6.20 - Closed
18-Jan-08 - Buy Back & Roll Out - BTC 2 Jan08 50.00 Call @ -0.16 -
18-Jan-08 - Continued Trade - STO 2 Feb08 50.00 Call @ 2.39 - Exercised
15-Feb-08 - Option Exercised - EX 2 Feb08 50.00 Call @ 50.00 -

I decided to allow KCI to be called away in order to free up the cash for investment in dividend paying stocks. KCI is currently above Morningstar's fair value estimate and it doesn't pay dividends. This was one of my oldest positions, before I switched to a value investing approach. It was a rocky ride and the stock never recovered back to the original purchase price. However, by selling call options I was able preserve my original capital and exit at a small profit, whereas a buy and hold strategy would have resulte in a loss. This is where covered calls usually outperform buy and hold (i.e. on declining stocks).