DIA-DXD - Closed

I decided to close out the DIA-DXD paper trade as of 06/20/08, which was June option expiration. I was on vacation during this time and unable to monitor and adjust this position. The DXD Jun08 54.00 call was ITM by almost $6 and it was too late to roll out/up. Had this been a real trade I most likely would have rolled it a lot sooner. However, I decided to close out the trade instead using the closing prices of 6/20/08.

Although this traded ended in a loss, it could have continued to be profitable if it was adjusted properly. However, it also shows that even though it appears to be a hedged position, a loss can occur whether it's traded as a double covered call or a buy & hold position. There's no free lunch.

This concludes this experiment. I've decided against establishing a real position in DIA-DXD, since it doesn't fit into my trading plan.

The following is the trade information, including IB commissions, using Friday's closing bid/ask prices:

DIA Position Trade History

12-Mar-08 - Initial Stock Position - BTO 100 DIA @ 121.41 - Closed
12-Mar-08 - Initial Call Option - STO 1 Apr08 127.00 Call @ 1.16 - Closed
14-Apr-08 - Dividend Received - DIV 100 Dividend @ 0.30 -
18-Apr-08 - Buy Back & Roll Out/Up - BTC 1 Apr08 127.00 Call @ -1.09 -
18-Apr-08 - Continued Trade - STO 1 May08 131.00 Call @ 0.99 - Closed
12-May-08 - Dividend Received - DIV 100 Dividend @ 0.16 -
16-May-08 - Buy Back & Roll Out/Up - BTC 1 May08 131.00 Call @ -0.06 -
16-May-08 - Continued Trade - STO 1 Jun08 133.00 Call @ 0.82 - Closed
16-Jun-08 - Dividend Received - DIV 100 Dividend @ 0.33 -
20-Jun-08 - Continued Trade - BTC 1 Jun08 133.00 Call @ -0.06 -

Stock Investment: $12,141.00
Income Generated: -$64.03
Percent Income Generated: -0.53%
Annualized Income Generated: -1.92%
Days Held to Expiration: 100 days

DXD Position Trade History

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 - Closed
31-Mar-08 - Dividend Received - DIV 100 Dividend @ 0.22 -
18-Apr-08 - Buy Back & Roll Out/Down - BTC 1 Apr08 63.00 Call @ -0.06 -
18-Apr-08 - Continued Trade - STO 1 May08 55.00 Call @ 0.79 - Closed
18-Apr-08 - Buy Back & Roll Out/Down - BTC 1 May08 55.00 Call @ -0.06 -
16-May-08 - Continued Trade - STO 1 Jun08 54.00 Call @ 0.64 -
20-Jun-08 - Option Exercised - EX 1 Jun08 54.00 Call @ 54.00 - Exercised

Stock Investment: $5,866.00
Income Generated: -$188.73
Percent Income Generated: -3.21%
Annualized Income Generated: -11.70%
Days Held to Expiration: 100 days

Combined Position

Stock Investment: $18,027.00
Income Generated: -$252.76
Percent Income Generated: -1.40%
Annualized Income Generated: -5.12%
Days Held to Expiration: 100 days

Buy & Hold Comparison

DIA Purchase Price: $121.41
DIA Current Price: $118.23
P/L on DIA: -$318.00
Dividends: $77.97
Total P/L on DIA: -$240.03

DXD Purchase Price: $58.86
DXD Current Price: $59.51
P/L on DXD: $65.00
Dividends: $22.27
Total P/L on DXD: $87.27

Combined Purchase Price: $180.27
Combined Current Price: $177.74
Combined P/L: -$253.00
Combined Dividends: $100.24
Combined Total P/L: -$152.76
Combined Percent Return: -0.85%
Combined Annualized Return: -3.09%
Combined Days Held: 100 days