May 2009 Results

Sunday, May 31, 2009

Returns -- Through May 2009

The month of May was quite interesting for both the market and the CCIP.  It was the third month that the CCIP has been in existence, and was also the first month that the CCIP lagged its benchmark (SPY), though only by less than 1%.  One would normally assume that during a period of relatively flat movement in the overall market, the CCIP would have performed well, because the general rationale of a covered call portfolio is that it will recieve income even when the market moves sideways.  Unfortunately, due to the relatively late expiration of June calls, as well as the high volatility of the positions in the portfolio, this was not the case.  Based on current market values, if all of the positions in the portfolio end in the money at expiration, the porfolio will increase another 5% in value.

The portfolio continues however to beat the market since its inception (by about 12%). The chart below presents the monthly performance of the CCIP for May, as well as the performance of the portfolio since inception.

Portfolio Results

The 2009 Since Inception results are as follows:

1. Since Inception Results

CCIP Absolute Return (March 7 through May 31, 2009) = 44.33%

Benchmark S&P 500 (SPY) Absolute Return (March 7 through April 30, 2009) = 32.34%

The CCIP has outperformed the S&P 500 benchmark by a total of 11.99%

June 2009 Next Steps

The current strategy for establishing calls in June for July expiration has yet to be determined.  This is mostly due to the fact that there are still 3 weeks left until June expiration, and a lot can happen in the meantime.  As GM is likely to file for bankruptcty tomorrow, it will be interesting to see how the market reacts, especially considering that in my opinion it has been pretty obvious for the past two months that it was going to happen.  I think that it is most likely already priced into the market.

Earnings season is essentially over at this point, and so there aren't really any unforeseen news events on the horizon besides the normal US data, such as housing, GDP, retail sales etc. Although the North Korea situation could pose an issue to the markets short-term I believe its just the usual posturing, though I wont make this a political blog.

Positions in the CCIP may be rolled up and out depending on what happens in the next three weeks, but this will be noted on the blog.  Additionally, I may add further cash-scured put positions with July expirations in order to maximize potential profit.

The strategy for establishing covered calls positions after June expiration will be as follows, and is similar to the rationale for establishing June calls earlier this month, based on the closing price of the S&P 500 on June expiration, June 19, 2009:

If S&P 500 is between 750 and 850, we have most likely recieved bad news on the economic front and aare moving towards retesting lows, and thus should establish calls 2.5-5% in the money

If S&P 500 is between 850 and 950, we have most likely solidified a new bottom, and should sell at the  money calls between -2.5% and 2.5% away from current price

If S&P 500 is above 950, we have most likely had consistent good news and should sell out of the money calls at least 2.5% out of the money

Initial Transaction - General Electric (GE)

The second cash-secured put position in the CCIP was established today. This new strategy is being used in an effort to diversify the income streams in the CCIP. This particular position is a way of getting back into a position I held a couple months ago in General Electric.  The stock has not traded under $12 since April, and continues to have positive forward looking indicators; most prominently, the movement towards green technology which GE plays a large part both in wind energy, and water desal.  Although I don't have high expectations of this put being assigned, it would give me a cost basis which has not been seen since April 21. The performance metrics are below:

5/27/2009 -- Sold To Open 1 GE June $12 Put @ 0.32


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Put Sale Profit: $32.00


Downward Movement Required (Put Sold When GE@13.29): 9.7%
Possible Max Upside: 2.67%

Annualized Max Upside: 42.32%

Update Transaction - Tivo (TIVO)

After releasing earnings on May 27 which were better than expected, Tivo fell about 10%. Based on this fact, I chose to close out the call I had sold, purchase a protective put, and sell an out-of the-money LEAP call in order to finance the purchase of the put. The reason I chose to do this was two-fold. An out-of-the-money LEAP call will not move very much with movements in the stock, which allows the stock to appreciate while also allowing me to buy back the call and sell a closer expiration call without paying to much of a premium. Additionally, after finally becoming profitable Tivo has now reverted back to negative earnings and as such I do want to protect my downside further, while still allowing for a rebound in the economy to send the stock higher. The purchase info is below:

4/19/2009 -- Bought 100 TIVO @ 7.48
4/19/2009 -- Sold To Open 1 TIVO June $7.50 Call @ .63
5/28/2009 -- Bought To Close 1 TIVO June $7.50 Call @ .25
5/28/2009 -- Sold To Open 1 TIVO Nov $10 Call @ .35
5/28/2009 -- Bought To Open 1 TIVO June $5 Put @ .2


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $748.00

Maximum Downside Risk: 39%
Downside Coverage From Current Price: None
Possible Max Upside: 43.17%

Annualized Max Upside: 84.71%

Update Transaction - Alpha Natural Resources (ANR)

Unfortunately, ANR is continuing to be a pain in my side. This may mostly be due to the fact that the market is making me ever more hesitant to create new positions, because I am not yet ready to believe we are completely out of the water when it comes to market drops. I am going to start slowly transitioning my covered call strategy to more conservative stocks which still have quality option premiums in order to keep my sanity. Today I sold a June $27.50 call which would leave me with essentially no gain if in the money at expiration. This decision was mostly made to lower my cost basis, while also making it more likely that the position would be called away. Unfortunately, my old nervous trading ways got a hold of me again, and so I bought back the call when the stock started to rise again, and sold the June $30 call which would leave me with more downside risk but also the possibility of making some money. After all of this trading, I plan to keep the position the way it is. The new purchase metrics are below:

5/20/2009 -- Bought 100 ANR @ 29.26
5/20/2009 -- Sold To Open 1 ANR June $32.50 Call @ 1.24
5/20/2009 -- Bought To Open 1 ANR June $20 Put @ .3
5/21/2009 -- Bought To Close 1 ANR June $32.50 Call @ .55
5/22/2009 -- Sold To Open 1 ANR June $27.50 Call @ 1.45
5/27/2009 -- Bought To Close 1 ANR $27.50 Call @ 2.18
5/27/2009 -- Sold To Open 1 ANR $30 Call @ 1.09


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00


Maximum Downside Risk (due to Put): 29.8%
Downside Coverage: 2.6%
Possible Max Upside: 5.23%

Annualized Max Upside: 61.53%

Initial Transaction - CSX Corporation (CSX)

Continuing with my recent shift toward collared positions, I began another today in CSX Corporation one of the nation's largest rail transportation companies. This position was started due to a few factors. Firstly, rail shipping will be one of the areas which rebounds once the economy rebounds, and as such this position is more of a long term play, though I wouldnt be disappointed if it got called away. I chose CSX as opposed to one of the other rail companies due to its high relative revenue growth, and the fact that it has lagged its peers in terms of a bounce off the bottom, trading between 25 and 30 for about a month and a half. The new purchase metrics are below:

5/27/2009 -- Bought 100 CSX @ 29.715
5/27/2009 -- Sold To Open 1 CSX June $30 Call @ 1.28
5/27/2009 -- Bought To Open 1 CSX June $26 Put @ 0.45



The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2971.50


Max Downside Risk: 9.99%
Downside Coverage: 2.79%
Possible Max Upside: 3.86%

Annualized Max Upside: 58.71%

Update Transaction - Continental Airlines (CAL)

After a 19% drop in Continenal Airlines since the June call was sold, I decided to buy back the call and hope for a rebound in CAL in order to sell the same call again for a higher price. Unfortunately, recent higher oil prices are great for the oil stocks but tend to wreak havoc on the airline stocks. I plan to attempt to resell the call if it reaches about $0.60, if not I may have to sell a July call. The new profit/loss projections are below:

4/14/2009 -- Bought 100 CAL @ 12.225
4/17/2009 -- Sold To Open 1 CAL May $11 Call @ 2.17

5/15/2009 – May $11 Call Expired

5/18/2009 – Sold To Open 1 CAL June $11 Call @ 1.05
5/27/2009 -- Bought To Close 1 CAL June $11 Call @ 0.3

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1222.50


Downside Coverage From Current Price (9.00): None
Possible Max Upside: Unlimited

Annualized Max Upside: N/A

Update Transaction - Bristol-Myers Squibb (BMY)

Due to about a 10% decrease in the share price of BMY since the June call was sold, the call was bought back today. This continues my strategy for BMY which has traded between about $19 and $21 for the past few months. I continue to sell $21 calls when BMY nears $21, and buy them back when it nears $19. This allows me the possibility to reap even more income out of BMY, while receiving a hefty dividend.

4/6/2009 -- Bought 100 BMY @ 20.48
4/6/2009 -- Sold To Open 1 BMY April $21 Call @ .34
4/17/2009 -- Covered Call Expired
4/20/2009 -- Sold To Open 1 BMY May $21 Call @ .65
4/29/2009 -- Bought To Close 1 BMY May $21 Call @ .11
5/12/2009 -- Sold To Open 1 BMY June $21 Call @ .55
5/27/2009 -- Bought To Close 1 BMY June $21 Call @ .18


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2048.00


Downside Coverage (from current price of $19.50): 1.4%
Possible Max Upside: Unlimited

Annualized Max Upside: N/A

Initial Transaction - Hewlett-Packard (HPQ)

The first cash-secured put position in the CCIP was established today. This new strategy is being used in an effort to diversify the income streams in the CCIP. This particular position in HP has been established based on a few factors. After the acquisition of EDS, HP has positioned itself as a growing leader in the space of IT consulting services. In my opinion it is on its way to becoming a company on par with IBM in terms of its ability to combine hardware sales with IT services. The stock was hit recently due to a somewhat negative forecast, but I would tend to think that the company is following in Apple's footsteps by simply attempting to be more conservative when it comes to outlook. In both investing, and the consulting work that I do, I tend to believe it is better to underpromise and over deliver, than promise more than you think you can do, simply to get a short-term bounce in share price, or new business in the case of consulting. Hopefully, this position will be the first of many profitable cash-secured put positions. The performance metrics are below:

5/27/2009 -- Sold To Open 1 HPQ June $35 Put @ 1.20


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Put Sale Profit: $120.00


Downside Coverage (Put Sold When HP@34.75): 3.45%
Possible Max Upside: 3.43%

Annualized Max Upside: 52.14%

Initial Transaction - Direxion 3x Financial (FAS)

Another position was established in Direxion 3x Financial Bull ETF today to increase the total position in the portfolio to 400 shares which is still less than the largest position I have held in the ETF at any particular time. This time however, instead of simply selling the covered call I decided to collar the purchase for added downside protection. Although I am starting to believe that the market is in a consolidation mode and is forming a new bottom around 870 in the S&P, I still think there may be a pull back. If so, I want to have the put in place not as much for the purpose of protecting my downside, but instead to add additional revenue by selling the put for a gain. If the ETF does in fact drop to around $8, I plan to buy back the call, and keep the put in case of a further drop. This should effectively lower my cost basis to around $8.40 which would only leave $40 on the table if FAS closed under $8 at June expiration. Just as a note these positions are being posted a bit late as I have been away on business for the last week. I will try to get all my recent positions up on the blog today or tomorrow. The purchase info is below:

5/21/2009 -- Bought 100 FAS @ 9.045
5/21/2009 -- Sold To Open 1 FAS June $10 Call @ 0.86
5/21/2009 -- Bought To Open 1 FAS June $8 Put @ 1


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $904.50


Downside Coverage: Downside Risk Limited to 12.9% due to Put
Possible Max Upside: 8.89%

Annualized Max Upside: 107.96%

Collared Long Positions

While watching the market oscillate for the last few days it has reminded me of how volatile the market can still be. The market continues to search for a direction after having risen more than 30% from its March 9th lows. As a covered call investor it would be wrong for me to either overestimate the veracity of this market bounce, or to underestimate the multitude of dollars still on the sidelines that could come in at any point their is a pullback and send the market higher. Today, on the cusp of breaching a technical barrier around 875, the S&P 500 managed to pull itself back up to close down only 1.7%. This does not however mean that there wont be a further pullback.

I believe that the S&P 500 does have a slight pullback in store for the regular investor like myself, though it may be constrained to a few segments of the economy that would be most impacted by an economic recovery such as commodity stocks. However, as we saw with the financials last year, weakness in one sector can sometimes drag everything down. Due to this fact, I have decided to institute a strategy for new positions I am opening for the near future, unless I see the near term (before June expiration) market dynamics change. In order to compensate for a possible correction to the 825-850 area. I will be selling out of the money calls in order to pay for the purchase of in the money puts. This will allow me to effectively collar any potential losses I have (though it will also cap my gains), so that I wont "lose the house." It also allows me to sell options further out of the money than I may normally, which could potentially yield greater upside if the market decides to go higher from here. On the other hand, if the market dips lower over the next few weeks, I will be able to profit from the drop both from the appreciation of the puts I will have purchased, as well as the depreciation of the calls Ive sold.

Trading Strategy For Covered Calls and Married Puts

For all intents and purposes there are two possible scenarios to address for the trading of the calls I will sell, and the puts I will purchase. If the stock decreases in value substantially enough to buy back the call for a reasonable price I will do so, and keep the put for additional downside protection in case the stock continues to fall. If the stock then rises after this point, I will resell the call that I bought back in order to earn an even greater return. It is important to note here, that this type of situation will most likely only occur with stocks that have fairly high volatility.

I would be interested to hear if anyone else has an opinion, or thoughts on this strategy, so please comment if you wish.

Update Transaction - Alpha Natural Resources (ANR)

After quite the downward spiral in ANR over the past two days, I bought back the call I had sold at a strike or $32.50. Generally, the friday before a three day weekend tends to be an up day, and so I am hoping to sell another call if ANR rebounds a bit tomorrow. The new purchase metrics are below:

5/20/2009 -- Bought 100 ANR @ 29.26
5/20/2009 -- Sold To Open 1 ANR June $32.50 Call @ 1.24
5/20/2009 -- Bought To Open 1 ANR June $20 Put @ .3
5/21/2009 -- Bought To Close 1 ANR June $32.50 Call @ .55


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00


Downside Coverage: Put with Strike of $20
Possible Max Upside: Unlimited

Annualized Max Upside: Unlimited

Continuing Transaction - AT&T (T)

After an extreme pullback in AT&T's stock over the past week, I decided to leave 100 shares of my position uncovered, and wait for a move higher, while establishing a further out call in order to capture premium, while still allowing for an upside movement. The new metrics for the 100 shares which are now covered is below:

Transaction History:
2/21/2009 -- Additional Stock Purchased -- Bought T @ 23
2/27/2009 -- Sold To Open 1 T April $20 Call @ 3.95
3/10/2009 -- Bought To Close 1 T April $20 Call @ 2.93
3/10/2009 -- Sold to Open 1 T April $25 Call @ .34
3/13/2009 -- Bought To Close 1 T April $25 Call @ .84
3/13/2009 -- Sold To Open 1 T April $26 Call @ .39
4/7/2009 -- AT&T Dividend @ .41
4/17/2009 -- Covered Call Expire
4/20/2009 -- Sold To Open 1 T May $27 @ .43
5/15/2009 -- Covered Call Expire
5/20/2009 -- Sold To Open 1 T Oct $27 @ .65

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $4,812.50


Downside Coverage (based on current share price): 9%
Possible Max Upside: 28.71% (not including July and Oct dividend which would make this 33%)

Annualized Max Upside: 44.04% (not including July and Oct dividend which would make this 50%)

Initial Transaction - Alpha Natural Resources (ANR)

A position was established in Alpha Natural Resources, a appalachian coal supplier which has recently become more diversified by acquiring Foundation Coal, a western US coal supplier. This acquisition allows ANR to become less dependent on metallurgical coal, which has been its main product, and is used for steel production. Foundation Coal is focused on thermal coal which is used for power generation. After hitting a peak of over $100 per share last year, the stock has traded between about $15 and $20 until recently breaking out up to the $30 mark. This position is most likely going to be a longer term covered call position in the portfolio as opposed to one that I expect to be called at expiration. I also expect the stock to pull back a bit from its recent highs, and so I have also purchased a put to cover my downside. The purchase info is below:

5/20/2009 -- Bought 100 ANR @ 29.26
5/20/2009 -- Sold To Open 1 ANR June $32.50 Call @ 1.24
5/20/2009 -- Bought To Open 1 ANR June $20 Put @ .3


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00


Downside Coverage: 3.2%
Possible Max Upside: 14.76%

Annualized Max Upside: 173.79%

Continuing Transaction - Omnicare (OCR)

As was discussed in my post after May expiration, I chose to continue the position in Omnicare, a pharmaceutical supply company, similar to a Walgreens. The premiums continue to remain relatively high for a company which is not very speculative, they continue to have high operating margins relative to their peers. The purchase info is below.

4/27/2009 -- Bought 100 OCR @ 26.465
4/27/2009 -- Sold To Open 1 OCR May $27.50 Call @ 1.25
5/15/2009 -- Call Option Expired
5/19/2009 -- Sold To Open 1 OCR June $27.5 Call @ 0.95


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2646.50

If stock is called at expiration:

Downside Coverage (based on current share price): 9.4%
Possible Max Upside: 13.62%

Annualized Max Upside: 92.08%

Continuation Transactions After May Expiration

After last Friday's expiration for May 2009, there were 11 positions which were retained and had options which had expired in May. Today it was decided to retain all of these positions based on continued option premium to be gathered, and a strong showing by the market today, which allowed for multiple in-the-money positions to be created which will still yield very high potential returns. There were only 2 positions which remain uncovered, AT&T (T) which was one of the few market movers to decline today, though all utilities had a poor showing today, and Omnicare (OCR), which I chose to set a limit order on the call which was not reached. The transactions to date and performance metrics for each of the positions is listed below.

1. Direxion 3x Financial Bull -- Continuation Transaction

As was explained in the post regarding May expirations, all positions in FAS will be kept through June expiration. The only notable difference, is that due to a drastic increase in the share price today, a $9, $10, and $11 call were sold instead of 1 $9 strike, and 2 $10 strikes. The new profit/loss projections are below:

4/9/2009 -- Bought 100 FAS @ 7.835
4/9/2009 -- Sold To Open 1 FAS May $8 Call @ 1.45

4/21/2009 – Bought To Close 1 FAS May $8 Call @ 0.85

4/21/2009 – Sold To Open 1 FAS May $9 Call @ 0.7

5/15/2009 – May $9 Call Expired

5/18/2009 – Sold To Open 1 FAS June $9 Call @ 1.5


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $783.50


Downside Coverage From Current Price: 51.2%
Possible Max Upside: 62.1%

Annualized Max Upside: 314.81%

2. Direxion 3x Financial Bull -- Continuation Transaction

The new profit/loss projections are below:

4/14/2009 -- Bought 100 FAS @ 9.245
4/14/2009 -- Sold To Open 1 FAS May $9 Call @ 0.9

4/15/2009 – Bought To Close 1 FAS May $9 Call @ 0.25

4/15/2009 – Sold To Open 1 FAS May $10 Call @ 0.95

5/15/2009 – May $10 Call Expired

5/18/2009 – Sold To Open 1 FAS June $10 Call @ 1.05


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $924.50


Downside Coverage From Current Price: 36%
Possible Max Upside: 40.8%

Annualized Max Upside: 222.28%

3. Direxion 3x Financial Bull -- Continuation Transaction

The new profit/loss projections are below:

4/17/2009 -- Bought 100 FAS @ 9.745
4/17/2009 -- Sold To Open 1 FAS May $8 Call @ 2.65

5/7/2009 – Bought To Close 1 FAS May $8 Call @ 3.55

5/7/2009 – Sold To Open 1 FAS May $10 Call @ 1.95

5/15/2009 – May $9 Call Expired

5/18/2009 – Sold To Open 1 FAS June $11 Call @ 0.95


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $974.50


Downside Coverage From Current Price: 26%
Possible Max Upside: 45.9%

Annualized Max Upside: 261.64%

4. Continental Airlines -- Continuation Transaction

Although Continental Airlines did eventually rebound above $11, it was my decision based on the other available covered call positions in my pipeline, that it would make the most sense to continue this position. The new profit/loss projections are below:

4/14/2009 -- Bought 100 CAL @ 12.225
4/17/2009 -- Sold To Open 1 CAL May $11 Call @ 2.17

5/15/2009 – May $11 Call Expired

5/18/2009 – Sold To Open 1 CAL June $11 Call @ 1.05

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1222.50


Downside Coverage From Current Price: 19%
Possible Max Upside: 19.84%

Annualized Max Upside: 108.09%

5. Mack-Cali Realty -- Continuation Transaction

As mentioned in the post for May expirations, the rather large position in CLI was not intended to remain after Friday. However, due to the large decrease in the stock price last week, all positions ended out of the money. In order to again attempt to reduce the position in CLI, but still capture value, additional calls have been sold with an emphasis on in-the-money calls. The new profit/loss projections are below:

Various -- Bought 100 CLI @ 20.91
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225

3/10/2009 – Bought To Close 1 CLI July $22.5 Call @ 1

4/1/2009 – CLI Dividend @ .45

4/3/2009 – Sold To Open 1 CLI May $22.5 Call @ 2.5

5/15/2009 – May $22.5 Call Expired

5/18/2009 – Sold To Open 1 CLI June $25 Call @ 0.95

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2091.00


Downside Coverage From Current Price: 29%
Possible Max Upside: 40.58%

Annualized Max Upside: N/A

6. Mack-Cali Realty -- Continuation Transaction

The new profit/loss projections are below:

Various -- Bought 100 CLI @ 20.91
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225

4/1/2009 – CLI Dividend @ .45

3/10/2009 – Bought To Close 1 CLI July $22.5 Call @ 4.45

4/3/2009 – Sold To Open 1 CLI May $25 Call @ 1.7

5/15/2009 – May $25 Call Expired

5/18/2009 – Sold To Open 1 CLI June $22.50 Call @ 2.75

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2091.00


Downside Coverage From Current Price: 20%
Possible Max Upside: 16.57%

Annualized Max Upside: N/A

7. Mack-Cali Realty -- Continuation Transaction

The new profit/loss projections are below:

Various -- Bought 100 CLI @ 22.90
2/23/2009 -- Sold To Open 1 CLI July $25 Call @ 0.4592

3/6/2009 – Bought To Close 1 CLI July $25 Call @ 0.1408

4/1/2009 – CLI Dividend @ .45

4/3/2009 – Sold To Open 1 CLI May $22.50 Call @ 2.8925

5/15/2009 – May $25 Call Expired

5/18/2009 – Sold To Open 1 CLI June $22.50 Call @ 1.8925

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2290.00


Downside Coverage From Current Price: 26%
Possible Max Upside: 20.96%

Annualized Max Upside: N/A

8. Chesapeake Energy -- Continuation Transaction

After contemplating selling this position over the weekend I decided that I would overlook recent issues with executive compensation and a miss in the latest earnings report. This stock is mainly focused on natural gas, which has seen a drastic decrease in price since the commodity bust. Unlike crude oil, natural gas has not recovered in the recent stock market rally. Based on some work that I performed in a consulting project recently, it is my opinion that natural gas is quite undervalued currently in comparison to crude on an energy basis. As such, I believe that there is quite a lot of upside here. Additionally, the stock took the earnings news pretty well in stride, which makes me think there is some underlying strength here. As such a new covered call position was established this afternoon. The new profit/loss projections are below:

4/14/2009 -- Bought 100 CHK @ 21.095
4/14/2009 -- Sold To Open 1 CHK May $21 Call @ 1.86

5/6/2009 – Bought To Open 1 CHK May $19 Put @ 0.35

5/15/2009 – May $21 Call and $19 Put Expired

5/18/2009 – Sold To Open 1 CHK June $21 Call @ 1.25

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2109.50


Downside Coverage From Current Price: 13%
Possible Max Upside: 13.85%

Annualized Max Upside: 75.48%

May 2009 Expiration Day

The Covered Calls Investor Portfolio contained a total of 16 positions with May 2009 expirations, and 3 positions either with a Non-March expiration or no current covered call. The 16 positions with May expirations had the following results:

- 5 positions (TOT, TIVO, TNA, FAS, TRLG) closed in-the-money. The calls were exercised and the stock was sold. Quite a few of these investments ended quite a bit in the money. The annualized gain/loss results (after commissions) were:

Total (TOT) => +58.76%
Tivo (TIVO) => +134.42%
Direxion 3x Small Cap (TNA) => +123.65%
Direxion 3x Financial (FAS) => +251.61%
True Religion (TRLG) => +174.72%

- 11 positions in the portfolio (T(2), CLI(3), FAS(3), CAL, CHK, OCR) ended out-of-the-money. This month's expiration was quite interesting, because many of the positions were in the money one or two days before expiration, and then fell below the strike on friday. In regards to the positions which will be kept, there are various reasons for each position, which are listed below.


AT&T (T) - $24.88
100 Shares with Current Cost Basis of $23.40
100 Shares with Current Cost Basis of $22.18

This position will be kept, due to the 7.2% dividend yield (based on current cost basis). Based on the current price, a $26 June call will be sold on Monday, while a $27 June call will be if the stock rebounds a bit.

Mack-Cali Realty (CLI) - $21.66
100 Shares with Current Cost Basis of $17.96
100 Shares with Current Cost Basis of $21.99
100 Shares with Current Cost Basis of $19.69

This position currently yields 9.5% (based on current cost basis). This remains a very large part of the portfolio, due to the drastic decrease from $27 at the end of April. It was my intention by selling very in the money calls at $22.50 that some of the this position would be called, but apparently it wasn't in the cards. In order to attempt to decrease this position, at least one $22.50 call will be sold. The other 2 positions will remain uncovered in order to wait for an increase in the share price to sell additional calls. I may also consider selling out of the money July calls to provide some protection, while allowing for the possibility to roll the call back to June if the stock rises.

Direxion 3x Financial (FAS) - $8.74
100 Shares with Current Cost Basis of $6.54
100 Shares with Current Cost Basis of $7.65
100 Shares with Current Cost Basis of $8.695

The positions in this ETF continue to yield great returns regardless of the closing price of the stock on expiration. It is my current plan to sell a $9, and 2 $10 June calls.

Continental Airlines (CAL) - $10.42
100 Shares with Current Cost Basis of $10.06

This position was in the money at the beginning of friday, and 5% out of the money by the end of the day. It is entirely possible that the stock could rebound to $11 on Monday, and if this occurs, the stock will be sold. If this does not happen, I will sell a $11 June call.

Chesapeake Energy (CHK) - $19.95
100 Shares with Current Cost Basis of $19.59

This position was also in the money a few days before expiration. I somewhat expected this stock to decrease in the few days before expiration after it had a poor earnings release, and bought a $19 strike put. Unfortunately, I overestimated the possible decrease in the stock, and both lost the $.30 in the put, and the stock closed out of the money. I still havent yet decided if I want to continue this position. If I do, I may both sell a call, and buy a put for extra security.

Omnicare (OCR) - $26.05
100 Shares with Current Cost Basis of $25.02

This position will most likely be continued due to the high volatility due to a continued view that the company may be acquired by Walgreens.


The positions in the portfolio which did not have May expirations include Bristol-Myers Squibb (BMY), Mack-Cali Realty (CLI), Savient Pharmaceuticals (SVNT). These positions are the following:

Bristol Myers Squibb
100 Shares Owned
1 June $21 Call

Mack-Cali Realty
100 Shares Owned
1 June $25 Call

Savient Pharmaceuticals
100 Shares Owned
1 June $5 Call

New Format

A new blog format has been chosen in order to make the blog more visually appealing.