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Update Transaction - Multi-Fine Electronix (MFLX)

This position was rolled forward to August expiration. The new profit/loss info is below:


1/15/2010 -- Sold to Open 1 MFLX February $25 Put @ 1.2324
2/5/2010 -- Bought to Open 1 MFLX February $20 Put @ 0.4101
2/19/2010 -- Stock Bought Due To Option ITM @ $25.10
2/22/2010 -- Sold to Open 1 MFLX April $25 Call @ .2824
4/9/2010 -- Bought to Close 1 MFLX April $25 Call @ .2975
4/9/2010 -- Sold 100 MFLX @ 24.8295
4/9/2010 -- Sold to Open 1 MFLX May $25 Put @ 1.4399
5/7/2010 -- Bought to Close 1 MFLX May $25 Put @ 0.89
5/7/2010 -- Sold to Open 1 MFLX June $25 Put @ 1.37
5/25/2010 -- Bought to Close 1 MFLX June $25 Put @ 2.02
5/25/2010 -- Sold to Open 1 MFLX July $25 Put @ 2.55
6/24/2010 -- Bought to Close 1 MFLX July $25 Put @ 0.72
6/24/2010 -- Sold to Open 1 MFLX August $25 Put @ 1.60


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $23.77
Current Cost Average: $21.13
Commissions (Included In Cost): $39

Potential Annualized Gain If Called At Expiration (8/20/2010): 27.36%

Current Holdings

The current holdings of the CCIP as of June 23, 2010 are:

MEMC Electronic Materials - 100 Shares ($12 July CC)

Verizon - 100 Shares & 1 CSP ($32 July CSP, 100 Shares Uncovered)

Marathon Oil (MRO) - 1 $32 August CSP

Discover Financial (DFS) - 100 Shares ($15 July CC)

Multi-Fineline Electronics (MFLX) - 1 $25 July CSP

Sociedad Quimica y Minera (SQM) - 1 $35 August CSP

Linear Technology (LLTC) - 100 Shares ($27 July CC)

Neutral Tandem (TNDM) - 100 Shares ($15 Aug CC)

Abbott Labs (ABT) - 1 $52.50 August CSP

Texas Instruments (TXN) - 1 $23 July CSP

Life Partners Holdings (LPHI) - 1 $17.50 Aug CSP

JC Penneys (JCP) - 1 $23 July CSP

Nucor (NUE) - 100 Shares ($40 July CC)

McGraw-Hill (MHP) - 1 $27.50 Aug CSP

Suncor (SU) - 1 $28 July CSP

A123 Systems (AONE) - 100 Shares ($9 July CC)

Posting to Resume

After an extended hiatus, posts will resume in the month of July. I will begin with a recap of how the portfolio has fared over the last few months.

Blog Moving to coveredcallsinvesting.blogspot.com

The blog has been officially moved to coveredcallsinvesting.blogspot.com. I will no longer be making updates to this blog.

Blog Moving

For all those who have been wondering why there has not been a post in quite a while, it is because I will be moving my blog to a different web address within the next few weeks. As a result I have been busily working on that site, and not posting to this one. I plan to list the new address shortly once I have moved all the posts over.

November Expiration Day

The Covered Calls Investor Portfolio contained a total of 7 positions with November 2009 expirations, and 10 positions either with a Non-November expiration or no current covered call. The 7 positions with November expiration had the following results:

- 3 positions (MHP, TZA, OCR) closed in-the-money. The calls were exercised and the stock was sold. OCR was established this month, and TZA and MHP was a holdover from the last few expirations. The annualized gain/loss results (after commissions) were:

McGraw-Hill (MHP) => 29.42% (Held Since 8/21/2009)
Direxion 3x Small Cap Bear => 18.7% (Held Since 9/14/2009)
Omnicare (OCR) => 36.51% (Held Since 9/29/2009)

- 4 positions in the portfolio (UNG, AMAT, FLR, JACK) ended out-of-the-money. As is the norm with UNG, it yet again ended OTM.


United States Natural Gas (UNG) - $9.01
100 Shares with Current Cost Basis of $11.185

I will continue to sell calls against all of my positions in UNG, while I wait for the price of natural gas to rebound. I do realize that this will take quite a while, but I consider this position to be a longer-term covered call position.

Applied Materials (AMAT) - $12.28
100 Shares with Current Cost Basis of $12.57

This position is one which I plan to hold for quite a well as well. The stock was pushed down as part of the sector downgrade which the semiconductor sector received this week. I believe the stock is still a good holding on a fundamental basis as it recently crushed earnings. I will continue to hold the position and sell a new call.

Fluor (FLR) - $44.32
100 Shares with Current Cost Basis of $45.37

After reporting lackluster earnings, FLR dropped from about $48 to under $45. Unfortunately, with the market declining in recent days, FLR has not been able to regain any of its lossed, even though it has been bordering on oversold territory for a few days. I will continue to hold the position and sell a new call.

Jack In The Box (JACK) - $18.55
100 Shares with Current Cost Basis of $19.10

Similar to Fluor, Jack In The Box recently reported earnings, and was obliterated from above $20 to down to $18 due to a dissapointing outlook, even though current quarter earnings beat estimates. I believe the company is still in the midst of moving from a non-franchise to franchise model, and thus will continue to be a turnaround play in the CCIP. I will be selling a new call on the position.


The positions in the portfolio which did not have October expirations include:

United States Natural Gas (UNG)(300 Shares) - December $9 Covered Call, January $13 Covered Call, 1 position uncovered

Intrepid Potash (IPI)(100 Shares) - December $27 Covered Call

MEMC Electronics (WFR) (100 Shares) - Uncovered

Intel (INTC) (100 Shares) - December $19 Covered Call

Applied Materials - 1 December $13 CSP

Gamestop (GME) (100 Shares) - December $24 Covered Call

Verizon (VZ) (100 Shares) - April $31 Covered Call

New York Community Bancorp (NYB) (100 Shares) - April $12 Covered Call

Initial Transaction - United States Natural Gas (UNG) (11/19/2009)

I decided to open another covered call position in UNG, as I believe it has reached a near-term bottom around $8.80. Natural gas prices have been further depressed recently due to the continuing high storage levels as well as the relatively warm fall that the US has been experiencing. As such I think the risk/reward for this position is good. The profit/loss info is below:

11/19/2009 -- Bought 100 UNG @ 8.83
11/19/2009 -- Sold To Open 1 UNG December $9 Call @ 0.38


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $845.00
Commissions (Included In Cost): $5


Downside Coverage (from current price of $8.83): 4.3%
Possible Max Upside: 5.56%

Annualized Max Upside: 67.59%

Update Transaction - United States Natural Gas (UNG) (11/18/2009)

This is the other position which I sold the protective put. The performance metrics are below:

7/23/2009 -- Bought 100 UNG @ 13.14
7/23/2009 -- Sold To Open 1 UNG July $13 Call @ 0.88
8/22/2009 -- Call Expired
8/30/2009 -- Sold To Open 1 UNG October $14 @ 0.25
9/2/2009 -- Bought To Close 1 UNG October $14 @ 0.18
9/2/2009 -- Sold To Open 1 UNG January $12 @ 0.68
9/10/2009 - Bought To Close 1 UNG January $12 @ 0.9
9/10/2009 -- Sold To Open 1 UNG January $13 @ 1.29
11/6/2009 -- Bought To Open 1 UNG December $9 Put @ 0.41
11/18/2009 -- Sold To Close 1 UNG December $9 Put @ 0.5025

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1353.00
Current Cost Average: $12.235

Downside Coverage: None

Possible Max Upside: 6.24%

Annualized Max Upside: 12.8%

Update Transaction - United States Natural Gas (UNG) (11/18/2009)

After UNG passed below the $9 mark, I decided to exit two of my put positions which I bought to further cover a decline in the price of UNG. I will most likely be selling some calls on my UNG positions over the next few weeks even if they have to be longer-term in order to justify the sale. The new profit/loss info is below:

7/2/2009 -- Sold To Open 1 UNG August $13 Put @ 1.15
8/21/2009 -- Stock Purchase @ $13
8/24/2009 -- Sold To Open 1 UNG October $13 Call @ 0.60
9/2/2009 -- Bought To Open 1 UNG October $8 Put @ .4275
10/16/2009 -- Option Expiration
10/20/2009 -- Sold To Open 1 UNG November $12 Call @ .45
11/6/2009 -- Bought To Open 1 UNG December $9 Put @ 0.41
11/18/2009 -- Sold To Close 1 UNG December $9 Put @ 0.5025


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Purchase Price: $1190.00
Current Cost Average: $11.185
Commissions (Included In Cost): $35

Possible Max Upside: 6.85%

Annualized Max Upside: 17.60%

Initial Transaction - New York Community Bancorp (NYB) (11/16/2009)

This position was established as another Long-Term Ex-Dividend (LTEX) position in the CCIP. New York Community Bancorp is a regional bank based in New York which mainly provides mortgages to multi-family dwellings. It has a very low default rate and has consistently paid a dividend (currently at 8.87%). The stock has been stuck between $10 and $12 since the market lows in March. I decided to establish a long-term covered call position including one possible pre-expiration exercise date in February. The new profit/loss info is below:

11/16/2009 -- Bought 100 NYB @ 11.48
11/16/2009 -- Sold To Open 1 NYB April $12 Call @ 0.55


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1093.00
Commissions (Included In Cost): $5


Downside Coverage (from current price of $11.48): 4.8%

Potential Annualized Gain If Called At First Ex-Div. Date (2/4/2010): 38.78%

Potential Annualized Gain If Called At Expiration (4/17/2010): 27.90%

Initial Transaction - Verizon (VZ) (11/16/2009)

This is another position established with the proceeds from the sale of BMY and MCHP. This position is part of a strategy I call LTEX, which is a Long-Term Ex-Dividend Strategy vs. the STEX, or short-term ex-dividend strategy of which MCHP was an example. The idea with this position is to select a stock which has a high dividend yield, is typically a value stock, and tends to have low volatility (meaning low option premiums). In the LTEX, the goal is to provide multiple points during the holding period, where the stock may be called away (these points being the ex-dividend dates). Verizon was chosen due to its extremely high dividend yield (6.24%), its low volatility, technical support around 28.64, and the fact that it has not participated in the low-quality rally since March. The question may be asked why Verizon vs. AT&T. I chose Verizon because I feel that it has less risk than AT&T. This is due to a variety of reasons including its FiOS, fiber optic television system which has been grabbing up market share better than AT&T's Uverse. Its generally better regarded cellular network, and most importantly, the fact that Verizon does not have to worry about the possibility of losing iPhone exclusivity. The new profit/loss info is below:

11/16/2009 -- Bought 100 VZ @ 30.37
11/16/2009 -- Sold To Open 1 VZ April $31 Call @ 1.08


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2930.00
Commissions (Included In Cost): $5


Downside Coverage (from current price of $30.37): 3.6%

Potential Annualized Gain If Called At First Ex-Div. Date (1/7/2010): 39.53%

Potential Annualized Gain If Called At Second Ex-Div. Date (4/7/2010): 19.04%

Potential Annualized Gain If Called At Expiration (4/17/2010): 21.64%

Initial Transaction - Gamestop (GME) (11/16/2009)

On Monday I began to open new CC positions with the proceeds from the sale of BMY and MCHP. This position is one of the more risky positions in the CCIP for the fact that GME will announce earnings in a few days, which is part of the reason for the high option premium. I feel that this risk is warranted however for a few reasons. The first is mainly a technical reason, in that the stock has recently found support around the $24 level, and was also quite a bit oversold recently. Another reason, is that the stock has been "talkd down" by a number of talking heads including Jim Cramer. Many people have cited weakening hardware sales as well as poor new game releases this year. I believe on the other hand, the Gamestop benefits from the weakened economy in its used game sales, which it makes good margins on, as well as the recent release of Call of Duty which broke sales records. For all these reasons I believe Gamestop to be a good holding for the CCIP. The new profit/loss info is below:

11/16/2009 -- Bought 100 GME @ 24.35
11/16/2009 -- Sold To Open 1 GME December $24 Call @ 1.42


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2293.00
Commissions (Included In Cost): $5


Downside Coverage (from current price of $24.35): 5.8%
Possible Max Upside: 4.25%

Annualized Max Upside: 47.01%

Closing Transaction - Microchip Technologies (MCHP) (11/13/2009)

This position was another in my ex-dividend strategy, which involves creating an ITM covered call position in a company which has an ex-dividend date prior to the expiration date of the option. As planned, the position was called away the last trading day before its ex-dividend date. The final profit/loss info is below:

10/20/2009 -- Bought 100 MCHP @ 26.14
10/20/2009 -- Sold To Open 1 MCHP November $25 Call @ 1.54
11/13/2009 -- Sold 100 MCHP @ 24.9543

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Cost Basis: 2460.00

Final Profit: 1.44%
Potential Annualized Gain If Called At Ex-Div Date: 21.90%

Closing Transaction - Bristol Myers Squibb (BMY) (11/13/2009)

I decided to close this position early, as Bristol Myers was substantially above the $22 strike price of the CC. I had entered this position as a way to continue a similar annualized return to the position I had held in COP which was called away pre-ex-dividend date. As there was essentially no time value remaining in the CC, I closed the position in order to apply the capital elsewhere. The final profit/loss info is below:

10/29/2009 -- Bought 200 BMY @ 22.2025
10/29/2009 -- Sold To Open 2 BMY November $22 Call @ 0.5625
11/13/2009 -- Bought To Close/Sold 200 BMY @ 21.9425


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $4328.00

Final Profit: 1.40%

Annualized Max Upside: 22.18%

Update Transaction - Intrepid Potash (IPI)

As the market continues to think about which direction it wants to go in, the agricultural stocks decided to move higher. As a result I rolled forward my November call position in IPI to December as the stock continues to have pretty high premiums, and has stayed somewhat detached from overall market movements as of late. I think this is a relatively good long term holding as potash companies should be seeing a rebound in demand sometime in the next 12 months as a result of the necessity of their product. Farmers cant go without fertilizer for too long without ill effects. My general rule for rolling a call to the next month is that I must maintain or increase my annualized gain, in this case I kept it almost exactly the same. The new profit/loss info is below:

7/30/2009 -- Bought 100 IPI @ 26.70
7/30/2009 -- Sold To Open 1 IPI $27 August Call @ 1.54
7/30/2009 -- Bought To Open 1 IPI $22 August Put @ 0.45
8/21/2009 -- Call Expired
8/24/2009 -- Sold To Open 1 IPI $28 September Call @ 0.7
8/26/2009 -- Bought To Open 1 IPI $21 September Put @ 0.25
8/31/2009 -- Bought To Close 1 IPI $28 September Call @ 0.10
8/31/2009 -- Sold To Open 1 IPI $27 October Call @ 0.50
10/1/2009 -- Bought To Close 1 IPI $27 October Call @ 0.10
10/8/2009 -- Sold To Open 1 IPI $27 November Call @ 0.70
11/12/2009 -- Bought To Close 1 IPI $27 November Call @ 0.71
11/12/2009 -- Sold To Open 1 IPI $27 December Call @ 1.41

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2561.00
Current Cost Average: $23.46

Previous Max Upside: 11.29%
New Possible Max Upside: 14.07%

Previous Annualized Max Upside:36.14%
Annualized Max Upside: 36.17%

Initial Transaction - Applied Materials (AMAT)

Today I decided to open a second position in Applied Materials (AMAT). This position is a cash-secured put, which basically means that I have sold the right for someone to sell me 100 shares of AMAT at $13/share at December expiration, if the stock price is below that. The position in Applied Materials was opened as it continues to be at multi-year lows. The company has unfortunately had some negative earnings as of late, but I believe the stock has alot of upside potential in the future due to its work in the semiconductor area (it profits regardless of whose chip is used), as well as the solar area which should benefit from legislation and regulation in the next few years once all of this health care debate is over. The company yields about 2% as noted in my previous position on it. The profit/loss info is below:

11/11/2009 -- Sold To Open 1 AMAT December $13 Put @ 0.55

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Cost Basis: N/A

Potential Gain If Called At Expiration: 4.23%
Potential Annualized Gain If Called At Expiration: 40.64%

Update Transaction - United States Natural Gas (UNG)(3)

The information regarding this transaction is noted in the previous post on UNG from today. This position is now uncovered, and protected on the downside with a $9 put. The new profit/loss info is below:

6/10/2009 -- Bought 100 UNG @ 14.50
6/10/2009 -- Sold To Open 1 UNG July $15 Call @ 0.97
7/6/2009 -- Bought To Close 1 UNG July $15 Call @ 0.15
7/17/2009 -- Sold To Open 1 UNG August $15 Call @ 0.45
8/22/2009 -- Call Expired
8/28/2009 -- Bought To Open 1 UNG October $10 Put @ 0.65
9/1/2009 -- Sold To Open 1 UNG January $14 Call @ 0.50
9/2/2009 -- Sold To Close 1 UNG October $10 Put @ 0.95
11/6/2009 -- Bought To Close 1 UNG January $14 Call @ 0.18
11/6/2009 -- Bought To Open 1 UNG December $9 Put @ 0.41


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1353.00

Possible Max Upside: N/A

Annualized Max Upside: N/A

Update Transaction - United States Natural Gas (UNG) (2)

Information regarding this transaction is noted in the previous post on UNG. The performance metrics are below:

7/23/2009 -- Bought 100 UNG @ 13.14
7/23/2009 -- Sold To Open 1 UNG July $13 Call @ 0.88
8/22/2009 -- Call Expired
8/30/2009 -- Sold To Open 1 UNG October $14 @ 0.25
9/2/2009 -- Bought To Close 1 UNG October $14 @ 0.18
9/2/2009 -- Sold To Open 1 UNG January $12 @ 0.68
9/10/2009 - Bought To Close 1 UNG January $12 @ 0.9
9/10/2009 -- Sold To Open 1 UNG January $13 @ 1.29
11/6/2009 -- Bought To Open 1 UNG December $9 Put @ 0.41

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1353.00

Downside Coverage: Covered below $9

Possible Max Upside: 2.14%

Annualized Max Upside: 4.39%

Update Transaction - United States Natural Gas (UNG)

As per the norm, UNG continues to drag down the CCIP at some points, and pull it up at others. UNG has plummeted from the $12 mark it was near at October expiration to near $9.50. As a result I decided to buy some December $9 put protection for all three positions, as well as buying back a January call for one of the positions which will be noted in another post. The new profit/loss info is below:

7/2/2009 -- Sold To Open 1 UNG August $13 Put @ 1.15
8/21/2009 -- Stock Purchase @ $13
8/24/2009 -- Sold To Open 1 UNG October $13 Call @ 0.60
9/2/2009 -- Bought To Open 1 UNG October $8 Put @ .4275
10/16/2009 -- Option Expiration
10/20/2009 -- Sold To Open 1 UNG November $12 Call @ .45
11/6/2009 -- Bought To Open 1 UNG December $9 Put @ 0.41


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Purchase Price: $1190.00

Possible Max Upside: 2.63%

Annualized Max Upside: 6.75%