Closed Bond(TLT) Covered Call Position

The Index Covered Call Trading Plan  (aka: ICC) is CCI's approach for managing a position of index ETFs and related covered calls.  The most recent trade against this plan is described below.  A reader can find details about the rational and management of the trades at the ICC trading plan tab on CCI's home page.

UNDERLYING ETF:  TLT   

DESCRIPTION: iShares Barclays 20+ Year Treasury Bond

 

TRANSACTION TYPE:  Closed June $121 Call

TRANSACTION RATIONALE:  As discussed  here another covered call candidate is the long term bond ETF.   US treasuries pulled back over the past week and CCI took advantage of this pull back to harvest option premium in the position. The June covered call trade resulted in a $1.41/contract gain to offset the drop in bond prices.  At the moment, CCI does not have a covered call position in TLT but will look to re-establish the position if the price bonces back and/or after dividends are paid early next week.

 

TRANSACTION DATE: Tues.  May 28, 2013

 

Action: Buy to Close

Exp. Date: June 22, 2013

Strike: $121

Price: $.20

 

Rolled EEM Covered Call Up and Out ....Again

The Index Covered Call Trading Plan  (aka: ICC) is CCI's approach for managing a position of index ETFs and related covered calls.  The most recent trade against this plan is described below.  A reader can find details about the rational and management of the trades at the ICC trading plan tab on CCI's home page. 

UNDERLYING ETF: EEM     
 

DESCRIPTION: iShares Emerging Market Shares

 

TRANSACTION TYPE: Roll - Emerging market stocks continued to bounced upwards which created the opportunity to harvest a little option premium via the transaction described below.

 

TRANSACTION DATE: Fri. 5/17/13

Action: Buy to Close 

Exp Date: May 24, 2013

Strike: $43.00

Price: $.60

 

Action: Sell to Open  

Exp. Date: May 31, 2013 (two weeks out) 

Strike: $43.50

Price: $.44

 

Net Debit/contract: $.18 after commissions

Markets Upward Movement Forces the Roll of SPY Covered Calls

The Index Covered Call Trading Plan  (aka: ICC) is CCI's approach for managing a position of index ETFs and related covered calls.  The most recent trade against this plan is described below.  A reader can find details about the rational and management of the trades at the ICC trading plan tab on CCI's home page.
 

UNDERLYING ETF:  SPY   

DESCRIPTION: SPDRs S&P500

TRANSACTION TYPE: Roll the May $158 call to the June $165 call

TRANSACTION RATIONALE:  The S&P 500 continues to climb upward making the covered calls a drain on the overall portfolio return.  With the hint of a pull back late last week CCI rolled the covered call position up and out as described below. 

 

TRANSACTION DATE: Fri.  May. 10, 2013

 

Action: Buy to Close

Exp. Date: May. 18, 2013

Strike: $158

Price: $5.49

 

Action: Sell to Open  

Exp. Date: June 22, 2013  

Strike: $165

Price: $1.67

 

Net debit: $3.91/contract after commissions.

Putting A Short Call in Citigroup Back in Place

As discussed here CCI has a long position in the financial sector etf (xlf) via the Jan 15 $10 Call, that has usually been hedged via a shorter duration short call in Citigroup (C).

* * *

Yes, it was just last week Citigroup was down 3% and as discussed here  CCI was removing a short call in Citigroup. "Surprisingly"  the "rationale market" seemed to "change its mind" over the last few days and Citgroup retraced the recent downdraft back to near its recent highs.  Hence CCI re-opened a short call position in Citigroup.  This time with Citigroup selling just over $47.50, CCI sold the June $50 call for a $.56/contract credit.

Some potential outcomes.

• Citigroup breaks out and trades up over $50.56 (up another 6+%).  In this situation this option position will start to lose money. Of course, CCI believes it is highly probably if that were to happen, the Jan 15 XLF $10 calls the portfolio is long will be showing a nice leveraged profit to more than offset this loss. (As a reminder, XLF and C are highly correlated and in fact C makes up 6% of XLF)
• Citigroup stalls/falls - Likely the long position in XLF will also stall/fall but the option premium collected via this trade will act as a hedge and soften the overall blow. 
• In an ideal situation for this position,  Citigroup and XLF will continue to rise, but Citigroup stalls at/below $50 (i.e. round number resistance). This would result in the portfolio harvesting all/most of this premium while the long position in XLF also likely grows in a leveraged manner

Rolled Covered Call Position in Bonds Up and Out

The Index Covered Call Trading Plan  (aka: ICC) is CCI's approach for managing a position of index ETFs and related covered calls.  The most recent trade against this plan is described below.  A reader can find details about the rational and management of the trades at the ICC trading plan tab on CCI's home page.

UNDERLYING ETF:  TLT   

DESCRIPTION: iShares Barclays 20+ Year Treasury Bond

 

TRANSACTION TYPE: Rolled May $120 Covered Call to June $121 Call

TRANSACTION RATIONALE:  As discussed  here another covered call candidate is the long term bond ETF.   After a reasonable large run-up/flight to quality in Apr., US treasuries pulled back over the past few days.  CCI took advantage of this pull back to roll out the bond covered call position for a modest credit as described below.  

 

FYI, The May covered call resulted in a $1.07/contract gain.   That amounts  to what is only a  .9%/month gain.   That seems fairly modest until you compare that to the rate of return for bonds these days.   Hmmm...

 

TRANSACTION DATE: Mon.  May 6, 2013

Action: Buy to Close
Exp. Date: May 18, 2013
Strike: $120
Price: $ 1.38
 

Action: Sell to Open

Exp. Date: June 22, 2013

Strike: $121

Price: $1.70%

 

Net credit: $0.27/contract after commission

Closed Short Citigroup Call Position

As discussed here CCI has a long position in the financial sector etf (xlf) via the Jan 15 $10 Call, that has usually been hedged via a shorter duration short call in Citigroup (C).
                                                                       * * *
Citigroup fell over 3% over the last few days, and CCI took advantage of this gyration to close the covered call position.  This resulted in a very modest .5% gain in about two weeks.  Of course it would take much longer to generate that return in cash or bonds.

 Since the position was established on Jan. 8 the approximate performance numbers are

• 8.9% - simply holding xlf
• 20.4% - holding the Jan $15 Leap (due to the increased risk/reward of the leverage)
• 19.1% - the combined long/short position described here

Good returns with lower risk ...hmmm.

Obviously there is plenty of time left on the position (Jan 15) ...so anything can still happen. 

 

CCI will look to re-establish a short position in Citgroup calls if/when the market gyrates upwards.  

Stay tuned.