Monday, May 6, 2013

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.

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

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