Monday, June 24, 2013

Closed C Covered Call

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).

Just last week, CCI rolled up and out a covered call in C as a hedge against a long call in the financial ETF XLF.

Since then the C and the market have pulled back. Today, CCI closed the covered call in C for a $.07 debit. CCI will be looking for an opportunity to re-establish this hedge.

As of the close of business the returns related to various related positions are

  • Holding the XLF ETF would have returned 10.2%
  • The leverage obtained via holding the Jan 15 $10 XLF call would have returned 23.3%.
  • The long/short strategy discussed in this thread is up 24.6%.  
This approach continues to achieving its objective of providing leveraged returns with some hedging of downside risks, but still a long way to go. 

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