Tuesday, July 30, 2013

Rolled C Covered Call Up and Out

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).

Both the XLF etf and C have moved mostly sideways over the past few days.  CCI took this opportunity to harvest a little option premium and provide a little more head room with the covered call. . Specifically, the Aug 9 $52,50 call was rolled to the Aug 23 $53 call for a credit of $.23/contract.

Since inception on Jan 8, the performance of various holdings are shown below

  • The XLF etf is up a very nice 20.1%! (including dividends)
  • The leverage obtained by instead simply holding the Jan 15 $10 call would have returned 48.8%.
  • The leveraged long/short strategy defined in this thread is up 42.4%.
Careful readers will notice that these results are very similar to those in the most recent post on this topic.  The main difference being that the hedged position is essentially flat, while the unhedged positions were down 1-2%. 

As described above, the position remains in place. Most of the big financial services firms (especially C) earnings reports are complete, and the usual August market doldrums are seemingly starting.  Hopefully, that creates a dull/drifting market for the next few weeks in which this position will continue to perform well.

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