Rolled Covered Call in EEM ...Again

 UNDERLYING ETF: EEM  

 DESCRIPTION: iShares Emerging Market Shares 
 

TRANSACTION TYPE:   The emerging market ETF pulled back early this week and CCI took the opportunity to harvest some option premium and reposition the the covered call  portion of the portfolio as described below.

 

TRANSACTION DATE: Wed 10/23/13 

 

Action: Buy to Close

Exp. Date: Oct 25, 2013

Strike: $43

Price: $.24

 

Action: Sell to Open  

Exp. Date: Nov. 1, 2013 (one week out) 

Strike: $43.5

Price: $.24

 

Net Debit: $.02 after commissions

Rolled Covered Call in Emerging Markets ETF (EEM) 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: EEM  

 DESCRIPTION: iShares Emerging Market Shares 
 

TRANSACTION TYPE:   The emerging market ETF moved upward last week.  At the end of the week CCI rolled the covered call  position as described below.

 

TRANSACTION DATE: Fri 10/18/13 

 

Action: Buy to Close

Exp. Date: Oct 19, 2013

Strike: $42.50

Price: $.92

 

Action: Sell to Open  

Exp. Date: Oct 25, 2013 (one week out) 

Strike: $43

Price: $.66

 

Net Debit: $.29 after commissions

Small Caps Continue to Soar, Rolled IWM Covered Call 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:  IWM

DESCRIPTION: iShares Russell 2000

 

TRANSACTION TYPE: Roll Out and Up

Small Cap Stocks continued to soar.  CCI rolled the IWM covered call position out and up and described below.

TRANSACTION DATE: Fri, Oct 18

Action: Buy to close

Exp. Date: Oct. 19,  2013

Strike: $108

Price: $2.25

 

Action: Sell to Open

Exp. Date: Nov. 16, 2013

Strike: $112

Price: $.87

Net Debit/Contract after commissions: $1.47

Rolled 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: SPDR S&P500 

 

TRANSACTION DESC:  Late Tuesday, rolled SPY covered calls as described below

 

Action: Buy to Close

Exp. Date: Oct. 19, 2013

Strike: $172

Price: $.49

Action: Sell to Open  

Exp. Date: Nov 16, 2013

Strike: $172

Price: $1.96

 

Net Credit after commissions: $1.38

Re-established Short Call in C

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).

With D.C. dominating the news, CCI decided to re-establish a short call in Citigroup as a hedge against the long position in XLF held in the portfolio. Specifically, on Monday CCI sold the Nov 1 $52 call at $.32.

Since inception on Jan 8, the performance of various potential holdings  as of the close of trading today are shown below

• The XLF etf  is still up 19.4%! (including dividends)
• The leverage obtained by instead simply holding the Jan 15 $10 call would have returned 45.2%.
• The leveraged, long/short strategy defined in this thread is up 43.6%. (i.e the short call has not been very much of a drag on the leveraged gain while providing a modest hedge for down moves)

Note: C reported earnings and they did not seem to push the stock higher. This reduces the volatility/risk of the short call. As the price of the option decays look for CCI to close or roll this position relatively soon.

ICC Q3 Results

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.  


CCI's accounting department (i.e. me) has been busy putting together spreadsheets of q3 results for the four index covered call positions that most of this quarter's posts cover.  After running these results past our staff auditors (me again), the technical staff (yes, me again) have posted q3 results for the ICC results, Buy & Hold results and some comparisons below.

                                                      ICC                B&H
                                                Q3      YTD          YTD               Variance         % of B&H Returned
SPY                                        1.6%    12.4%        19.7%           -  7.3%                   63%
IWM                                        7.1%    13.0%        27.0%           -14.0%                   48%
QQQ                                       2.2%      8.9 %       21.8%           -12.9%                   40%
EEM                                        5.9%   - 3.4%       - 6.9%           + 3.5%                    49%
TLT(10 yr Bond)                                                   -8.3%  
        
Some Observations

• The stock market has basically continued its one way trip higher this quarter.  That is the best environment for B&H, and where a covered call  strategy would expect to be the biggest drag on performance.  These results seem to support that assumption.
• Also as expected, the covered call approach continues to under perform the stock market when the market is up and over perform the stock market when the market is down.
• The combined performance of the four etf covered calls (7.7% ytd) approximates the return of a 60/40 stock/bond portfolio represented by 60% SPY/40% TLT (7.6%ytd).
• FYI, YTD performance for an etf offering a covered call strategy for the S&P 500(PBP) is up 5.4%. That is substantially less than the ICC SPY position (up 12.4%).  I'm still not sure what exactly is causing that difference, but I think it must have something to do with how the covered calls are managed.  It certainly does appear that investors should be aware that all covered call strategies are not exactly the same
• Lastly, the results of the covered call strategy as a percentage of the B&H strategy are shown in the final column. As a general statement, it seems the covered call strategy is achieving 50ish% of the stock market return. Obviously that means a less volatile ride over the long term.  . 

Rolled EEM 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: EEM     

DESCRIPTION: iShares Emerging Market Shares

 

TRANSACTION TYPE:   CCI rolled the covered call  position as described below.

 

TRANSACTION DATE: Fri 10/11/13  

 

Action: Buy to Close

Exp. Date: Oct 11, 2013

Strike: $42

Price: $.62

 

Action: Sell to Open  

Exp. Date: Oct 18, 2013 (one week out) 

Strike: $42.50

Price: $.55

 

Net Debit: $.09 after commissions

Rolled EEM Coverd 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: EEM     

DESCRIPTION: iShares Emerging Market Shares

 

TRANSACTION TYPE:   Emerging market stocks pulled back again.  CCI used this opportunity to harvest option premium, and re-establish the covered call  as described below.

 

TRANSACTION DATE: Wed  10/22/13  

 

Action: Buy to Close

Exp. Date: Oct 4, 2013

Strike: $42.5

Price: $.03

 

Action: Sell to Open  

Exp. Date: Oct 11, 2013 (one week out) 

Strike: $42

Price: $.32

 

Net Credit: $.27 after commissions