Rolled IWM Covered Call

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 Down

Small cap. stocks pulled back a little over the last weeks after a nice run up.  CCI used this pull back as an opportunity to roll the IWM covered call position as described below.

TRANSACTION DATE: Wed. Jun 12

Action: Buy to close

Exp. Date: June 22, 2013

Strike: $100

Price: $0.23

 

Action: Sell to Open

Exp. Date: July 20, 2013

Strike: $99

Price: $1.37

 

Net Credit/Contract after commissions: $1.09

Apple Call - "Roll on the News"

As discussed here, CCI is long the Apple (AAPL) Jan $300 call as a stock replacement and intends to  write shorter term calls against the position.  CCI's primary thesis is that Apple's low valuation will provide a floor under the stock, but margin pressures from lots of worthy competitors will keep a lid on the stock. Hence, there is a good probability Apple will trade sideways for awhile, and this options strategy would capitalize on that situation.


As discussed  here  CCI's last activity in this position was to sell the June $660 call against the Jan $300 call held in the portfolio. Since that time the stock has drifted mostly sideways (slightly up).  This week Apple is holding its developer conference. CCI has no particular insight into what this conference might mean to the company or its products.  However, these type of events often seem to lend themselves to the old adage "buy on the rumor, sell on the news".  In this case, "roll on the news". The intent of rolling this option position was to

• harvest a little of the option premium gained to date 
• re-establish a covered call that provides a little more risk protection and reward if the stock were to jump up or down based on the perceived outcome of the conference.

Specifically, CCI closed the June $660 call and rolled out to the July 5 (two weeks further out) $665 call. This transaction was done for a $1.34 credit/contract after commissions.  The June $660 call position made a very modest $.61/contract, and the July 5 $665 contract has about $5.70/contract in premium remaining at this time.

If you have been keeping score at home ... Since Mar. 1 when this position was established

• Holding the stock would have resulted in the position being up 4.3% (including dividends)
• Holding the $300 Leap for leverage would have resulted in the position being up 8.0%
• Holding the $300 Leap and rolling calls against that position as described here is up 14.5%

So far...so good, but the reactions to the developers conference will likely impact these results in some manner. Hence, it is likely CCI will adjust the position again in a week or two in anticipation of  Apple's q2 earnings results in late July.

Updating the Status of the QQQ Covered Call Position

The Index Covered Call (aka: ICC) trading plan 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: QQQ 

DESCRIPTION: Power Shares NASDAQ 100 

TRANSACTION TYPE: Roll

 

DESCRIPTION:  Unfortunately, CCI has fallen a little behind with posts on the QQQ covered call position.  The last post discussed the establishment of the May 3 $69.50 call.  After that position was established, QQQ continued to move substantially higher and CCI let the underlying position be called away.  Since that position was initiated on March 18 until its closure on May 3 it returned 2.25%.  Not bad for seven weeks (about 18% annualized).  Of course this was in an up market, so as anticipated this strategy "made less in an up market".  As often discussed, this strategy should also  "lose less" in a down market and make more in sideways market.

On May 29, CCI re-established the position buying the QQQ at $73.43 and at the same time selling the June 7 $74 call for $.42.  With the market down today, CCI rolled that position out a week, harvesting $.36/contract (just under .5%).  Specifics of the last transaction are shown below.

 

TRANSACTION DATE: Th. 6/6/13

Action: Buy to Close

Strike: $74

Exp. Date:  June 7, 2013

Price: $0..05

 

Action: Sell to Open

 Exp. Date: June 14, 2013 (out an additional  week) 

 Strike: $73

 Price: $0.53

 

Net Credit: $.45/contract  after commissions

Re-established a Covered Call Position in EEM

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 haven fallen over the past weeks. The May 31 $43.50 options expired this past weekend generating a $.43/contract gain to somewhat mitigate the loss in the underlying ETF.  CCI re-established a covered call position as described below.

 

TRANSACTION DATE: Mon.  6/3/13

 

Action: Sell to Open  

Exp. Date: June 14, 2013 (two weeks out) 

Strike: $42

Price: $.42

 

Net credit/contract: $.40 after commissions

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.