Initial Transaction - Direxion Financial Bull 3x (FAS)

Another position was established in Direxion 3x Financial Bull ETF today to increase the total position in the portfolio to 400 shares which is still less than the largest position I have held in the ETF at any particular time. This time however, instead of simply selling the covered call I decided to collar the purchase for added downside protection. Although I am starting to believe that the market is in a consolidation mode and is forming a new bottom around 870 in the S&P, I still think there may be a pull back. If so, I want to have the put in place not as much for the purpose of protecting my downside, but instead to add additional revenue by selling the put for a gain. If the ETF does in fact drop to around $8, I plan to buy back the call, and keep the put in case of a further drop. This should effectively lower my cost basis to around $8.40 which would only leave $40 on the table if FAS closed under $8 at June expiration. Just as a note these positions are being posted a bit late as I have been away on business for the last week. I will try to get all my recent positions up on the blog today or tomorrow. The purchase info is below:

5/21/2009 -- Bought 100 FAS @ 9.045
5/21/2009 -- Sold To Open 1 FAS June $10 Call @ 0.86
5/21/2009 -- Bought To Open 1 FAS June $8 Put @ 1


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $904.50


Downside Coverage: Downside Risk Limited to 12.9% due to Put
Possible Max Upside: 8.89%

Annualized Max Upside: 107.96%

Update Transaction - Alpha Natural Resources (ANR)

After quite the downward spiral in ANR over the past two days, I bought back the call I had sold at a strike or $32.50. Generally, the friday before a three day weekend tends to be an up day, and so I am hoping to sell another call if ANR rebounds a bit tomorrow. The new purchase metrics are below:

5/20/2009 -- Bought 100 ANR @ 29.26
5/20/2009 -- Sold To Open 1 ANR June $32.50 Call @ 1.24
5/20/2009 -- Bought To Open 1 ANR June $20 Put @ .3
5/21/2009 -- Bought To Close 1 ANR June $32.50 Call @ .55


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00


Downside Coverage: Put with Strike of $20
Possible Max Upside: Unlimited

Annualized Max Upside: Unlimited

Update Transaction - AT&T (T)

After an extreme pullback in AT&T's stock over the past week, I decided to leave 100 shares of my position uncovered, and wait for a move higher, while establishing a further out call in order to capture premium, while still allowing for an upside movement. The new metrics for the 100 shares which are now covered is below:

Transaction History:
2/21/2009 -- Additional Stock Purchased -- Bought T @ 23
2/27/2009 -- Sold To Open 1 T April $20 Call @ 3.95
3/10/2009 -- Bought To Close 1 T April $20 Call @ 2.93
3/10/2009 -- Sold to Open 1 T April $25 Call @ .34
3/13/2009 -- Bought To Close 1 T April $25 Call @ .84
3/13/2009 -- Sold To Open 1 T April $26 Call @ .39
4/7/2009 -- AT&T Dividend @ .41
4/17/2009 -- Covered Call Expire
4/20/2009 -- Sold To Open 1 T May $27 @ .43
5/15/2009 -- Covered Call Expire
5/20/2009 -- Sold To Open 1 T Oct $27 @ .65

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $4,812.50


Downside Coverage (based on current share price): 9%
Possible Max Upside: 28.71% (not including July and Oct dividend which would make this 33%)

Annualized Max Upside: 44.04% (not including July and Oct dividend which would make this 50%)

Initial Transaction - Alpha Natural Resources (ANR)

A position was established in Alpha Natural Resources, a appalachian coal supplier which has recently become more diversified by acquiring Foundation Coal, a western US coal supplier. This acquisition allows ANR to become less dependent on metallurgical coal, which has been its main product, and is used for steel production. Foundation Coal is focused on thermal coal which is used for power generation. After hitting a peak of over $100 per share last year, the stock has traded between about $15 and $20 until recently breaking out up to the $30 mark. This position is most likely going to be a longer term covered call position in the portfolio as opposed to one that I expect to be called at expiration. I also expect the stock to pull back a bit from its recent highs, and so I have also purchased a put to cover my downside. The purchase info is below:

5/20/2009 -- Bought 100 ANR @ 29.26
5/20/2009 -- Sold To Open 1 ANR June $32.50 Call @ 1.24
5/20/2009 -- Bought To Open 1 ANR June $20 Put @ .3


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00


Downside Coverage: 3.2%
Possible Max Upside: 14.76%

Annualized Max Upside: 173.79%

Update Transaction - Omnicare (OCR)

As was discussed in my post after May expiration, I chose to continue the position in Omnicare, a pharmaceutical supply company, similar to a Walgreens. The premiums continue to remain relatively high for a company which is not very speculative, they continue to have high operating margins relative to their peers. The purchase info is below.

4/27/2009 -- Bought 100 OCR @ 26.465
4/27/2009 -- Sold To Open 1 OCR May $27.50 Call @ 1.25
5/15/2009 -- Call Option Expired
5/19/2009 -- Sold To Open 1 OCR June $27.5 Call @ 0.95


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2646.50

If stock is called at expiration:

Downside Coverage (based on current share price): 9.4%
Possible Max Upside: 13.62%

Annualized Max Upside: 92.08%

Continuing Transactions - May 2009

After last Friday's expiration for May 2009, there were 11 positions which were retained and had options which had expired in May. Today it was decided to retain all of these positions based on continued option premium to be gathered, and a strong showing by the market today, which allowed for multiple in-the-money positions to be created which will still yield very high potential returns. There were only 2 positions which remain uncovered, AT&T (T) which was one of the few market movers to decline today, though all utilities had a poor showing today, and Omnicare (OCR), which I chose to set a limit order on the call which was not reached. The transactions to date and performance metrics for each of the positions is listed below.

1. Direxion 3x Financial Bull -- Continuation Transaction

As was explained in the post regarding May expirations, all positions in FAS will be kept through June expiration. The only notable difference, is that due to a drastic increase in the share price today, a $9, $10, and $11 call were sold instead of 1 $9 strike, and 2 $10 strikes. The new profit/loss projections are below:

4/9/2009 -- Bought 100 FAS @ 7.835
4/9/2009 -- Sold To Open 1 FAS May $8 Call @ 1.45

4/21/2009 – Bought To Close 1 FAS May $8 Call @ 0.85

4/21/2009 – Sold To Open 1 FAS May $9 Call @ 0.7

5/15/2009 – May $9 Call Expired

5/18/2009 – Sold To Open 1 FAS June $9 Call @ 1.5


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $783.50


Downside Coverage From Current Price: 51.2%
Possible Max Upside: 62.1%

Annualized Max Upside: 314.81%

2. Direxion 3x Financial Bull -- Continuation Transaction

The new profit/loss projections are below:

4/14/2009 -- Bought 100 FAS @ 9.245
4/14/2009 -- Sold To Open 1 FAS May $9 Call @ 0.9

4/15/2009 – Bought To Close 1 FAS May $9 Call @ 0.25

4/15/2009 – Sold To Open 1 FAS May $10 Call @ 0.95

5/15/2009 – May $10 Call Expired

5/18/2009 – Sold To Open 1 FAS June $10 Call @ 1.05


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $924.50


Downside Coverage From Current Price: 36%
Possible Max Upside: 40.8%

Annualized Max Upside: 222.28%

3. Direxion 3x Financial Bull -- Continuation Transaction

The new profit/loss projections are below:

4/17/2009 -- Bought 100 FAS @ 9.745
4/17/2009 -- Sold To Open 1 FAS May $8 Call @ 2.65

5/7/2009 – Bought To Close 1 FAS May $8 Call @ 3.55

5/7/2009 – Sold To Open 1 FAS May $10 Call @ 1.95

5/15/2009 – May $9 Call Expired

5/18/2009 – Sold To Open 1 FAS June $11 Call @ 0.95


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $974.50


Downside Coverage From Current Price: 26%
Possible Max Upside: 45.9%

Annualized Max Upside: 261.64%

4. Continental Airlines -- Continuation Transaction

Although Continental Airlines did eventually rebound above $11, it was my decision based on the other available covered call positions in my pipeline, that it would make the most sense to continue this position. The new profit/loss projections are below:

4/14/2009 -- Bought 100 CAL @ 12.225
4/17/2009 -- Sold To Open 1 CAL May $11 Call @ 2.17

5/15/2009 – May $11 Call Expired

5/18/2009 – Sold To Open 1 CAL June $11 Call @ 1.05

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1222.50


Downside Coverage From Current Price: 19%
Possible Max Upside: 19.84%

Annualized Max Upside: 108.09%

5. Mack-Cali Realty -- Continuation Transaction

As mentioned in the post for May expirations, the rather large position in CLI was not intended to remain after Friday. However, due to the large decrease in the stock price last week, all positions ended out of the money. In order to again attempt to reduce the position in CLI, but still capture value, additional calls have been sold with an emphasis on in-the-money calls. The new profit/loss projections are below:

Various -- Bought 100 CLI @ 20.91
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225

3/10/2009 – Bought To Close 1 CLI July $22.5 Call @ 1

4/1/2009 – CLI Dividend @ .45

4/3/2009 – Sold To Open 1 CLI May $22.5 Call @ 2.5

5/15/2009 – May $22.5 Call Expired

5/18/2009 – Sold To Open 1 CLI June $25 Call @ 0.95

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2091.00


Downside Coverage From Current Price: 29%
Possible Max Upside: 40.58%

Annualized Max Upside: N/A

6. Mack-Cali Realty -- Continuation Transaction

The new profit/loss projections are below:

Various -- Bought 100 CLI @ 20.91
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225

4/1/2009 – CLI Dividend @ .45

3/10/2009 – Bought To Close 1 CLI July $22.5 Call @ 4.45

4/3/2009 – Sold To Open 1 CLI May $25 Call @ 1.7

5/15/2009 – May $25 Call Expired

5/18/2009 – Sold To Open 1 CLI June $22.50 Call @ 2.75

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2091.00


Downside Coverage From Current Price: 20%
Possible Max Upside: 16.57%

Annualized Max Upside: N/A

7. Mack-Cali Realty -- Continuation Transaction

The new profit/loss projections are below:

Various -- Bought 100 CLI @ 22.90
2/23/2009 -- Sold To Open 1 CLI July $25 Call @ 0.4592

3/6/2009 – Bought To Close 1 CLI July $25 Call @ 0.1408

4/1/2009 – CLI Dividend @ .45

4/3/2009 – Sold To Open 1 CLI May $22.50 Call @ 2.8925

5/15/2009 – May $25 Call Expired

5/18/2009 – Sold To Open 1 CLI June $22.50 Call @ 1.8925

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2290.00


Downside Coverage From Current Price: 26%
Possible Max Upside: 20.96%

Annualized Max Upside: N/A

8. Chesapeake Energy -- Continuation Transaction

After contemplating selling this position over the weekend I decided that I would overlook recent issues with executive compensation and a miss in the latest earnings report. This stock is mainly focused on natural gas, which has seen a drastic decrease in price since the commodity bust. Unlike crude oil, natural gas has not recovered in the recent stock market rally. Based on some work that I performed in a consulting project recently, it is my opinion that natural gas is quite undervalued currently in comparison to crude on an energy basis. As such, I believe that there is quite a lot of upside here. Additionally, the stock took the earnings news pretty well in stride, which makes me think there is some underlying strength here. As such a new covered call position was established this afternoon. The new profit/loss projections are below:

4/14/2009 -- Bought 100 CHK @ 21.095
4/14/2009 -- Sold To Open 1 CHK May $21 Call @ 1.86

5/6/2009 – Bought To Open 1 CHK May $19 Put @ 0.35

5/15/2009 – May $21 Call and $19 Put Expired

5/18/2009 – Sold To Open 1 CHK June $21 Call @ 1.25

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2109.50


Downside Coverage From Current Price: 13%
Possible Max Upside: 13.85%

Annualized Max Upside: 75.48%

Options Expiration - May 2009

The Covered Calls Investor Portfolio contained a total of 16 positions with May 2009 expirations, and 3 positions either with a Non-May expiration or no current covered call. The 16 positions with May expirations had the following results:

- 5 positions (TOT, TIVO, TNA, FAS, TRLG) closed in-the-money. The calls were exercised and the stock was sold. Quite a few of these investments ended quite a bit in the money. The annualized gain/loss results (after commissions) were:

Total (TOT) => +58.76%
Tivo (TIVO) => +134.42%
Direxion 3x Small Cap (TNA) => +123.65%
Direxion 3x Financial (FAS) => +251.61%
True Religion (TRLG) => +174.72%

- 11 positions in the portfolio (T(2), CLI(3), FAS(3), CAL, CHK, OCR) ended out-of-the-money. This month's expiration was quite interesting, because many of the positions were in the money one or two days before expiration, and then fell below the strike on friday. In regards to the positions which will be kept, there are various reasons for each position, which are listed below.


AT&T (T) - $24.88
100 Shares with Current Cost Basis of $23.40
100 Shares with Current Cost Basis of $22.18

This position will be kept, due to the 7.2% dividend yield (based on current cost basis). Based on the current price, a $26 June call will be sold on Monday, while a $27 June call will be if the stock rebounds a bit.

Mack-Cali Realty (CLI) - $21.66
100 Shares with Current Cost Basis of $17.96
100 Shares with Current Cost Basis of $21.99
100 Shares with Current Cost Basis of $19.69

This position currently yields 9.5% (based on current cost basis). This remains a very large part of the portfolio, due to the drastic decrease from $27 at the end of April. It was my intention by selling very in the money calls at $22.50 that some of the this position would be called, but apparently it wasn't in the cards. In order to attempt to decrease this position, at least one $22.50 call will be sold. The other 2 positions will remain uncovered in order to wait for an increase in the share price to sell additional calls. I may also consider selling out of the money July calls to provide some protection, while allowing for the possibility to roll the call back to June if the stock rises.

Direxion 3x Financial (FAS) - $8.74
100 Shares with Current Cost Basis of $6.54
100 Shares with Current Cost Basis of $7.65
100 Shares with Current Cost Basis of $8.695

The positions in this ETF continue to yield great returns regardless of the closing price of the stock on expiration. It is my current plan to sell a $9, and 2 $10 June calls.

Continental Airlines (CAL) - $10.42
100 Shares with Current Cost Basis of $10.06

This position was in the money at the beginning of friday, and 5% out of the money by the end of the day. It is entirely possible that the stock could rebound to $11 on Monday, and if this occurs, the stock will be sold. If this does not happen, I will sell a $11 June call.

Chesapeake Energy (CHK) - $19.95
100 Shares with Current Cost Basis of $19.59

This position was also in the money a few days before expiration. I somewhat expected this stock to decrease in the few days before expiration after it had a poor earnings release, and bought a $19 strike put. Unfortunately, I overestimated the possible decrease in the stock, and both lost the $.30 in the put, and the stock closed out of the money. I still havent yet decided if I want to continue this position. If I do, I may both sell a call, and buy a put for extra security.

Omnicare (OCR) - $26.05
100 Shares with Current Cost Basis of $25.02

This position will most likely be continued due to the high volatility due to a continued view that the company may be acquired by Walgreens.


The positions in the portfolio which did not have May expirations include Bristol-Myers Squibb (BMY), Mack-Cali Realty (CLI), Savient Pharmaceuticals (SVNT). These positions are the following:

Bristol Myers Squibb
100 Shares Owned
1 June $21 Call

Mack-Cali Realty
100 Shares Owned
1 June $25 Call

Savient Pharmaceuticals
100 Shares Owned
1 June $5 Call