Closing Transaction - Mack-Cali Realty (CLI)

After a long time waiting, part of my position in CLI has finally been called away due to an ex-div date. This reduces my overall position to 300 shares, and reduces its share of the CCIP portfolio from 23% to 18%, which is still very high, but still better. I may sell a cash-secured put against CLI in the future, if another 100 shares is called away at July expiration. The final profit info is below:


Various -- Bought 100 CLI @ 18.80
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225
4/1/2009 – CLI Dividend @ .45
4/16/2009 – Bought To Close 1 CLI July $22.5 Call @ 4.45
4/16/2009 – 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
6/19/2009 - June $22.50 Call Expired
6/23/2009 - Sold To Open 1 CLI July $20.00 Call @ 1.70
6/30/2009 - Stock Called @ 20.00

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1880.00


Total Upside: 26.01%

Annualized Max Upside: 79.12%

Monthly Returns - June 2009

The month of June continued to leave investors and traders wondering where the market will be by the end of the year. It was the fourth month that the CCIP has been in existence, and it was a real test of whether the portfolio could make money in a sideways market. As I have mentioned many times before successful stock picking is very important when the market is oscillating around the same value for a long time. After oscillating between 880 and 920 in the month of May, the S&P 500 has shifted its bounds slightly higher to between 890 and 950 in June. A somewhat disturbing fact for the overall market, though possibly a good thing for covered calls investors is that after hitting a low of around 25 on June 29, the VIX (a measure of the volatility in the market) rebounded to 28 by thursday. This pop is most likely related to the worse than expected job numbers which came out for June.

In my opinion, the market over reacted the these job numbers. For one, they included all of the auto workers who have been idled since GM entered bankruptcy. Secondly, the unemployment rate itself was better than expected. Lastly, it is unrealistic to assume that this recovery will be straight up; there are going to be blips along the way. Over the next few weeks the market will be driven very much so by the earnings reports which start next week. If earnings are mixed to better than expected I think the market will be ok, if they are mostly below expectations, we may be looking at a move back towards 800 if not 700. So lets hope for everyone's sake that this does not happen.

The portfolio continues to beat the market since its inception (by about 14.5%). The chart below presents the monthly performance of the CCIP for June, as well as the performance of the portfolio since inception.

Portfolio Results

The 2009 Since Inception results are as follows:

1. Since Inception Results

CCIP Absolute Return (March 7 through June 30, 2009) = 46.09%

Benchmark S&P 500 (SPY) Absolute Return (March 7 through June 30, 2009) = 31.51%

The CCIP has outperformed the S&P 500 benchmark by a total of 14.58%

July 2009 Next Steps

The month of July is going to be very interesting for both the market and the CCIP portfolio. As earnings season begins, the market is likely to become much more volatile, which could be an advantage for option premium selling, but also cause wild fluctuations in stock prices. In terms of strategy for the CCIP, it is somewhat centered around a current strategy of selling both near month calls as well as 2-month out calls. About half of the current portfolio is in July calls, while half is in August calls. This will make expiration for July much less difficult in terms of finding new positions, but also makes it so that no additional option premiums will be had for many of the positions. This strategy was born mostly out of the fact that quite a few positions in the CCIP had fallen precipitously and so in order to sell a call above the original purchase price, it had to be done for August rather than July.

For those positions in with options expiring in July, much will depend on if the market declines until expiration, because I may face the same issue when it comes to whether to sell August calls or September calls. One thing which will give a boost to the CCIP this month is dividend payments which will tack an additional 1% onto the performance of the CCIP in July.

The strategy for establishing covered calls positions after July expiration will be as follows, and is similar to the rationale for establishing July calls earlier this month, based on the closing price of the S&P 500 on July expiration, July 17, 2009:

If S&P 500 is between 750 and 850, initial earnings reports have most likely been below expectations and the market is moving towards retesting lows. This will likely result in the sale of September calls for positions expiring in July, and possibly the buy back of calls sold for August. As far as new positions go, if there is any cash, I may sell cash-covered puts to buy in at lower prices if the market continues to decline, but still make money if the market rebounds.

If S&P 500 is between 850 and 950, we have most likely survived the first week of earnings without too much of a hitch, and some of the July covered calls should be called away. In this case I will likely establish either covered calls or cash-secured puts depending on which is positioned to yield a greater result.

If S&P 500 is above 950, we have most likely seen better than expected earnings. This would probably result in all the July calls being called away (maybe not Best Buy), and some of the August covered call positions being substantially in the money, which may result in may closing some of the positions, or rolling them up.

Update Transaction - Direxion Financial Bull 3x (FAS)

As I mentioned in my post concerning ANR, it seems that option premiums for July are baking in a very volatility until expiration. For FAS specifically, premiums have been slashed dramatically since I started taking positions in it in March. I decided to establish an August call for one of my FAS positions leaving me with only one which remains uncovered. For that position I hope to see a rise in FAS to around $11 for me to sell another call. 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
6/19/2009 - Covered Call Expired
6/26/2009 - Sold To Open 1 FAS August $10 Call @ 0.85


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $924.50
Current Cost Basis: $5.75


Downside Coverage From Current Price: 41.5%
Possible Max Upside: 50.99%

Annualized Max Upside: 143.16%

Updated Transaction - Continental Airlines (CAL)

After watching Continental continue to stay below the $9 level, I decided that I had waited long enough, and attempting to hold out until a July $11 call reached a good premium was not the best idea. As such I have decided to sell an August $11 call in order to get some premium, but not have to reduce my strike price. Technically the original purchase price of the CAL stock was above $12, so I had always planned to take a loss on the actual stock purchase, but not more than 10-15%. 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
5/27/2009 -- Bought To Close 1 CAL June $11 Call @ 0.3
6/2/2009 -- Sold To Open 1 CAL June $11 Call @ 0.65
6/12/2009 -- Bought To Close 1 CAL June $11 Call @ 0.10
6/25/2009 -- Sold To Open 1 CAL August $11 Call @ 0.50

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 (8.55): 3.5%
Possible Max Upside: 27.3%

Annualized Max Upside: 76.7%

Update Transaction - Alpha Natural Resources (ANR)

After about a 10% rebound from its recent low, ANR got back up around $26. I noticed an interesting dynamic occurring in the option prices for July and August however. The $30 July call option was hardly moving while the stock price would oscillate about 50 cents. The $30 August call option on the other hand was tracking the stock price movement fairly closely. I checked the annualized gain if I sold a July call vs an August call and found that the August call actually yielded a higher annualized return. As a result, I decided to sell an August call instead. 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
5/22/2009 -- Sold To Open 1 ANR June $27.50 Call @ 1.45
5/27/2009 -- Bought To Close 1 ANR $27.50 Call @ 2.18
5/27/2009 -- Sold To Open 1 ANR $30 June Call @ 1.09
6/16/2009 -- Bought To Close 1 ANR $30 June Call @ 0.15
6/16/2009 -- Bought To Open 1 ANR $20 June Put @ 0.5
6/25/2009 -- Sold To Open 1 ANR $30 August Call @ 1.90



The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2926.00
Current Cost Basis: $27.26


Maximum Downside Risk (due to Put): 26%
Downside Coverage: None
Possible Max Upside: 9.78%

Annualized Max Upside: 37.97%

Update Transaction - Bristol Myers Squibb (BMY)

Bristol-Myers Squibb has continued to oscillate between $19 and $21 since I purchased it in April. I have kept this position because as I mentioned in my asset allocation post, it is very important to make sure you are diversified in your portfolio. You cant always chase stocks that have the highest returns, because they are often in the same sector and can be very risky. BMY adds a low risk, high dividend position to the portfolio.

In the past few days there has been a very large run-up in the price of BMY, as a result of a shift in the market towards healthcare stocks. Unfortunately, the July premiums for BMY are not very good, and it will pay a dividend in early July, so I do not want it called away before then. As such, I sold an august call with a strike more than 5% above the current price. My new plan for BMY is to sell 2 month out calls, unless there is some event which boosts current month premiums. The new profit/loss info is below:

4/6/2009 -- Bought 100 BMY @ 20.48
4/6/2009 -- Sold To Open 1 BMY April $21 Call @ .34
4/17/2009 -- Covered Call Expired
4/20/2009 -- Sold To Open 1 BMY May $21 Call @ .65
4/29/2009 -- Bought To Close 1 BMY May $21 Call @ .11
5/12/2009 -- Sold To Open 1 BMY June $21 Call @ .55
5/27/2009 -- Bought To Close 1 BMY June $21 Call @ .18
6/25/2009 -- Sold To Open 1 BMY August $22 Call @ .35


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2048.00


Downside Coverage (from current price of $20.89): 9.6%
Possible Max Upside: 15.49%

Annualized Max Upside: 40.97%

Update Transaction - Mack-Cali Realty (CLI)

As I mentioned in my last post on CLI, I am trying to exit part of my position to reduce the 30% weighting which it holds in my portfolio. As such I have previously sold a $22.50 Call and will now sell a $20 call. If this call expires out of the money I while be extremely surprised. Additionally, the ex-dividend date is July 1st, so I assume the stock will be called away if it is above $21.70 on June 30. The profit/loss info is below:


Various -- Bought 100 CLI @ 18.80
3/2/2009 -- Sold To Open 1 CLI July $22.5 Call @ 1.2225
4/1/2009 – CLI Dividend @ .45
4/16/2009 – Bought To Close 1 CLI July $22.5 Call @ 4.45
4/16/2009 – 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
6/19/2009 - June $22.50 Call Expired
6/23/2009 - Sold To Open 1 CLI July $20.00 Call @ 1.70

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1880.00


Downside Coverage From Current Price: 28.5%
Possible Max Upside: 26.01%

Annualized Max Upside: 68.8%