Silver covered calls

Sold two covered calls for Silver.

Made $414.

Stay tuned......

MCD Covered Call Timeline

10/29/2010

Buy 100 shares of McDonald's (MCD) @ $77.78
Sell to open one Jan 2011 $80 call @ $1.14

Net profit: $114

Reasons for this trade:

- P/E = 17.10
- good earnings released on 10/21/2010
- Beta = 0.60
- 50 EMA and 200 EMA trending up
- $0.61/share dividend payable on 12/15/2010 (ex-div 11/29/2010)

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12/15/2010

Dividend: $0.61/share

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1/21/2011

Jan 2011 call expired. No assignment.

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2/14/2011

Sell to open June 2011 $80 call @ $0.97

Net profit: $97

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3/15/2011

Dividend: $0.61/share

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5/18/2011

Buy to close June 2011 $80 call @ $1.61
Sell to open Dec 2011 $80 call @ $4.00

This is a "spread" trade, one commission

Net profit: $239

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This options trader teaches at Lilia's Investing Academy. For more details, click here.

Gold Covered Call

Sold a gold covered call today. Made $327.00.
Premium: $3.27 (sell to open)

GLD was purchased at $129.24/share.

On Dec. 1, 2010, I "rolled" this Dec 2010 $130 call into a Jan 2011 $129 call.
This order was placed as a "spread".

Premium: $7.85 (sell to open)
Premium: $5.80 (buy to close)

The math:

($3.27 + $7.85) - ($5.80) = Net $5.32 per share

Sold Silver Covered Call

I recently sold two covered calls for Silver. I received $132 (gross).

Today (11 am, 10/5/2010), silver was up 3.48%, but the silver call option was up 53.85% !!!

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UPDATE (expiration Friday, 11/19/2010):

SLV closed at $26.74 today. The call option is in-the-money => automatic assignment.

The call option closed at $4.70 today.

IMPORTANT NOTE:

This call option traded as high as $6.70 (11/9/2010) during its life!!!!!!!!!!

Remember......the BUYER of this call option paid only 66 cents per contract (10/4/2010).

Just one month later (on 11/9/2010), this same contract was worth $6.70!!!!! That is a return of 915% in four weeks !!!!!!!!!!!!!!!!!!!!

Another way to look at this:

An initial investment of only $660 (10 contracts) was worth $6700 on 11/9 !!!!!!!!

This is the reason I love options! :-)

(you can learn all about options trading in my Level 4 class.....see www.moneyandlilia.blogspot.com for details)

GLD Sept 30 2010 123 call option

My GLD call option expired today (9/30/2010).

GLD closed at $127.91 today.

The closing bid on the call option was $4.85 and the closing ask was $4.95.

Notice that this call option still has INTRINSIC VALUE at expiration because the market price of GLD was much higher than the strike price of $123.

I was "assigned."

CONCLUSION: I am happy with this trade.

I received the following email from the PRESIDENT of TD Ameritrade at 1:00AM that night:
Date: 10-01-2010

Dear Valued Client,

You have recently been assigned the following option position:

1 GLD Sep 30 2010 123.0 Call

If you don't have sufficient cash or positions to cover this assignment, please wire the necessary funds or make the necessary trades to close your position.

If you want to trade the position created by this assignment but it hasn't posted to your account yet, you can place your trade by calling a broker. Please let the broker know the reason the order can't be completed online in order to receive the Internet commission rate.

If you have questions, please call Client Services. Please enter your account number or UserID when you call to receive the best possible service.

Sincerely,

John B. Bunch
President
TD AMERITRADE

Update on my Gold Sept 30 2010 123 call option

Gold is currently (11:16 am) trading at $126.71.

The call's strike price is $123.

$126.71 - $123.00 = $3.71

current bid for call option = $3.75

current ask for call option = $3.85

Prices of options are made up of two parts:

1) INTRINSIC VALUE = difference between current price of stock and strike price

2) TIME VALUE = how much time do we have left until expiration?

That's the reason this call price is HIGHER than $3.71. The option does not expire until 9/30.

Analysis of gold Sep 30 2010 covered call

Gold shot up today (9/14/2010), so I had to do a quick analysis:

1) close out my call position and sell gold for a profit?

or

2) leave things alone until expiration and wait for a possible assignment?

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ANALYSIS #1:

Opening trades:

bought gold @ $122.75
at this moment, gold is at $124.48
----------------------------------
profit of $1.73 x 100 = $173.00
minus $10 fee to sell gold
-----------------------------
NET profit on sale of gold if done now = $163.00

~~~~~~~~~~~~

sold call @ $1.67
right now, call costs $2.46 to buy back
-------------------------
cost = $0.79 x 100 = $79.00
initial sell to open fee = $10.75
buy to close fee = $10.75
----------------------------
total costs = $79 + $10.75 + $10.75 = $100.50

CONCLUSION (if close out position now) :

$163 - $100.50 = $62.50

============================

ANALYSIS #2:

(leave everything alone until expiration and wait for possible assignment)

Strike = $123
bought @ $122.75
--------------------
Profit = $0.25 x 100 = $25.00

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sell to open call @ $1.67 x 100 = $167.00
minus sell to open fee = $10.75
-------------------------------
= $156.25
minus assignment fee of $20
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$136.25

CONCLUSION:

Net profit if assigned: $25 (sale of gold) + $136.25 (call option) = $161.25

Net profit if NOT assigned: $167 (for selling call) - $10.75 (fee for opening trade) = $156.25

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ANALYSIS ON 9/17/2010

When I logged on this morning at 10:00 am, GLD was trading at $124.74.

The Sept 30 2010 123 call option was trading at $2.48 (bid) and $2.53 (ask).

TRANSLATION: as the price of GLD rises past the strike price of $123, the value of the call option becomes more valuable.

Gold covered call

Sold a gold covered call today. Made $167.

Covered Call on Gold

I sold another covered call today.....for GOLD!

I feel pretty good about this trade......I "made" a little over $100.