OPEN: We started a position on OPEN on 3/21/11 with a covered call (April 16, $90), cost 86.8. On 4/14/11, OPEN was above 104. We rolled up the April call to May 21, $90, for an additional profit of $2.7. This effectively brought our purchasing cost of OPEN down to $84.1. After disappointing earnings of yesterday, OPEN is trading around $90 now. With options expiring tomorrow, I rolled up OPEN options from May 21 to June 18, same strike (90), with a credit of $3.38/sh (i.e. the profit of selling next month’s options at 90 – the cost of buying back the short options due tomorrow). This effectively brought my purchasing cost of OPEN down further to $84.1 – $3.38 = $80.72. The monthly return is profit/cost (the margin requirement)=12.51% (in one month). Obviously, this trade shows a pretty high return. This is because the option is near or at the money (=strike price is pretty close to the stock price now).
OPEN stock price was 92.15 on 3/21/11 when I started my positions. During the past 3 months, OPEN went to as high as $115.62 on 4/25/11, but today it closed at $91.3. If you owned OPEN shares only, you would have lost about $1/sh. But using covered calls, I have gained ~$11/sh so far.
