Bare Escentuals, Inc Covered Call Results
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In bowling it is called a turkey, that is right I have beat the S&P 500 3 times in a row through my trades. The most recent strike that I bowled was the Covered Call trade on Bare Escentuals, initiated back on Sept 23rd, 2009.
The October 16th expiration date has come and passed on this strategy with BARE closing at $13.28, well above the $12.50 call option price that I sold. So if you are not familiar with option trading, the underlying option that I sold was exercised and I sold my position at $12.50 less commissions. I know it seems crazy that I sold for $12.50 when the stock closed over 0.75 higher but that is risk you take when you enter into a covered call (limits your upside for the premium)
Trade Summary (includes commissions):
Net Cash Investment: $1,162.70
Net Cash Proceeds: $1,239.01
Return of 6.56% over 23 days
S&P 500 return for the same time period 2.53%
Alpha Generated of 4.04%
So I am on a search for my next investment to continue the streak. If you have any ideas, please feel free to leave me a comment with your trade recommendation for my portfolio. I will update my net worth accordingly.
I also want to say congrats to PF Stock for capturing a gain on BARE during the same time period, although he didn’t enter into a covered call he was still able to lock in some gains on the upward movement of the stock.
Author Disclosure: I no longer have a position in BARE.
2 Comments on this post
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pfstock said:
Hi Elias: Thanks again for mentioning PFStock in your blog! Fidelity just sent me a new commission schedule, and I think that I understand what you were saying about the “Buy Write” strategy. It seems that they classify it as a “Multi-Leg Option” trade for which they charge only a single commission.
In the comments of the MarketClub post on my blog, I mentioned that I was stopped out of BARE at $11.25. This happened during a short period of extreme volatility in the market. I still made a 20% gain, but I could have made more if I had held.
My newest investment is Merck, which I decided to purchase based on information from the same MarketClub tool that I mentioned in my post. We will see how that turns out. Again, good luck to you.
October 19th, 2009 at 12:45 am -
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November 6th, 2009 at 1:37 am
