33Back to Monitoring page 3

Recording a Transaction
        The 'Record' button adjacent to the 'Graph' button is only used once the actual transactions have been made to establish a position. This button should not be clicked until the transactions have been executed, so that both the Stock and Options prices, and the resultant calculations appearing on the Evaluation View are a true reflection of  the actual transaction. 

What If?
       You may have noticed that two different methods are used to display data on the Evaluation View. In the boxes describing the existing open position and the possible new position, some of the data is displayed in cells surrounded by a 'frame'. For example, in the example above the Stock bid quote of 31.9, is in a framed cell. You can change the information in any of the framed cells by clicking on the cell, then entering a different value. Once the new value has been entered, pressing the Tab key will recalculate all values related to the variable just changed. Observing the differences caused by changing these values, can give you valuable insight into the relationship between the pricing of options and the variables used in determining that price.

        For a simple example of how the 'What If?' feature can be used, let's simply change the number of Call contracts from the original three down to just two. Once the change has been made, and the Tab key is hit, a number of things have changed:

A command button labeled 'Restore' has appeared above the 'Record' button, clicking this button will, surprise, surprise - restore the values and resultant calculations to thier original values. In addition to this added command button, the percentile values at neutral have both decreased - this is because the total income from the selling of Calls has been reduced by one contract. On the other hand, the rates of return as the Stock price increases has risen substantially, even when the underlying Stock price exceeds the Call Strike price of 32 1/2. This reflects the fact that all gains experienced in the one-hundred shares of naked Stock are fully realized, not reduced or eliminated by the obligation of a covered Call.

Recording a Transaction
        After reviewing the different possibilities we have decided to go with rolling out and up to the January 32 1/2's rolling from a completely covered position of three calls, to a partially covered position of two. This decision was based on a number of factors including the rate of return at expiration, the reduction in the funds invested, which decreased the 'Break Even' amount, and our neutral to slightly bullish attitude towards the Stock. Clicking the 'Record' button will transfer the relevant information to both the Accounting View and Current View as shown below. 

The Accounting View
        The Accounting View services as both a historic record of all transactions occurring in a position, plus the source for calculating the average amount invested per share - the divisor used in determining all rate of return values. All transactions are recorded on this View, including the expiration of any options and the receipt of dividends. If any open options have expired, Covered Calls Plus will prompt you to enter the Stock offer at the end of the trading day prior to expiration in order to record the worthless expiration or the call away of shares. Each time any file is opened, the Accounting View is accessed so as to update the calculations for the average amount invested per share. The x-dividend date is checked, and if need be the dividend payment is subtracted from the total funds invested in the position. In this example there is an x-dividend date of 12/20 and a dividend of .04. Any time this file is opened after 12/20, a debit of .04 times 300, or $12.00 will be subtracted from the total amount invested on the next available line on the Accounting View, which will be dated 12/20/04.
        Any time an option position has been unwound or otherwise closed, the program will calculate and post the annualized rate of return, along with the total number of days that the posted rate was realized.
        The transaction values listed in the 'Credit/Debit' column can be adjusted manually to correct any discrepancies that may occur, including using the wrong commission or to make allowance for the SEC fees (not included automatically). Changing any of the values in this column will not effect the values displayed on the Current View, but will assure the accuracy of any future calculations appearing on the Evaluation or Accounting Views.

The Current View
As mentioned previously in the 'Getting Started' section of this tutorial, a nonfunctioning copy of the Evaluation View is designated as the 'Current View', as displayed above, and is available for future reference.