Dublin, Ireland, 24 February, 2002 How did Patrick Murray's investment club make its profit? Patrick Murray's investment club drip fed about $ 1,150 per month into their trading account, depending on the Irish pound/dollar and euro/dollar exchange rate. The total investment for period Aug 01 to February 02 inclusive equals $ 9,000. The following is a chronology of shares which were bought and sold, and how they fared.
Aug 01: Two hundred shares in Symbol Technologies (SBL) were purchased at $ 11.95. A one-month out-of-the-money covered call' was sold generating $ 180 of income on the shares. The exercise price was $ 12.50. The option was exercised, and generated an additional $ 110 profit on the original purchase price. The total gain in one month was $ 290 on a $ 2,398 investment, or a 12 per cent profit.
Sept 01: 300 Oracle (ORCL) shares were bought at $ 14.15 each: total cost $ 4,256. A covered call was sold with an exercise price of $ 15. The option was not exercised, so the shares were retained. The profit was $ 345 or 8 per cent on the investment amount. In the wake of Sept 11, the share price fell to around $ 12.
Oct 01: A further 100 Oracle shares at $ 13.15 were purchased. A call option was sold which generated $ 115 of income. The option was not exercised so the shares were retained.
Nov 01: The club still owns 400 Oracle shares and sold a one-month call option, again at an exercise price of $ 15, which generated a further $ 235 income or a 4.25 per cent return on investment. The call was not exercised as the shares remained below $ 15. One hundred shares were purchased in Parexel, a clinical research company, at $ 11.90. A one-month call option was sold generating $ 59 of income or a 5 per cent return on investment.
Dec 01: Covered calls were again sold at an exercise price of $ 15 on the 400 Oracle shares, generating a further $ 415 of income. The total income generated to date on Oracle was $ 1,100 on a $ 5,527 investment, equivalent to a return of about 20 per cent, and the club still owns 400 shares.
Two hundred shares were purchased in Pacificare (PHSY), a healthcare insurance company, at $ 17.65. The price fell 13 per cent due to unexpected refinancing. However, call options were sold at an exercise price of $ 17.50, the price rallied and the option was exercised. The shares were sold which generated $ 275 and covered a major part of the share price depreciation.
Jan 02: The 400 Oracle shares were finally sold at $ 15, generating a cash sum of $ 6,000. The Pacificare shares were sold at $ 17.50, which showed a loss of 15 cents per share or a $ 30 loss in total. However, this loss was more than covered by option income of $ 275, therefore the net gain was $ 245.
The group purchased 300 shares in Jabil Circuits at $ 21.57 for a total cost of $ 6,472. A covered call option was sold at $ 22.50, generating an income of $ 470. The option was not exercised, so the club continued to own the shares.
The group also purchased 400 shares at $ 12.58 in a healthcare company called Humana at a total cost of $ 4,995. A call option was sold at a strike price of $ 15, generating $ 135.
The share price exceeded $ 15 on the day of execution and the share option was exercised, generating a further profit of almost $ 1,000.
February 20 2002 The value of the investment account stands at $ 12,000 at current valuations from an original investment of $ 9,000, producing a profit of 33 per cent to date.
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