Established Covered Calls in Nvidia Corporation

This morning a short-term Covered Calls position was established in Nvidia Corporation (ticker NVDA). Three hundred shares were purchased at $117.96 and three August 16th, 2024 Call options were sold at the $110.00 strike price at $11.12 per share--a buy/write net debit transaction of $106.84 per share which provides a $3.16 per share time value profit potential.  As I prefer, the next quarterly earnings report on August 28th is after the August 16th options expiration date.  The average target price of the Wall Street analysts following Nvidia is $135.53 which is +14.5% above today's stock purchase price.

As detailed below, a potential return-on-investment result is +3.0% absolute return-on-investment (equivalent to +46.8% annualized return-on-investment for the next 23 days) if the Nvidia share price is in-the-money (i.e. above the $110.00 strike price) and therefore assigned on its August 16th, 2024 options expiration date.

 
Nvidia Corporation (NVDA) -- New Covered Calls Position

The Buy/Write transaction was as follows:
7/24/2024 Bought 300 shares of Nvidia Corporation @ $117.96 per share.  
7/24/2024 Sold 3 NVDA  August 16th, 2024 $110.00 Call options @ $11.12 per share.  The Implied Volatility of these Call options was very high at 51.5 and the probability that the Calls will expire in-the-money on the options expiration date was 69.0% when this transaction was executed today. 

A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $32,054.01
= ($117.96 - $11.12) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$3,333.99
= ($11.12 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $110.00 strike price at expiration): -$2,388.00
+($110.00 - $117.96) * 300 shares

Total Net Profit Potential (If 300 Nvidia shares assigned at $110.00 strike price at expiration): +$945.99
= (+$3,333.99 options income + $0.00 dividend income - $2,388.00 capital appreciation)

Potential Absolute Return-on-Investment: +3.0%
= +$945.99/$32,054.01
Potential Annualized Return-on-Investment: +46.8%
= (+$945.99/$32,054.01) * (365/23 days)

Established Covered Calls in Delta Air Lines Inc.

This afternoon, a buy/write limit order was entered in Delta Air Lines Inc. (ticker DAL) to buy 400 shares and simultaneously sell 4 Call options at the August 9th, 2024 weekly options expiration date and at the $43.00 strike price. The net debit limit price for my order was $42.34 and this order was executed at 2:51PM ET when 400 shares were purchased at $44.15 and 4 August 9th, 2024 Call options were sold for $1.81 per share.  Therefore, a maximum potential time value profit of $.66 per share = [$1.81 options premium - ($44.15 stock price - $43.00 strike price)] is available for this position.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here) since Delta has an upcoming quarterly ex-dividend of $.15 per share (a 1.4% annual dividend yield) on July 30th which is prior to the August 9th options expiration date.  This dividend is included in the detailed return-on-investment calculations below.  Either an early assignment on the last trading day prior to the ex-dividend date or on the August 9th options expiration date would be desirable to the Covered Calls Advisor given the potential annualized return on investments for either outcome.  Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on October 10th, 2024 is after the August 9th, 2024 options expiration date.

As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  Even if the Delta Air Lines Inc. stock price declines somewhat during the next 18 days until the options expiration date, if the stock closes above the $43.00 strike price, then a satisfactory annualized-return-on-investment of +38.5% will be achieved.  

The average Target Price of the analysts covering Delta Air Lines is $60.31 which is +36.6% above today's purchase price; and all 19 analysts have a "Strong Buy" rating.  A primary reason for establishing this position was that Delta was highly ranked in my Stock Rover "Analysts Picks" stock screener since all 15 criteria in that screener are currently achieved by Delta (see chart below):  

 

As detailed below, two potential return-on-investment results are: 

•  +1.5% absolute return (equivalent to +70.4% annualized return-on-investment for the next 8 days) if the stock is assigned early (on the last business day prior to the July 30th, 2024 ex-dividend date); or  
  

• +1.9% absolute return (equivalent to +38.5% annualized return-on-investment over the next 18 days) if the stock is assigned on the August 9th, 2024 options expiration date.

Delta Air Lines Inc. (DAL) -- New Covered Calls Position
The buy/write transaction was:
7/22/2024 Bought 400 Delta Air Lines Inc. shares @ $44.15.
7/22/2024 Sold 4 Delta 8/9/2024 $43.00 Call options @ $1.81 per share.
7/30/2024 Upcoming quarterly ex-dividend of $.15 per share.

Two possible overall performance results (including commissions) for this Delta Air Lines Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $16,938.68
= ($44.15 - $1.81) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$721.32
= ($1.81 * 400 shares) - $2.68 commission
(b) Dividend Income (If Delta Air Lines Call options exercised early on July 29th, 2024, the last business day prior to the July 30th ex-div date): +$0.00; or
(b) Dividend Income (If Delta stock assigned at the August 9th, 2024 options expiration date): +$60.00
= ($.15 dividend per share x 400 shares)

(c) Capital Appreciation (If Delta's Call options assigned early on July 30th): -$460.00

+($43.00 strike price - $44.15 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $43.00 strike price at the August 9th options expiration): -$460.00
+($43.00 - $44.15) * 400 shares

1. Total Net Profit [If option exercised early (business day prior to the July 30th, 2024 ex-dividend date)]: +$261.32

= (+$721.32 options income +$0.00 dividend income -$460.00 capital appreciation); or

2. Total Net Profit (If Delta's shares assigned at $43.00 at the August 9th, 2024 expiration): +$321.32

= (+$721.32 options income +$60.00 dividend income -$460.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.5%

= +$261.32/$16,938.68

Potential Annualized Return-on-Investment (If option exercised early): +70.4%

= (+$261.32/$16,938.68) * (365/8 days); or

2. Potential Absolute Return-on-Investment (If Delta's shares assigned on August 9th options expiration date): +1.9%

= +$321.32/$16,938.68

Potential Annualized Return-on-Investment (If Delta's shares assigned at $43.00 at the August 9th, 2024 expiration): +38.5%

= (+$321.32/$16,938.68) * (365/18 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, all nine criteria are achieved for this Delta Air Lines Inc. Covered Calls position.

Continuation of Covered Calls Position in KraneShares CSI China Internet ETF

Last Friday, the Covered Calls positions in KraneShares CSI China Internet ETF (ticker KWEB) closed out-of-the-money. So, the Calls expired and shares remained in the Covered Calls Advisor Portfolio.  This morning, I decided to continue this Covered Calls position by selling Call options to roll out two weeks to the August 2nd, 2024 weekly options expiration date. The transactions-to-date as well as the potential return-on-investment results if this position is assigned on the options expiration date is as follows:

KraneShares CSI China Internet ETF (KWEB) -- Continuation of Covered Calls Position 

The Buy/Write transaction was as follows:
5/20/2024 Bought 1,000 shares of CSI China Internet ETF @ $31.90 per share.  
5/20/2024 Sold 10 KWEB June 21st, 2024 $30.00 Call options @ $2.44 per share.  The Implied Volatility of the Calls was 31.2 when this position was established.  

6/21/2024 Ten KWEB Calls expired out-of-the-money and the 1,000 KWEB shares remain in the Covered Calls Advisor Portfolio.

6/24/2024 Continued this Covered Calls position by selling-to-open 10 KWEB 7/19/2024 $30.00 Call options at $.33 when the KWEB price was $28.60 per share against the 1,000 KWEB shares owned.

7/19/2024 Ten KWEB Calls expired out-of-the-money and the 1,000 KWEB shares remain in the Covered Calls Advisor Portfolio.

7/22/2024 Continued this Covered Calls position by selling-to-open 10 KWEB 8/2/2024 $29.00 Call options at $.17 when the KWEB price was $27.70 per share against the 1,000 KWEB shares owned.

 

A possible overall performance result (including commissions) for this CSI China Internet ETF Covered Calls position if it is in-the-money on its 8/2/2024 options expiration date is as follows: 

KWEB Covered Calls Net Investment: $29,466.70

= ($31.90 - $2.44) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$2,756.60
= ($2.44 + $.33 + $.17) * 1,000 shares - $20.10 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 CSI China Internet ETF shares assigned at $29.00 strike price at the 8/2/2024 options expiration date): -$2,900.00
+($29.00 strike price - $31.90 shares purchase price) * 1,000 shares

Total Net Profit Potential (If 1,000 CSI China Internet ETF shares assigned at the $29.00 strike price at expiration): - $143.40
= (+$2,756.60 options income + $0.00 dividend income - $2,900.00 capital appreciation)

Potential Absolute Return-on-Investment: -0.5%
= -$143.40/$29,466.70
Potential Annualized Return-on-Investment: -2.4%
= (-$143.40/$29,466.70) * (365/74 days)

Covered Calls Position Closed in The Walt Disney Company

Last Friday, the Covered Calls position in The Walt Disney Company (ticker DIS) closed out-of-the-money at $95.74 which was below its $100.00 strike price.  Today I decided to close out this position by selling the 200 shares. The transactions history for this Disney Covered Calls position and its associated return-on-investment results are detailed below.

The Walt Disney Company (DIS) -- Covered Calls Position Closed by Decision

The buy/write transaction was:
7/2/2024 Bought 200 The Walt Disney Company shares @ $97.58
7/2/2024 Sold 2 DIS 7/19/2024 $100.00 Call options @ $1.03 per share.
7/8/2024 Ex-dividend of $.45 per share.

7/19/2024 Two Disney Call options expired out-of-the-money at $95.74 per share and the 200 Disney shares remain in the Covered Calls Advisor Portfolio.

7/22/2024 Closed out this Disney Covered Calls position by selling the 200 remaining shares at $94.42. 

The overall performance results (including commissions) for this Disney Covered Calls position are as follows:
Covered Calls Net Investment: $19,311.34
= ($97.58 - $1.03) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$204.66
= ($1.03 * 200 shares) - $1.34 commission
(b) Dividend Income:  +$90.00
= ($.45 dividends per share x 200 shares)
(c) Capital Appreciation (DIS stock sold at $94.42): -$632.00
+($94.42 selling price - $97.58 stock purchase price) * 200 shares

Total Net Profit: -$337.34

= (+$204.66 options income +$90.00 dividend income -$632.00 capital appreciation)

Absolute Return-on-Investment: -1.7%

= (-$337.34/$19,311.34)

Equivalent Annualized Return-on-Investment: -31.9%

= (-$337.34/$19,311.34) * (365/20 days)