- Alibaba Group Holding Ltd.: +3.15% absolute return (+31.9% annualized return) in 36 days
- Applied Materials Inc.: +2.1% absolute return (+35.1% annualized return) in 22 days
- Bank of America Corp.: +1.3% absolute return (+13.2% annualized return) in 37 days
- Delta Air Lines Inc. (position #1): +1.0% absolute return (+7.8% annualized return) in 45 days
- Delta Air Lines Inc. (position #2): +2.3% absolute return (+21.9% annualized return) in 37 days
- Micron Technology Inc.: +2.1% absolute return (+29.3% annualized return) in 26 days
- Tenneco Inc.: +1.22% absolute return (+23.4% annualized return) in 19 days
- Voya Financial Inc.: +1.7% absolute return (+23.5% annualized return) in 26 days
Friday, September 15, 2017
September 2017 Options Expiration Results
The Covered Calls Advisor Portfolio had eight Covered Calls positions with September 15th, 2017 options expirations. Every position closed
in-the-money, so the maximum possible return-on-investment result was
achieved for each of these positions:
Thursday, September 14, 2017
Continuation of Covered Calls Position in Devon Energy Corp.
Upon the August 18th, 2017 options expiration, the Covered
Calls position in Devon Energy Corp. (ticker symbol DVN) expired with
the stock price below the $35.00 strike price. So, the August Call
options expired and the 500 shares of Devon stock were retained in the
Covered Calls Advisor Portfolio. Today, when Devon stock had risen to $34.12,
a sell-to-open order was executed to sell 5 October 20th, 2017 Call
options at the $35.00 strike price for $.89 per share to continue the
Devon Covered Calls position.
The history of this Devon Energy position so far as well as a potential return-on-investment result is detailed below:
Devon Energy Corp. (DVN) -- Continuation Covered Calls Position
The transactions were as follows:
05/25/2017 Bought 500 Devon Energy Corp. shares @ $37.45
05/25/2017 Sold 5 DVN June 16, 2017 $36.00 Call options @ $2.10
Note: this was a simultaneous buy/write transaction.
06/13/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
06/16/2017 5 DVN June 16th, 2017 Call options expired
Note: the price of DVN stock closed at $31.76 upon the June 16th options expiration date.
07/03/2017 Sold 5 DVN July 21, 2017 $33.00 Call options @ $.87 per share
07/21/2017 5 DVN Call options expired
07/26/2017 Sold 5 DVN Aug 18, 2017 $35.00 Call options @ $.65 per share
08/18/2017 5 DVN Call options expired
Note: the price of DVN stock was $30.40 upon expiration of the Aug 18th Call options
09/14/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
09/14/2017 Sold 5 DVN October 20th, 2017 $35.00 Call options @ $.89 per share
Note: the price of DVN stock was $34.12 today when the Oct 20th Call options were sold
A possible overall performance result (including commissions) would be as follows:
Cost Basis of Purchase of 500 shares DVN: $17,679.95
= ($37.45 - $2.10)*500 + $4.95 commission
Net Profit:
(a) Options Income: +$2,241.60
= ($2.10 + $.87 + $.65 + $.89) *500 shares - 4*$3.35 commissions
(b) Dividend Income: +$60.00
= ($.06 + $.06) * 500 shares
(c) Capital Appreciation (If DVN is above $35.00 strike price at Oct 20th, 2017 expiration): -$1,229.95
= ($35.00-$37.45)*500 shares - $4.95 commissions
Total Net Profit (If DVN stock is above $35.00 strike price at Oct 20, 2017 options expiration): +$1,017.65
= (+$2,241.60 options income +$60.00 dividends -$1,229.95 capital appreciation)
Absolute Return: +5.8%
= +$1,017.65/$17,679.95
Annualized Return: +14.2%
= (+$1,017.65/$17,679.95)*(365/148 days)
The history of this Devon Energy position so far as well as a potential return-on-investment result is detailed below:
Devon Energy Corp. (DVN) -- Continuation Covered Calls Position
05/25/2017 Bought 500 Devon Energy Corp. shares @ $37.45
05/25/2017 Sold 5 DVN June 16, 2017 $36.00 Call options @ $2.10
Note: this was a simultaneous buy/write transaction.
06/13/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
06/16/2017 5 DVN June 16th, 2017 Call options expired
Note: the price of DVN stock closed at $31.76 upon the June 16th options expiration date.
07/03/2017 Sold 5 DVN July 21, 2017 $33.00 Call options @ $.87 per share
07/21/2017 5 DVN Call options expired
07/26/2017 Sold 5 DVN Aug 18, 2017 $35.00 Call options @ $.65 per share
08/18/2017 5 DVN Call options expired
Note: the price of DVN stock was $30.40 upon expiration of the Aug 18th Call options
09/14/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
09/14/2017 Sold 5 DVN October 20th, 2017 $35.00 Call options @ $.89 per share
Note: the price of DVN stock was $34.12 today when the Oct 20th Call options were sold
A possible overall performance result (including commissions) would be as follows:
Cost Basis of Purchase of 500 shares DVN: $17,679.95
= ($37.45 - $2.10)*500 + $4.95 commission
Net Profit:
(a) Options Income: +$2,241.60
= ($2.10 + $.87 + $.65 + $.89) *500 shares - 4*$3.35 commissions
(b) Dividend Income: +$60.00
= ($.06 + $.06) * 500 shares
(c) Capital Appreciation (If DVN is above $35.00 strike price at Oct 20th, 2017 expiration): -$1,229.95
= ($35.00-$37.45)*500 shares - $4.95 commissions
Total Net Profit (If DVN stock is above $35.00 strike price at Oct 20, 2017 options expiration): +$1,017.65
= (+$2,241.60 options income +$60.00 dividends -$1,229.95 capital appreciation)
Absolute Return: +5.8%
= +$1,017.65/$17,679.95
Annualized Return: +14.2%
= (+$1,017.65/$17,679.95)*(365/148 days)
Friday, September 8, 2017
Early Assignment of MGM Resorts International Covered Calls
This morning the Covered Calls Advisor received email, phone mail, and text notifications from my broker (Schwab) that the
7 MGM Resorts International (ticker symbol MGM) September 15th, 2017 Call options were exercised early, so the 700 shares of MGM stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold)
at the $30.00 strike price.
Early exercise by the owners of these Call options was plausible since there was only $0.04 per share [$4.03 midpoint of Call options bid/ask price - ($33.99 current stock price - $30.00 strike price)] time value remaining in these Call options. So the Call owners were willing to immediately forego the remaining $0.04 per share time value by exercising their option to buy the shares (in order to capture today's $0.11 per share ex-dividend). The per share stock price had increased from $31.56 when this MGM position was originally established on August 28th to $33.99 at yesterday's market close.
The Covered Calls Advisor preferred this early assignment outcome instead of keeping the Covered Calls position and capturing the $0.11 per share ex-dividend today since this early assignment resulted in higher annualized return-on-investment (+27.1% achieved) rather than if the position had instead been assigned on the September 15th options expiration date; which (including the $0.11 per share dividend) would have resulted in a +22.8% annualized ROI. Using the Dividend Capture Strategy spreadsheet has been working nicely recently. In addition to this MGM position, recent early assignments in Kohl's, Intel, and JPMorgan Chase Covered Calls positions have achieved nice return-on-investment results.
As detailed below, the actual return-on-investment result achieved for this MGM position was a +0.8% absolute return (equivalent to +27.1% annualized return) for the 11 days this position was held. The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established, the transactions details of which will be posted on this blog site the same day they occur.
MGM Resorts International -- Covered Calls Position Closed by Early Assignment
The transactions were as follows:
08/28/2017 Bought 700 MGM Resorts International shares @ $31.56
08/28/2017 Sold 7 MGM Sept 15, 2017 $30.00 Call options @ $1.81 and the implied volatility of these options was 29.2 when this buy/write transaction was executed.
09/07/2017 Seven Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $30.00 strike price.
Note: the price of MGM was $33.99 when these Calls were exercised
The overall performance result (including commissions) was as follows:
Cost Basis of 7 Covered Calls in MGM: $20,834.64
= ($31.56 -$1.81)*700 + $9.64 commissions
Components of Net Profit:
(a) Options Income: +$1,267.00
= ($1.81*700 shares)
(b) Dividend Income: $0.00
(c) Capital Appreciation: -$1,096.95
= ($30.00-$31.56)*700 shares - $4.95 commissions
Total Net Profit (MGM assigned early on day prior to Sept 8th ex-dividend date) : +$170.05
= (+$1,267.00 options income +$0.00 dividends - $1,096.95 capital appreciation)
Absolute Return: +0.8%
= +$170.05/$20,834.64
Equivalent Annualized Return: +27.1%
= (+$170.05/$20,834.64)*(365/11 days)
Early exercise by the owners of these Call options was plausible since there was only $0.04 per share [$4.03 midpoint of Call options bid/ask price - ($33.99 current stock price - $30.00 strike price)] time value remaining in these Call options. So the Call owners were willing to immediately forego the remaining $0.04 per share time value by exercising their option to buy the shares (in order to capture today's $0.11 per share ex-dividend). The per share stock price had increased from $31.56 when this MGM position was originally established on August 28th to $33.99 at yesterday's market close.
The Covered Calls Advisor preferred this early assignment outcome instead of keeping the Covered Calls position and capturing the $0.11 per share ex-dividend today since this early assignment resulted in higher annualized return-on-investment (+27.1% achieved) rather than if the position had instead been assigned on the September 15th options expiration date; which (including the $0.11 per share dividend) would have resulted in a +22.8% annualized ROI. Using the Dividend Capture Strategy spreadsheet has been working nicely recently. In addition to this MGM position, recent early assignments in Kohl's, Intel, and JPMorgan Chase Covered Calls positions have achieved nice return-on-investment results.
As detailed below, the actual return-on-investment result achieved for this MGM position was a +0.8% absolute return (equivalent to +27.1% annualized return) for the 11 days this position was held. The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established, the transactions details of which will be posted on this blog site the same day they occur.
MGM Resorts International -- Covered Calls Position Closed by Early Assignment
08/28/2017 Bought 700 MGM Resorts International shares @ $31.56
08/28/2017 Sold 7 MGM Sept 15, 2017 $30.00 Call options @ $1.81 and the implied volatility of these options was 29.2 when this buy/write transaction was executed.
09/07/2017 Seven Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $30.00 strike price.
Note: the price of MGM was $33.99 when these Calls were exercised
The overall performance result (including commissions) was as follows:
Cost Basis of 7 Covered Calls in MGM: $20,834.64
= ($31.56 -$1.81)*700 + $9.64 commissions
Components of Net Profit:
(a) Options Income: +$1,267.00
= ($1.81*700 shares)
(b) Dividend Income: $0.00
(c) Capital Appreciation: -$1,096.95
= ($30.00-$31.56)*700 shares - $4.95 commissions
Total Net Profit (MGM assigned early on day prior to Sept 8th ex-dividend date) : +$170.05
= (+$1,267.00 options income +$0.00 dividends - $1,096.95 capital appreciation)
Absolute Return: +0.8%
= +$170.05/$20,834.64
Equivalent Annualized Return: +27.1%
= (+$170.05/$20,834.64)*(365/11 days)
Tuesday, September 5, 2017
Covered Calls Position Established in Discover Financial Services
Today, a Covered Calls positions was established in Discover Financial Services (ticker symbol DFS). This was established when the stock price was $58.46 and three October 20th, 2017 $57.50 Calls were sold at $2.36. This is are relatively conservative position since the Covered Calls Advisor's current Overall Market Meter sentiment is Neutral, so Discover has 1.6% downside protection to the $57.50 strike price.
Discover is currently rated as a good value by many in the investment community. Ratings by 24 analysts are: 9 Buys; 8 Outperforms; 6 Neutral; and 1 Underperform. In addition, the current Discover Financial Services target price for some services I follow are well above its current $58.46 price: S&P -- $73; Argus -- $74; and Credit Suisse -- $82.
As detailed below, the potential return-on-investment is +2.5% absolute return in 46 days (equivalent to a +19.6% annualized return-on-investment).
Discover Financial Services (DFS) -- New Covered Calls Position
The implied volatility of the Call options was 21.7 when this position
was established.
The transactions were as follows:
09/05/2017 Bought 300 shares of Discover Financial Services @ $58.46
09/05/2017 Sold 3 DFS October 20th, 2017 $57.50 Call options @ $2.36
Note: this was a simultaneous Buy/Write transaction
A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $16,836.96
= ($58.46 - $2.36)* 300 shares + $6.96 commission
Net Profit:
(a) Options Income: +$708.00
= ($2.36* 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If DFS is above $57.50 strike price at Oct 20th expiration): -$292.95
= ($57.50 -$58.46)* 300 shares - $4.95 commission
Total Net Profit (If Discover stock price is above $57.50 strike price at Oct 20th options expiration): +$415.05
= (+$708.00 options income +$0.00 dividend income -$292.95 capital appreciation)
Absolute Return: +2.5%
= +$415.05/$16,836.96
Annualized Return: +19.6%
= (+$415.05/$16,836.96)*(365/46 days)
The downside 'breakeven price' at expiration is at $56.10 ($58.46 - $2.36), which is 4.0% below the current market price of $58.46.
The probability of making a profit (if held until the October 20th, 2017 options expiration) for this Discover Financial Services Covered Calls position is 59.0%. This compares with a probability of profit of 50.2% for a buy-and-hold of Discover shares over the same time period. Using this probability of profit of 59.0%, the expected value annualized return-on-investment (if held until expiration) is +11.6% (+19.6% * 59.0%).
The 'crossover price' at expiration is $60.82 ($58.46 + $2.36). This is the price above which it would have been more profitable to simply buy-and-hold Discover Financial Services stock until the October 20th, 2017 options expiration date.
Discover is currently rated as a good value by many in the investment community. Ratings by 24 analysts are: 9 Buys; 8 Outperforms; 6 Neutral; and 1 Underperform. In addition, the current Discover Financial Services target price for some services I follow are well above its current $58.46 price: S&P -- $73; Argus -- $74; and Credit Suisse -- $82.
As detailed below, the potential return-on-investment is +2.5% absolute return in 46 days (equivalent to a +19.6% annualized return-on-investment).
Discover Financial Services (DFS) -- New Covered Calls Position
The transactions were as follows:
09/05/2017 Bought 300 shares of Discover Financial Services @ $58.46
09/05/2017 Sold 3 DFS October 20th, 2017 $57.50 Call options @ $2.36
Note: this was a simultaneous Buy/Write transaction
A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $16,836.96
= ($58.46 - $2.36)* 300 shares + $6.96 commission
Net Profit:
(a) Options Income: +$708.00
= ($2.36* 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If DFS is above $57.50 strike price at Oct 20th expiration): -$292.95
= ($57.50 -$58.46)* 300 shares - $4.95 commission
Total Net Profit (If Discover stock price is above $57.50 strike price at Oct 20th options expiration): +$415.05
= (+$708.00 options income +$0.00 dividend income -$292.95 capital appreciation)
Absolute Return: +2.5%
= +$415.05/$16,836.96
Annualized Return: +19.6%
= (+$415.05/$16,836.96)*(365/46 days)
The downside 'breakeven price' at expiration is at $56.10 ($58.46 - $2.36), which is 4.0% below the current market price of $58.46.
The probability of making a profit (if held until the October 20th, 2017 options expiration) for this Discover Financial Services Covered Calls position is 59.0%. This compares with a probability of profit of 50.2% for a buy-and-hold of Discover shares over the same time period. Using this probability of profit of 59.0%, the expected value annualized return-on-investment (if held until expiration) is +11.6% (+19.6% * 59.0%).
The 'crossover price' at expiration is $60.82 ($58.46 + $2.36). This is the price above which it would have been more profitable to simply buy-and-hold Discover Financial Services stock until the October 20th, 2017 options expiration date.
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