06/10/2013 Sold 3 DOW Jul2013 $33.00 Call Options @ $1.99
Note: the price of DOW was $34.65 today when these options were sold.
06/26/2013 Ex-dividend of $.32 per share
If Dividend Capture: +20.4% annualized return if the stock is assigned at July 2013 expiration on July 20th
As is often the case, early assignment provides a higher annualized return, so this is the Covered Calls Advisor's preferred outcome; but either outcome would provide a very good return. These returns will be achieved as long as the stock stays above the $33.00 strike price at assignment -- a nice 4.3% of downside protection. Alternatively, if the stock declines below the strike price, the breakeven price of $32.48 ($33.47-$1.99) provides a substantial 5.8% downside protection from the original $33.47 purchase price.
In summary, this covered calls investment provides a very nice annualized ROI potential for such a conservative (hedged with substantial downside protection and the next earnings announcement is after the July options expiration date) investment.
The Covered Calls Advisor has established a set of criteria to identify situations that are advantageous for establishing covered calls positions that might achieve good returns from either an early assignment or from assignment upon options expiration. There are a very limited number of these "Early Assignment or Dividend Capture" covered call opportunites that meet the criteria below, but if/when we find them we should take full advantage.
As shown below, this DOW position satisfies almost all these criteria:
Stock Purchase Cost: $10,349.95
= ($34.47*300+$8.95 commission)
(a) Options Income: +$585.80
= ($1.99*300 shares) - $11.20 commissions
(b) Dividend Income (If option exercised early on day prior to Jun 26th ex-div date): +$0.00
(b) Dividend Income (If stock assigned at Jul2013 expiration): +$96.00 = ($.32 dividend per share x 300 shares); or