Friday, September 13, 2013
Established Foot Locker Inc. Covered Calls
09/13/2013 Bought 300 FL shares @ $32.67
09/13/2013 Sold 3 FL Oct2013 $32.00 Call Options @ $1.35
Note: Oct2013 options expiration is 10/18/2013 and next FL ex-dividend of $.20 per share is on 10/16/2013.
If Dividend Capture and stock assigned at Oct2013 expiration: +2.49% absolute return (equivalent to +24.5% annualized return) if the stock is assigned at October 2013 expiration on October 18th
Either outcome would provide a very satisfactory return. These returns will be achieved as long as the stock stays above the $32.00 strike price at assignment (2.05% of downside protection). Alternatively, if the stock declines below the strike price, the breakeven price of $31.32 ($32.67-$1.35) provides a nice 4.13% downside protection from the original $32.67 stock purchase price.
The detailed transactions and two possible performance results for this Foot Locker Inc.(FL) covered calls position is as follows:
Stock Purchase Cost: $9,809.95
= ($32.67*300+$8.95 commission)
(a) Options Income: +$393.80
= ($1.35*300 shares) - $11.20 commissions
(b) Dividend Income (If option exercised early on day prior to Oct 16th ex-div date): +$0.00
(b) Dividend Income (If stock assigned at Oct2013 expiration): +$60.00
= ($.20 dividend per share x 300 shares); or