Thursday, March 19, 2015

Early Exercise of Las Vegas Sands Covered Calls Position

Early this morning (prior to the stock market open), I received both an email and a phone call notification from my broker that the covered calls position in Las Vegas Sands Corp. (Ticker Symbol LVS) with an Apr2015 expiration and at the $50.00 strike price was exercised early. The LVS shares had risen to $54.80 as of yesterday's close and the time value remaining in the call option had declined to only about $.05, so the owner of the option decided to exercise his/her option to buy the shares at $50.00 in order to capture today's quarterly ex-dividend payment of $.65 per share.

The actual return-on-investment result for this closed position was 1.8% absolute return (equivalent to +213.0% annualized return for the 3 day holding period).
As is often the case, early assignment in this case provided a higher annualized return than the 32.3% annualized return if the position had been assigned at the Apr2015 expiration.

The transactions associated with this Las Vegas Sands position were as follows:
03/16/2015 Bought 200 LVS shares @ $51.53
03/16/2015 Sold 2 LVS Apr2015 $50.00 Call Options @ $2.53
Note: the price of LVS was $51.53 today when these options were sold.
03/19/2015 Short Call options exercised; so 200 LVS shares sold at $50.00 strike price
Note: the LVS stock was $54.80 upon market close yesterday

The details of the overall performance result (including commissions) for these Las Vegas Sands Corp. covered calls was as follows:
Stock Purchase Cost: $10,314.95
= ($51.53*200+$8.95 commission)

Net Profit:
(a) Options Income: +$495.55
= 200*$2.53 - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (LVS assigned at $50.00) = -$314.95
= ($50.00-$51.53)*200 - $8.95 commissions

Total Net Profit: +$180.60
= (+$495.55 +$0.00 -$314.95)

Absolute Return: +1.8%
= +$180.60/$10,314.95
Annualized Return: +213.0%
= (+$180.60/$10,314.95)*(365/3 days)