At the Dec2015 options expiration last Friday, the four Put options in Cal-Maine Foods Inc.(ticker symbol CALM) were assigned and 400 shares of Cal-Maine stock were purchased at the $50.00 strike price. Quarterly earnings were released after the market close yesterday and after an initial hit to the stock, the stock price recovered to above the $50 level. At that point today, the Covered Calls Advisor established a covered calls position by selling four Jan2016 Call options against the 400 Cal-Maine shares held. The company also declared a quarterly dividend of $.751 which will go ex-dividend on Jan 25th (after the Jan2016 options expiration on Jan 15th). It is likely that the Covered Calls Advisor will roll the Jan2016 covered calls into a Feb2016 covered calls position to enable a potential dividend capture.
A potential return-on-investment is +7.2% absolute return (equivalent to +57.1% annualized) for the 46 days of this Cal-Maine investment. Details of these Cal-Maine transactions to-date and a potential return-on-investment result are provided below:
1. Cal-Maine Foods Inc. (CALM) -- Continuation
12/01/2015 Sold 4 CALM Dec2015 $50.00 100% cash-secured Put options @ $1.20
Note: the price of CALM was $52.10 today when this transaction was executed.
12/18/2015 4 CALM Dec2015 Puts assigned and 400 shares of Cal-Maine stock purchased at $50.00 strike price
Note: the price of CALM was $47.52 upon the Dec2015 options expiration
12/24/2015 Established a covered calls position by selling 4 Jan2016 $50.00 Call options @ $2.45
Note: the price of CALM was $50.84 when these Call options were sold.
A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $20,000.00
(a) Options Income: +$1,438.10
= ($1.20 +$2.45)*400 shares - 2*$10.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CALM is above $50.00 strike price at Jan2016 expiration): +$0.00
= ($50.00-$50.00)*400 shares
Total Net Profit (If CALM is above $50.00 strike price at Jan2016 options expiration): +$1,438.10
= (+$1,438.10 options income +$0.00 dividend income +$0.00 capital appreciation)
Absolute Return (If CALM is above $50.00 strike price at Jan2016 options expiration): +7.2%
Annualized Return: +57.1%
= (+$469.05/$20,000.00)*(365/46 days)