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Saturday, December 16, 2017

December 15th, 2017 Options Expiration Results

The Covered Calls Advisor Portfolio had fifteen positions with December 15th 2017 options expirations.  Five positions (2 positions in Bank of America, Best Buy, Devon Energy, and Schlumberger) had early assignments (on the day prior to the ex-dividend date in each instance) and the financial results from those positions were posted on this blog the same day they occurred.

Of the total fifteen positions, the remaining ten positions were held until yesterday's December 15th expiration.  Of these, eight positions (Blackstone Group LP, Citgroup Inc., The Coca-Cola Company, Delta Air Lines Inc., Devon Energy Corp., Freeport McMoRan Inc., Lam Research Corp., and Sinclair Broadcast Group Inc.) closed in-the-money, so the maximum possible return-on-investment result was achieved for each of these positions:
  • Blackstone Group LP:  +1.7% absolute return (+17.3% annualized return) in 36 days
  • Citigroup Inc.:  +2.9% absolute return (+20.0% annualized return) in 53 days  
  • The Coca-Cola Company:  +1.4% absolute return (+17.7% annualized return) in 29 days
  • Delta Air Lines Inc.:  +2.2% absolute return (+22.7% annualized return) in 36 days
  • Devon Energy Corp.:  +12.8% absolute return (+22.9% annualized return) in 204 days  
  • Freeport McMoRan Inc.:  +6.2% absolute return (+53.6% annualized return) in 42 days
  • Lam Research Corp.:  +1.8% absolute return (+38.3% annualized return) in 17 days
  • Sinclair Broadcast Group:  +1.9% absolute return (+37.8% annualized return) in 18 days
The cash now available in the Covered Calls Advisor Portfolio from the closing of these eight positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

The remaining two positions (Alibaba and General Motors) closed yesterday with their stock price below their strike prices, so those shares will remain in the Covered Calls Advisor Portfolio (see holdings in right sidebar) until either the stock is sold or continuation Covered Calls positions are established. 


To show how return-on-investment results for a closed Covered Calls position are calculated, the details for one of the eight assigned positions (Blackstone Group LP) is provided here:


Blackstone Group L.P. (BX) -- Covered Calls Position Closed
The implied volatility of the Call options was 25.2 when this position was established.  There weree no ex-dividend dates or earnings reports prior to the December 15th options expiration date.

The transactions were as follows:
11/10/2017 Bought 500 shares of Blackstone Group stock @ $31.96 per share 
11/10/2017 Sold 5 BX December 15th, 2017 $31.00 Call options @ $1.49 per share
12/15/2017 Blackstone Group stock closed at $31.41 (above $31.00 strike price) at expiration, so 5 Call options expired and 500 shares of BX stock owned were sold at $31.00

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $15,243.30
= ($31.96 - $1.49)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$745.00
= ($1.49* 500 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BX stock assigned at $31.00 strike price at Dec 15th expiration): -$484.95
= ($31.00 -$31.96)* 500 shares - $4.95 commission

Total Net Profit: +$260.05
= (+$745.00 options income +$0.00 dividend income -$484.95 capital appreciation)

Absolute Return: +1.7%
= +$260.05/$15,243.30
Equivalent Annualized Return: +17.3%
= (+$260.05/$15,243.30)*(365/36 days)

Friday, December 15, 2017

Established Covered Calls Position in Financial Select Sector SPDR Fund

A Covered Calls position has been established in the Financial Select Sector SPDR Fund (ticker XLF) at the $28.00 strike price and for the December 29th, 2017 options expiration date. Today, XLF went ex-distibution at $.1283 per share. Capturing this distribution is included in the potential financial results detailed below. In this case, a slightly out-of-the money strike price was chosen as the stocks of large banks and insurance companies, which are the predominant holdings in the XLF Fund, should benefit from the expected passage next week of the current tax bill.  

As detailed below, two potential return-on-investment results are:
  • +1.1% absolute return in 16 days (equivalent to a +25.3% annualized return-on-investment) if the price of XLF is unchanged upon the Dec 29th options expiration; OR
  • +1.8% absolute return in 16 days (equivalent to a +41.3% annualized return-on-investment) if the price of XLF rises to above the $28.00 strike price on the expiration date 


  • Financial Select Sector SPDR Fund (XLF) -- New Covered Calls Position
    The transactions were as follows:
    12/14/2017 Bought 1,000 shares of Financial Select Sector SPDR Fund shares @ $27.80 
    12/14/2017 Sold 10 XLF Dec 29th, 2017 $28.00 Call options @ $.18 per share
    Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of these Call options was 14.8 
    12/15/2017 Ex-Distribution of $128.30 = $.1283 per share x 1,000 shares

    Two possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $27,811.65
    = ($27.80 - $.18)* 1,000 shares + $11.65 commission

    Net Profit Components:
    (a) Options Income: +$180.00
    = ($.18* 1,000 shares)
    (b) Distribution Income: +$128.30
    = $.1283 per share * 1,000 shares 
    (c) Capital Appreciation (If XLF is unchanged at $27.80 purchase price at Dec 29th expiration): +$0.00
    = ($27.80 -$27.80)* 1,000 shares; OR
    (c) Capital Appreciation (If XLF is above $28.00 strike price at Dec 29th expiration): +$195.05
    = ($28.00 -$27.80)* 1,000 shares - $4.95 commission

    (a) Total Net Profit (If XLF price unchanged at $27.80 at expiration): +$308.30
    = (+$180.00 options income +$128.30 distribution income -$0.00 capital appreciation); OR
    (b) Total Net Profit (If XLF shares assigned at expiration): +$503.35
    = (+$180.00 options income +$128.30 distribution income +$195.05 capital appreciation)

    (a) Absolute Return (If XLF price unchanged at expiration): +1.1%
    = +$308.30/$27,811.65
    Equivalent Annualized Return: +25.3%
    = (+$308.30/$27,811.65)*(365/16 days); OR
    (b) Absolute Return (If XLF shares assigned at expiration): +1.8%
    = +$503.35/$27,811.65
    Equivalent Annualized Return: +41.3%
    = (+$503.35/$27,811.65)*(365/16 days)

    The downside 'breakeven price' at expiration is at $27.4917 ($27.80 price per share - $.18 options income - $.1283 distribution income), which is 1.1% below the current market price of $27.80.

    Thursday, December 14, 2017

    Early Assignment of Devon Energy Corp. Covered Calls

    Early this morning, the Covered Calls Advisor received notifications from my broker (Schwab) that three Devon Energy Corp. (ticker symbol DVN) December 15th, 2017 $36.00 Call options were exercised early, so 300 shares of Devon Energy stock in the Covered Calls Advisor Portfolio (CCAP) were assigned (i.e. sold) at the $36.00 strike price. 

    As you might recall, the Covered Calls Advisor Portfolio (CCAP) was short 5 Dec. 15th $36.00 Call options and was fully covered by 500 long shares of Devon stock.  So, three of the five Devon Covered Calls were exercised early by the owners of these Call options and the remaining 2 Covered Calls remain in the CCAP.  The possibility of some Dec 15th $36.00 Devon Call owners choosing to exercise early to capture the $.06 ex-dividend today while other owners didn't is not surprising.  There was only $0.05 per share [$2.11 midpoint of Call options' $2.03/$2.18 bid/ask price - ($38.06 current stock price - $36.00 strike price)] time value remaining in these Call options.  So some Call owners were willing to immediately forego the remaining $0.05 per share time value by exercising their option to buy the shares (in order to capture today's $0.06 per share ex-dividend).

    As detailed below, the actual return-on-investment result achieved for the three Devon Covered Calls that were assigned today was a +12.5% absolute return (equivalent to +22.7% annualized return) for the 202 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 two Devon Covered Calls remaining in the Covered Calls Advisor Portfolio will likely be assigned at their Dec 15th options expiration at market close tomorrow.


    Devon Energy Corp. (DVN) -- Covered Calls Position Closed by Early Assignment
    The transactions history was 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
    10/20/2017 5 DVN Call options expired
    Note: the price of DVN stock was $34.92 upon expiration of the Oct 20th Call options
    10/27/2017 Sold 5 DVN November 17th, 2017 $36.00 Call options @ $.93 per share
    Note: the price of DVN stock was $35.66 today when the Nov 17th Call options were sold
    11/17/2017 Bought-to-Close 5 DVN Nov 17th $36.00 Call options @ $2.73
    11/17/2017 Sold-to-Open 5 DVN Dec 15th, 2017 $36.00 Call options @ $3.14
    12/14/2017 Three DVN Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $36.00 strike price.
    Note: the closing price of Devon stock was $38.06 when these Calls were exercised

    The overall performance result (including commissions) was as follows:
    Cost Basis of Original Covered Calls Position Established in DVN: $10,607.97
    = ($37.45 - $2.10)*300 + (3/5) * $4.95 commission

    Net Profit Components:
    (a) Options Income: +$1,734.90
    = ($2.10 + $.87 + $.65 + $.89 +$.93 -$2.73 +$3.14) *300 shares - 6*$3.35 commissions
    (b) Dividend Income: +$36.00
    = ($.06 + $.06) * 300 shares
    (c) Capital Appreciation: -$439.95
    = ($36.00-$37.45)*300 shares - $4.95 commissions

    Total Net Profit: +$1,330.95
    = (+$1,734.90 options income +$36.00 dividends -$439.95 capital appreciation)

    Absolute Return: +12.5%
    = +$1,330.95/$10,607.97
    Annualized Return: +22.7%
    = (+$1,330.95/$10,607.97)*(365/202 days)

    Wednesday, December 13, 2017

    Overall Market Meter Remains 'Neutral'

    Today, the Covered Calls Advisor recalculated the current values for each of the seven factors used to determine the "Overall Market Meter" rating.  The result is that the Covered Calls Advisor's current market viewpoint remains unchanged at Neutral.  A graphical representation of the "Overall Market Meter" is shown in the right sidebar on this page.    

    The seven factors used can be categorized as:
    - macroeconomic (the first two indicators in the chart below),
    - momentum (next two indicators in the chart),
    - value (next two indicators), and
    - growth (the last indicator).
    Note: The rating for each of these factors is not subjective.  Each factor is calculated using objective, quantifiable measures.

    The current Market Meter average of 3.14 (see blue line at the bottom of the chart above) is in the Neutral range (Note: the Neutral range is from 3.10 to 3.59).  As shown in the right sidebar, the Covered Calls investing strategy corresponding to this overall Neutral sentiment is to "on-average sell 1% out-of-the-money Covered Calls for the next options expiration month".

    The Macroeconomic and Momentum factors are Bullish, the Value factors are Very Bearish, and the Growth factor is Neutral.  Please take special notice that both Value indicators (P/E Ratios and also Total Market Index to GDP) are Very Bearish:
    • The current P/E ratio for the S&P 500 (based on the average of the actual 'Operating' and 'As Reported' earnings for the past year) is very high at 23.6.  This is higher than the expected current P/E ratio of 18.6 (based on the current 2.0% CPI-U inflation rate for the past year).  The market would have to decline by 21.2% from its current level to reach a current expected average P/E ratio of 18.6.  
    • As the chart below clearly demonstrates, only once since 1970 has the Wilshire 5000 to GDP (aka Buffett Indicator) been at a higher level than it is currently.    
    This very high current market valuation explains why the Covered Calls Advisor Portfolio is now establishing only conservative in-the-money positions.

    Finally, in February this year, the Covered Calls Advisor posted an article about the 'Emotional Roller Coaster of Investing' (Link to Article) which posited that we were in the 'Exhiliration' stage and furthermore that passing a Tax Reform bill might be the final step that would transition investors further into the 'Euphoria' stage. Such a bill could become law within the next month. That might result in yet another short-term all-time high in the stock market.  But when it comes to investing, the Covered Calls Advisor now advises 'extreme caution' since (as the 'Emotional Roller Coaster of Investing graph shows) euphoria is normally followed by declines in investors' sentiment which are accompanied by stock market declines.
    Do you agree?  Disagree?  Why?

    To share your comments or questions regarding this post (or the details related to any of the seven factors used in this Overall Market Meter model), please click on the Comments link below or email me at the address shown in the upper-right sidebar.

    Regards and Godspeed,
    Jeff

    Thursday, December 7, 2017

    Established Covered Calls Position in Skyworks Solutions Inc.

    Today, a Covered Calls position was established in Skyworks Solutions Inc. (ticker SWKS) for the January 19th, 2018 expiration and at the $90.00 strike price.  The stock was purchased today at $95.56.  Skyworks' stock has experienced a precipitous decline since its earnings report one month ago when it was trading at $116 per share just prior to its earnings release.  The extent of the decline does not seem justified because of the ongoing increase in both revenues and earnings and the prospect for this continuing into 2018 since Skyworks should benefit as a supplier to Apple's iPhones, including the just released Apple X phone.  Although Skyworks is improving the diversification of its customer base, currently almost 40% of their revenues are from Apple.  One result of this stock price decline is that the 90-day historic volatility of the stock has spiked from 26.4 to 35.1 today when this position was established.   

    One of the Screeners developed by the Covered Calls Advisor called the 'Multifactor Model' uses a combination of factors in the categories of Value, Profitability, Growth, Capital Allocation, and Quality of Earnings.  Skyworks is one of the stocks that was identified by this screen. 

    As detailed below, a potential return-on-investment result is +2.59% absolute return (equivalent to +21.5% annualized return for the next 44 days) if the stock is assigned on the January 19th, 2018 options expiration date.

     
    Skyworks Solutions Inc. (SWKS) -- New Covered Calls Position

    Call options liquidity was good with 976 open interest contracts in the Jan 19th $90.00 Calls.

    As shown in the chart below, a Covered Calls positions was chosen instead of its synthetically equivalent short 100% Cash-Secured Put options position in this instance:
    You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  Skyworks' next quarterly earnings report is after the January 19, 2018 options expiration date.
    Also in the chart above is a column called "Intervening Ex-Div" and "NO" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  Skyworks' next ex-dividend date is after the January 19, 2018 options expiration date, so the potential for applying a Dividend Capture Strategy is not relevant in this instance.

    For this position, the downside 'breakeven price' at expiration is at $87.70 ($95.56 - $7.86), which is 8.2% below the current market price of $95.56. 

    The 'crossover price' at expiration is $103.42 ($95.56 + $7.86).  This is the price above which it would have been more profitable to simply buy-and-hold Skyworks Solutions stock until January 19th (the January monthly options expiration date) rather than establishing this Covered Calls position.

    If you have any questions or comments to share, please click on the Comments link below.  Thank you.

    Established Covered Calls Position in iShares China Large-Cap ETF

    Today, a January 19th, 2018 Covered Calls position was established in iShares China Large-Cap ETF (ticker symbol FXI).  Given the Covered Calls Advisor's current Neutral market sentiment, a slightly in-the-money position (at the $43.00 strike price, 3.4% below the $44.52 stock price when the position was established).  

    As detailed below, two potential return-on-investment results are:
    • Early Assignment: A +0.7% absolute return in 13 days (equivalent to a +19.1% annualized return-on-investment); or
    • Assignment at Expiration: A +2.2% absolute return in 44 days (equivalent to a +18.1% annualized return-on-investment)
    Note: the Implied Volatility (IV) of the options at the time they were sold was 26.9 which exceeds the Covered Calls Advisor's minimum threshold of IV>20 and thus provides a sufficiently attractive potential return-on-investment for this relatively conservative position.  


    iShares China Large-Cap ETF (FXI) -- New Covered Call Position
    A semi-annual distribution will occur on December 20th.  The amount of the distribution has not yet been declared by BlackRock, but a current estimate of $.65 (the distribution was $.6892 last December) is included in the potential results analysis below.  Although unlikely, if the current time value (i.e. extrinsic value) of $.30 [$1.82 option premium - ($44.52 stock price - $43.00 strike price)] remaining in the short call option decays to approximately $.10 or less by December 19th (the day prior to the ex-distribution date), then there is a possibility that the Call options owner would exercise early and call FXI away to capture the distribution.


    The transactions were:
    12/07/2017 Bought 500 FXI shares @ $44.52
    12/07/2017 Sold 5 FXI Jan 19th, 2018 $43.00 Call options @ $1.82
    Note: a simultaneous buy/write transaction was executed.
    12/20/2017 Upcoming FXI semi-annual distribution estimated at $.65 per share

    Two possible overall performance results (including commissions) for this FXI Covered Calls position are as follows:
    Covered Calls Purchase Cost Basis: $21,358.30
    = ($44.52 - $1.82) *500 shares + $8.30 commissions

    Net Profit Components:
    (a) Options Income: +$910.00
    = ($1.82*500 shares)
    (b) Distribution Income (If Call options exercised early on business day prior to Dec 20th ex-distribution date): +$0.00; or
    (b) Distribution Income (If FXI assigned at Jan 19th, 2018 expiration): +$325.00
    = ($.65 distribution per share x 500 shares)
    (c) Capital Appreciation (If FXI assigned early on Dec 19th): -$764.95
    +($43.00-$44.52)*500 shares - $4.95 commissions; or
    (c) Capital Appreciation (If FXI assigned at $43.00 at Jan 19th, 2018 expiration): -$764.95
    +($43.00-$44.52)*500 shares - $4.95 commissions

    Total Net Profit (If option exercised on day prior to Dec 20 ex-distribution date): +$145.05
    = (+$910.00 +$0.00 -$764.95); or
    Total Net Profit (If FXI assigned at $43.00 at Jan 19th, 2018 expiration): +$470.05
    = (+$910.00 +$325.00 -$764.95)

    1. Absolute Return [If options exercised on Dec 19th (business day prior to ex-distribution date)]: +0.7%
    = +$145.05/$21,358.30
    Annualized Return (If option exercised early): +19.1%
    = (+$145.05/$21,358.30)*(365/13 days); OR

    2. Absolute Return (If FXI assigned at $43.00 at Jan 19th, 2018 expiration): +2.2%
    = +$470.05/$21,358.30
    Annualized Return: +18.1%
    = (+$470.05/$21,358.30)*(365/44 days)

    In this instance, early assignment provides a slightly higher annualized return, so this is the Covered Calls Advisor's preferred outcome; but either outcome would provide an attractive return-on-investment result for this investment.  These returns will be achieved if FXI is above the $43.00 strike price at the January 19th, 2018 expiration.  If the stock declines below the strike price, the breakeven price of $42.05 ($44.52 -$1.82 - $.65) provides a 5.5% downside protection below today's purchase price.

    Wednesday, December 6, 2017

    Established Covered Calls Position in Las Vegas Sands Corp.

    Today, a Covered Calls position was established in Las Vegas Sands Corp. (ticker LVS) for the January 19th, 2018 expiration and at the $67.50 strike price.   Given the Covered Calls Advisor's current Overall Market Meter sentiment of Neutral, a slightly in-the-money position was established.

    The Implied Volatility of the Jan 19th $67.50 Call options was 21.9 and the Open Interest was 2,141 contracts today when this position was established.  In addition, there is an upcoming ex-dividend of $.73 on December 20th which is included in the detailed analysis below.

    This morning, the Covered Calls Advisor ran screens using my six favorite customized screeners [Earnings Surprise, Jeff #1, Base Hit, Reinvestment Moats, QVG (Quality, Value, and Growth), and Margin of Safety] via the Old School Value site.  There are 10 companies that appeared on more than one screen result and that also (1) have good options liquidity for January 19th near-the-money strike prices, and (2) are either Buy or Outperform rated on average by Analysts surveyed by Reuters:

    Of these 10 stocks, the Covered Calls Advisor chose to invest today in Las Vegas Sands because:
    1. LVS is also buy-rated by Schwab Equity Ratings, Argus, and CFRA(i.e. S&P's Global Market Intelligence); and 
    2. It has a very attractive annualized return-on-investment potential, namely:
    • A +1.48% absolute return (equivalent to +38.7% annualized return for the next 14 days) if the stock is assigned early (business day prior to the December 20th ex-div date); OR  
    • A +2.58% absolute return (equivalent to +20.9% annualized return over the next 45 days) if the stock is assigned on the January 19th, 2017 options expiration date.


    Las Vegas Sands Corp (LVS) -- New Covered Calls Position
    As shown in the chart below, a Covered Calls positions was established since the potential return-on-investment results are preferable in comparison to its synthetically equivalent short Cash-Secured Put options position in this instance:
    You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  Las Vegas Sands next quarterly earnings report is after the January 19, 2018 options expiration date.
    Also in the chart above is a column called "Intervening Ex-Div" and "YES" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  This means that LVS will go ex-dividend sometime between today and the options expiration date and the Covered Calls Advisor's Dividend Capture Strategy spreadsheet should be completed to determine if the pre-determined criteria are met to justify establishing a Covered Calls position for Las Vegas Sands.

    The Covered Calls Advisor has established a set of eleven criteria to evaluate potential Covered Calls using a Dividend Capture Strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all eleven criteria are achieved for this Las Vegas Sands position.

    For this position, the downside 'breakeven price' at expiration is at $65.77 ($68.91 - $2.41 -$.73), which is 4.6% below the current market price of $68.91. 

    The 'crossover price' at expiration is $70.59 ($68.91 + $2.41 -$.73).  This is the price above which it would have been more profitable to simply buy-and-hold LVS stock until January 19th (the January monthly options expiration date) rather than establishing this Covered Calls position.

    If you have any questions or comments to share, please click on the Comments link below.  Thank you.

    Early Assignment of Best Buy Inc. Covered Calls Position

    Before the market open today, the Covered Calls Advisor received notification from my broker (Schwab) that the 4 Best Buy Inc. (ticker symbol BBY) December 15th, 2017 Call options were exercised early, so the 400 shares of Best Buy stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $52.50 strike price. 

    Best Buy stock was $61.98 at yesterday's market close.  Early exercise by the owners of these Call options was expected since the Call options were deep in-the-money and there was only $.02 time value [$9.50 midpoint of Call options bid/ask price - ($61.98 current stock price - $52.50 strike price)] remaining in these Call options.  So, the Call owners were willing to immediately forego the remaining $0.02 per share (by exercising their option to buy the shares) in order to capture today's $0.34 per share ex-dividend.  The per share stock price had increased from $55.11 when this Best Buy position was originally established on October 25th to $61.98 (18.1% in-the-money) at yesterday's market close.

    The Covered Calls Advisor preferred this early assignment outcome instead of keeping the Covered Calls position and capturing the $0.34 per share ex-dividend today since this early assignment resulted in higher annualized return-on-investment (+41.1% achieved) rather than if the position had instead been assigned on the December 15th options expiration date; which (including today's $0.34 per share dividend) would have resulted in a slightly lower +37.8% annualized ROI. 

    Using the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (Link to 'Criteria for Identifying Dividend Capture Covered Calls Opportunities' blog article) has been working nicely recently.  In addition to this Best Buy position, recent early assignments in Schlumberger, Bank of America (2 positions), MGM Resorts, Kohl's, Intel, JPMorgan Chase, PulteGroup, and Goldman Sachs Covered Calls positions have achieved annualized return-on-investment results of 41.1%, 19.3%, 33.0%, 27.1%, 37.0%, 53.2%, 16.1%, 15.6%, and 19.8% respectively.  In each instance, the annualized returns for these early assignments exceeded that which would have been achieved if the dividends had instead been received for these Covered Calls and the Call options exercised on the options expiration date.

    As detailed below, the actual return-on-investment result achieved for this Best Buy position was a +4.6% absolute return (equivalent to +41.1% annualized return) for the 41 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.


    Best Buy Inc. (BBY) -- Early Assignment of Covered Calls Position
    The implied volatility of the Call options was 25.6 when this position was established on October 25th. 
    The transactions were as follows:
    10/25/2017 Bought 400 shares of Best Buy stock @ $55.11 per share 
    10/25/2017 Sold 4 Best Buy November 17th, 2017 $52.50 Call options @ $4.23 per share
    Note: this was a simultaneous Buy/Write transaction
    11/17/2017 Bought-to-Close 4 Nov 17th $52.50 Call options @ $1.92 per share
    11/17/2017 Sold -to-Open 4 Dec 15th, 2017 $52.50 Call options @ $2.68 per share
    Note: this was a simultaneous Net Credit transaction of $.76 when the BBY stock was at $54.30.
    12/05/2017 Four BBY Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $52.50 strike price.
    Note: the closing price of Best Buy stock was $61.98 when these Calls were exercised

    The overall performance result (including commissions) was as follows:
    Covered Calls Original Cost Basis: $20,359.63
    = ($55.11 - $4.23)* 400 shares + $7.63 commission

    Net Profit Components:
    (a) Options Income: +$1,988.37
    = ($4.23 - $1.92 + $2.68) * 400 shares) - $7.63 commissions
    (b) Dividend Income: +$0.00
    (c) Capital Appreciation: -$1,048.95
    = ($52.50 -$55.11)* 400 shares - $4.95 commission

    Total Net Profit: +$939.42
    = (+$1,988.37 options income +$0.00 dividend income -$1,048.95 capital appreciation)

    Absolute Return: +4.6%
    = +$939.42/$20,359.63
    Equivalent Annualized Return: +41.1%
    = (+$939.42/$20,359.63)*(365/41 days)

    Please click on the 'Comments' link below if you have any questions or comments to share related to this topic.

    Godspeed,
    Jeff

    Tuesday, December 5, 2017

    Early Assignment of Schlumberger Ltd. Covered Calls Position

    This morning the Covered Calls Advisor received email, phone mail, and text notifications from my broker (Schwab) that the 4 Schlumberger Ltd. (ticker symbol SLB) December 15th, 2017 Call options were exercised early, so the 400 shares of Schlumberger stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $60.00 strike price. 

    Early exercise by the owners of these Call options was expected since there was only $.08 time value [$4.58 midpoint of Call options bid/ask price - ($64.50 current stock price - $60.00 strike price)] remaining in these Call options.  So, the Call owners were willing to immediately forego the remaining $0.08 per share (by exercising their option to buy the shares) in order to capture today's $0.50 per share ex-dividend.  The per share stock price had increased from $61.37 when this Schlumberger position was originally established on November 27th to $64.50 (7.6% in-the-money) at yesterday's market close.

    The Covered Calls Advisor preferred this early assignment outcome instead of keeping the Covered Calls position and capturing the $0.50 per share ex-dividend today since this early assignment resulted in higher annualized return-on-investment (+33.5% achieved) rather than if the position had instead been assigned on the December 15th options expiration date; which (including the $0.50 per share dividend) would have resulted in a slightly lower +30.2% annualized ROI.  This +33.5% result was the maximum possible return result that could have been achieved when this position was established.

    Using the Dividend Capture Strategy spreadsheet has been working nicely recently.  In addition to this Schlumberger position, recent early assignments in Bank of America (2 positions), MGM Resorts, Kohl's, Intel, JPMorgan Chase, PulteGroup, and Goldman Sachs Covered Calls positions have achieved annualized return-on-investment results of 19.3%, 33.0%, 27.1%, 37.0%, 53.2%, 16.1%, 15.6%, and 19.8% respectively. 

    As detailed below, the actual return-on-investment result achieved for this Schlumberger position was a +0.73% absolute return (equivalent to +33.5% annualized return) for the 9 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.


    Schlumberger Ltd. -- Covered Calls Position Closed by Early Assignment
    The transactions were as follows:
    11/27/2017  Bought 400 Schlumberger Ltd. shares @ $61.37
    11/27/2017 Sold 4 SLB Dec 15, 2017 $60.00 Call options @ $1.82
    12/04/2017 Four Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $60.00 strike price.
    Note: the closing price of Schlumberger stock was $64.50 when these Calls were exercised

    The overall performance result (including commissions) was as follows:
    Cost Basis of 4 Covered Calls in SLB: $21,287.41
    = ($61.37 -$1.82)*400 shares + $7.63 commissions

    Components of Net Profit:
    (a) Options Income: +$728.00
    = ($1.82*400 shares)
    (b) Dividend Income: $0.00
    (c) Capital Appreciation: -$552.95
    = ($60.00-$61.37)*400 shares - $4.95 commissions

    Total Net Profit (Schlumberger stock assigned early on day prior to Dec. 5th ex-dividend date) : +$175.05
    = (+$728.00 options income +$0.00 dividends - $552.95 capital appreciation)

    Absolute Return: +0.73%
    = +$175.05/$21,287.41
    Equivalent Annualized Return: +33.5%
    = (+$175.05/$21,287.41)*(365/9 days)


    Thursday, November 30, 2017

    Early Assignment of Two Bank of America Corp. Covered Calls Positions

    This morning the Covered Calls Advisor received email and text notifications from my broker (Schwab) that both Covered Calls positions in Bank of America Corp. (ticker BAC) were assigned early.  As detailed below, these two positions were established on different dates, but both were established at the $25.00 strike price and for the December 15th expiration date.  This early assignment occurred because of today's ex-dividend of $.12 per BAC share.  With the stock price closing at $28.16 yesterday, the Dec 15th $25.00 Calls were well in-the-money, so the Call options owners exercised their options early to purchase the stock in order to capture today's dividend.

    Early exercise by the owners of these Call options was plausible since there was $0.115 per share [$3.275 midpoint of Call options' $3.25/$3.30 bid/ask price - ($28.16 current stock price - $25.00 strike price)] time value remaining in these Call options.  The Call owners were willing to immediately forego the remaining $0.115 per share time value by exercising their option to buy the shares (in order to capture today's $0.12 per share ex-dividend). 

    The Covered Calls Advisor preferred this early assignment outcome instead of keeping both of these Covered Calls positions and capturing the $0.12 per share ex-dividend today since these early assignments resulted in higher annualized return-on-investments rather than if the positions had instead not been assigned until the December 15th options expiration date.

    As detailed below, the actual return-on-investment results achieved for these BAC Covered Calls positions was:
    • For Position #1:  A +1.1% absolute return (equivalent to +19.3% annualized return) for the 21 days this position was held.                                                                                               Note: This +19.3% annualized return-on-investment exceeds the +15.6% that would have been achieved if the position was instead exercised at the December 15th expiration. 
    • For Position #2:  A +1.4% absolute return (equivalent to +33.0% annualized return) for the 15 days this position was held.                                                                                       Note: This +33.0% annualized return-on-investment exceeds the +21.7% that would have been achieved if the position was instead exercised at the December 15th expiration. 

    The Covered Calls Advisor's Dividend Capture Strategy spreadsheet has been working nicely.  In addition to these Bank of America positions, advantageous early assignments in recent months have occurred for Covered Calls positions in Las Vegas Sands, Goldman Sachs, PulteGroup, Kohl's, Intel, JPMorgan Chase, and MGM Resorts.  Consequently, the Covered Calls Advisor plans to continue to seek these types of investment opportunities.


    1. Bank of America Corp. (BAC) -- Covered Calls Position #1 Closed
    The transactions were as follows:
    11/09/2017 Bought 1,000 shares of Bank of America stock @ $26.29 per share 
    11/09/2017 Sold 10 Bank of America Dec 15th, 2017 $25.00 Call options @ $1.57 per share
    Note: this was a simultaneous Buy/Write transaction
    11/30/2017  10 BAC Dec 15th, 2017 $25.00 Call options exercised, so 1,000 shares of BAC stock sold at $25.00 strike price

    The overall performance result (including commissions) was as follows:
    Covered Calls Cost Basis: $24,731.65
    = ($26.29 - $1.57)* 1,000 shares + $11.65 commission

    Net Profit Components:
    (a) Options Income: +$1,570.00
    = ($1.57* 1,000 shares)
    (b) Dividend Income: +$0.00 
    (c) Capital Appreciation: -$1,294.95
    = ($25.00 -$26.29)* 1,000 shares - $4.95 commission

    Total Net Profit: +$275.05
    = (+$1,570.00 options income +$0.00 dividend income -$1,294.95 capital appreciation)

    Absolute Return: +1.1%
    = +$275.05/$24,731.65
    Equivalent Annualized Return: +19.3%
    = (+$275.05/$24,731.65)*(365/21 days)


    2. Bank of America Corp. (BAC) -- Covered Calls Position #2 Closed
    The transactions were as follows:
    11/15/2017 Bought 1,000 shares of Bank of America stock @ $25.83 per share 
    11/15/2017 Sold 10 Bank of America Dec 15th, 2017 $25.00 Call options @ $1.17 per share
    Note: this was a simultaneous Buy/Write transaction
    11/30/2017  10 BAC Dec 15th, 2017 $25.00 Call options exercised, so 1,000 shares of BAC stock sold at $25.00 strike price

    The overall performance result (including commissions) was as follows:
    Covered Calls Cost Basis: $24,671.65
    = ($25.83 - $1.17)* 1,000 shares + $11.65 commission

    Net Profit Components:
    (a) Options Income: +$1,170.00
    = ($1.17* 1,000 shares)
    (b) Dividend Income: +$0.00
    (c) Capital Appreciation: -$834.95
    = ($25.00 -$25.83)* 1,000 shares - $4.95 commission

    Total Net Profit: +$335.05
    = (+$1,170.00 options income +$0.00 dividend income -$834.95 capital appreciation)

    Absolute Return: +1.4%
    = +$335.05/$24,671.65
    Equivalent Annualized Return: +33.0%
    = (+$335.05/$24,671.65)*(365/15 days)

    Wednesday, November 29, 2017

    Covered Call Established in Lam Research Corp.

    Today, a Covered Calls position was established in Lam Research Corp. (ticker LRCX) for the December 15th expiration and at the $185.00 strike price.   Given the Covered Calls Advisor's current Overall Market Meter sentiment of Neutral, a relatively conservative in-the-money position was established.

    The Implied Volatility of the Dec 15th $185.00 Call options was 34.7 when this position was established.  With the sharp decline in semiconductor stocks today, LRCX's Implied Volatility spiked up dramatically to its highest level in almost 2 years.  Selling this Covered Call at this time seems very advantageous, especially since there is no quarterly earnings report prior to expiration.  In addition there is an upcoming ex-dividend of $.50 next Tuesday (Dec. 5th) which is included in the detailed analysis below.  Furthermore, Lam Research is either 'Buy' or 'Outperform' rated by 15 of the 18 Analysts that cover its stock according to Reuters. 

    As detailed below, a potential outcome for this investment is +1.8% absolute return-on-investment for the next 17 days (equivalent to +38.3% on an annualized return basis) if the stock closes above the $185.00 strike price on the December 15th options expiration date.

    Lam Research Corp. (LRCX) -- New Covered Calls Position
    The transactions were as follows:
    11/29/2017 Bought 100 shares of Lam Research stock @ $193.48 per share 
    11/29/2017 Sold 1 Lam Research Dec 15th, 2017 $185.00 Call option @ $11.28 per share
    Note: this was a simultaneous Buy/Write transaction
    12/05/2017 Upcoming ex-dividend of $.50 per share

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $18,225.62
    = ($193.48 - $11.28)* 100 shares + $5.62 commission

    Net Profit Components:
    (a) Option Income: +$1,128.00
    = ($11.28 * 100 shares)
    (b) Dividend Income: +$50.00
    = $.50 per share * 100 shares 
    (c) Capital Appreciation (If LRCX is above $185.00 strike price at Dec 15th expiration): -$852.95
    = ($185.00 -$193.48)* 100 shares - $4.95 commission

    Potential Total Net Profit (If assigned at expiration): +$325.05
    = (+$1,128.00 option income +$50.00 dividend income -$852.95 capital appreciation)

    Absolute Return: +1.8%
    = +$325.05/$18,225.62
    Equivalent Annualized Return: +38.3%
    = (+$325.05/$18,225.62)*(365/17 days)

    The downside 'breakeven price' at expiration is at $181.70 ($193.48 - $11.28 - $.50), which is 6.1% below the current market price of $193.48.  This is substantial protection given the relatively high +38.3% potential annualized ROI for this investment.

    Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the December 15th, 2017 options expiration) for this Lam Research Covered Call position is 72.0%, so the expected value annualized ROI of this investment (if held until expiration) is +27.6% (+38.3% * 72.0%), a nice expected value profit for this moderately in-the-money Covered Call position.   

    Tuesday, November 28, 2017

    Covered Calls Established in Sinclair Broadcast Group, Inc.

    Today, a Covered Calls positions was established in Sinclair Broadcast Group, Inc. (ticker SBGI) for the December 15th expiration and at the $31.00 strike price.   Given the Covered Calls Advisor's current Overall Market Meter sentiment of Neutral, a relatively conservative in-the-money position was established.

    The Implied Volatility of the Dec 15th $31.00 Call options was 38.2 when this position was established.  This is much higher than the average Historic Volatility for Sinclair so far this year, so selling these Call options premiums at this time seems very advantageous, especially since there is no quarterly earnings report prior to expiration.  There is an upcoming ex-dividend of $.18 this Thursday (Nov. 30th) which is included in the analysis below.

    Sinclair is 'Buy'-rated by Reuters -- the highest of their five rating categories.  To put that in perspective, of the Analysts' consensus ratings reported by Reuters (7 Analysts currently follow SBGI), only 5.9% of 3,593 optionable stocks are now 'Buy'-rated. 

    As detailed below, a potential outcome for this investment is +1.9% absolute return-on-investment for the next 18 days (equivalent to +37.8% on an annualized return basis) if the stock closes above the $31.00 strike price on the December 15th options expiration date.

    Sinclair Broadcast Group, Inc. (SBGI) -- New Covered Calls Position
    The transactions were as follows:
    11/28/2017 Bought 500 shares of Sinclair stock @ $32.55 per share 
    11/28/2017 Sold 5 Sinclair Dec 15th, 2017 $31.00 Call options @ $1.95 per share
    Note: this was a simultaneous Buy/Write transaction
    11/30 Upcoming ex-dividend of $.18 per share

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $15,308.30
    = ($32.55 - $1.95)* 500 shares + $8.30 commission

    Net Profit Components:
    (a) Options Income: +$975.00
    = ($1.95* 500 shares)
    (b) Dividend Income: +$90.00
    = $.18 per share * 500 shares 
    (c) Capital Appreciation (If SBGI is above $31.00 strike price at Dec 15th expiration): -$779.95
    = ($31.00 -$32.55)* 500 shares - $4.95 commission

    Potential Total Net Profit (If assigned at expiration): +$285.05
    = (+$975.00 options income +$90.00 dividend income -$779.95 capital appreciation)

    Absolute Return: +1.9%
    = +$285.05/$15,308.30
    Equivalent Annualized Return: +37.8%
    = (+$285.05/$15,308.30)*(365/18 days)

    The downside 'breakeven price' at expiration is at $30.42 ($32.55 - $1.95 - $.18), which is 6.5% below the current market price of $32.55.  This is substantial protection given the relatively high +37.8% potential annualized ROI for this investment.

    Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the December 15th, 2017 options expiration) for this Sinclair Covered Calls position is 72.3%, so the expected value annualized ROI of this investment (if held until expiration) is +27.4% (+37.8% * 72.4%), a nice expected value result for this moderately in-the-money Covered Calls position.   

    Monday, November 27, 2017

    Covered Calls Established for General Motors Co. and Schlumberger N.V.

    Today, Covered Calls positions were established with General Motors Co. (ticker GM) and Schlumberger N.V. (ticker SLB).  Given the Covered Calls Advisor's current cautious overall market outlook, moderately in-the-money Covered Calls positions were established for both positions.  Also, there are upcoming ex-dividends prior to the December 15th options expiration date for both companies which is taken into consideration in the details presented below.

    As detailed below, some potential return-on-investment results are:
    • For General Motors: A +1.03% absolute return (equivalent to +37.7% annualized return for the next 11 days) if the stock is assigned early (business day prior to the December 7th ex-div date); OR A +1.93% absolute return (equivalent to +37.0% annualized return over the next 19 days) if the stock is assigned on the Dec 15th, 2017 options expiration date.
    • For Schlumberger: A +0.73% absolute return (equivalent to +33.5% annualized return for the next 9 days) if the stock is assigned early (business day prior to the December 5th ex-div date); OR A +1.57% absolute return (equivalent to +30.2% annualized return over the next 19 days) if the stock is assigned on the Dec 15th, 2017 options expiration date.
    These results for both companies would well exceed the Covered Calls Advisor's target for a greater than +20% potential annualized return-on-investment.


    As shown in the chart below, Covered Calls positions were established in both GM and Schluberger since their potential returns are preferable in comparison to their synthetically equivalent short 100% Cash-Secured Put options positions:
    You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  The next earnings report for both companies is after the December 15th options expiration date. 

    Also in the chart above is a column called "Intervening Ex-Div" and "YES" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  This means that both GM and SLB will go ex-dividend prior to the Dec 15th expiration and therefore the Covered Calls Advisor's Dividend Capture Strategy spreadsheet should be completed to determine if the pre-determined criteria are met to justify establishing these Covered Calls positions.

    The Covered Calls Advisor has established a set of eleven criteria to evaluate potential Covered Calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all eleven criteria are achieved for both the GM and the Schlumberger Covered Calls positions.

    Monday, November 20, 2017

    Covered Calls Positions Continued in Citigroup Inc. and Freeport-McMoRan Inc.

    Last Friday, the November 17th, 2017 Covered Calls positions in Citigroup Inc. (ticker symbol C) and Freeport-McMoRan Inc. (ticker FCX) expired with the stock prices below their strike prices.  So, their Call options expired and their stock shares were retained in the Covered Calls Advisor's Portfolio.  This morning, the Covered Calls Advisor continued both Covered Calls positions by selling December 15th, 2017 Call options against both long stock positions.

    Some potential return-on-investment results for each position are:  

    • Citigroup Inc. -- A +2.0% absolute return in 53 days (equivalent to a +13.9% annualized return-on-investment if stock price unchanged at $71.86 at the December 15th expiration; OR a +2.9% absolute return in 53 days (equivalent to a +20.0% annualized return if Citi stock closes above the $72.50 strike price on the December 15th expiration date.
    • Freeport-McMoRan Inc. -- A +6.2% absolute return in 42 days (equivalent to a +53.6% annualized return if FCX stock remains above the $14.00 strike price on the December 15th expiration date.
    The transactions to-date and potential return-on-investment results for both positions are detailed below. 

    1. Citigroup Inc.(C) -- Covered Calls Position Continued
    The transactions to-date are as follows:
    10/23/2017 Bought 400 shares of Citigroup stock @ $73.76 per share 
    10/23/2017 Sold 4 Citigroup Nov 17th, 2017 $72.50 Call options @ $1.97 per share
    Note: this was a simultaneous Buy/Write transaction
    11/03/2017 $128.00 ex-dividend ($.32 per share x 400 shares)
    11/17/2017 4 Citi Nov. 17th Call options expired and 400 shares of Citi stock were retained in the Covered Calls Advisor Portfolio
    Note: the price of Citi stock was $71.33 upon the options expiration.
    11/20/2017 Continuation of Citi Covered Calls position by selling 4 Dec 15th, 2017 Call options at the $72.50 strike @ $1.09 per share
    Note: Citi stock was at $71.86 when this transaction occurred

    Two possible overall performance results (including commissions) would be as follows:
    Covered Calls Cost Basis: $28,723.63
    = ($73.76 - $1.97)* 400 shares + $7.63 commission

    Net Profit Components:
    (a) Options Income: +$1,216.37
    = ($1.97 + $1.09) * 400 shares -$7.63 commission
    (b) Dividend Income: +$128.00
    = $.32 per share * 400 shares 
    (c) Capital Appreciation (If Citi stock price is unchanged at current $71.86 at Dec 15th expiration): -$764.95
    = ($71.86 -$73.76)* 400 shares - $4.95 commission; OR
    (c) Capital Appreciation (If Citi stock closes above $72.50 strike price at expiration) : -$508.95
    = ($72.50 -$73.76)* 400 shares - $4.95 commission

    Two Potential Total Net Profits:
    (a) If Citi stock price is unchanged at current $71.86 at Dec 15th expiration: +$579.42
    = (+$1,216.37 options income +$128.00 dividend income -$764.95 capital appreciation); OR
    (b) If Citi stock price is above $72.50 strike price at Dec 15th expiration) +$835.42
    = (+$1,216.37 options income +$128.00 dividend income -$508.95 capital appreciation)

    Two Potential Return-on-Investment Results:
    (a) If Citi stock price is unchanged at current $71.86 at Dec 15th expiration:
    Absolute Return : +2.0%
    = +$579.42/$28,723.63
    Equivalent Annualized Return: +13.9%
    = (+$579.42/$28,723.63)*(365/53 days); OR
    (b) If Citi stock price is above $72.50 strike price at Dec 15th expiration:
    Absolute Return : +2.9%
    = +$835.42/$28,723.63
    Equivalent Annualized Return: +20.0%
    = (+$835.42/$28,723.63)*(365/53 days)


    2. Freeport-McMoRan Inc. (FCX) -- Covered Calls Position Continued
    The implied volatility of the Call options was 34.2 when this position was originally established and 33.8 when the Dec 15th Calls were sold today.  There are no ex-dividend dates or earnings reports scheduled prior to the December 15th options expiration date.

    The transactions were as follows:
    11/03/2017 Bought 1,000 shares of Freeport-McMoRan stock @ $14.11 per share 
    11/03/2017 Sold 10 FCX November 17th, 2017 $14.00 Call options @ $.44 per share
    Note: this was a simultaneous Buy/Write transaction with excellent options liquidity at 38,263 open interest.
    11/17/2017 10 FCX Nov. 17th Call options expired and 1,000 shares of Freeport McMoRan stock were retained in the Covered Calls Advisor Portfolio
    Note: the price of FCX stock was $13.86 upon the options expiration.
    11/20/2017 Continuation of FCX Covered Calls position by selling 10 Dec 15th, 2017 Call options at the $14.00 strike @ $.53 per share
    Note: Freeport-McMoRan stock was at $14.03 when this transaction occurred

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $13,681.65
    = ($14.11 - $.44)* 1,000 shares + $11.65 commissions

    Net Profit Components:
    (a) Options Income: +$958.35
    = ($.44 + $.53)* 1,000 shares - $11.65 commission
    (b) Dividend Income: +$0.00 
    (c) Capital Appreciation (If FCX stock is above $14.00 strike price at Dec 15th expiration): -$114.95
    = ($14.00 -$14.11)* 1,000 shares - $4.95 commission

    Total Net Profit: +$843.40
    = (+$958.35 options income +$0.00 dividend income -$114.95 capital appreciation)

    Absolute Return: +6.2%
    = +$843.40/$13,681.65
    Equivalent Annualized Return: +53.6%
    = (+$843.40/$13,681.65)*(365/42 days)

    Closed Postion in Wynn Resorts Ltd.

    Last Friday, the November 17th, 2017 Covered Calls position in Wynn Resorts Ltd. (ticker symbol WYNN) expired with the stock price at $152.28, below the $152.50 strike price -- so the Call options expired and the 100 shares were retained in the Covered Calls Advisor's Portfolio.  The stock moved higher this morning at the market opening and the position was closed out by selling the 100 shares at $154.71.  As detailed below, this weekly Covered Calls position achieved a return-on-investment result of +2.1% absolute return in 6 days (equivalent to a +130.5% annualized return-on-investment).

    Wynn Resorts Ltd. (WYNN) -- New Covered Calls Position
    The transactions were as follows:
    11/14/2017 Bought 100 shares of Wynn Resorts stock @ $153.90 per share 
    11/14/2017 Sold 1 WYNN Nov. 17th, 2017 $152.50 Call option @ $2.00 per share
    Note: this was a simultaneous Buy/Write transaction with relatively good options liquidity of 1,754 open interest contracts.  The implied volatility of the Call options was 17.9 when this position was established.
    11/17/2017 The WYNN 11/17/2017 $152.50 Call option expired and the 100 shares of stock was retained.  Note: the price of the stock was $152.28 upon the options expiration.
    11/20/2017 Sold 100 WYNN shares at $154.71.  

    The overall performance result (including commissions) was as follows:
    Covered Calls Cost Basis: $15,195.62
    = ($153.90 - $2.00)* 100 shares + $5.62 commissions

    Net Profit Components:
    (a) Options Income: +$200.00
    = ($2.00* 100 shares)
    (b) Dividend Income: +$50.00
    = $.50/share * 100 shares 
    (c) Capital Appreciation: -$76.05
    = ($154.71 -$153.90)* 100 shares - $4.95 commission

    Total Net Profit: +$326.05
    = (+$200.00 options income +$50.00 dividend income +$76.05 capital appreciation)

    Absolute Return: +2.1%
    = +$326.05/$15,195.62
    Equivalent Annualized Return: +130.5%
    = (+$326.05/$15,195.62)*(365/6 days)

    Sunday, November 19, 2017

    November 17th, 2017 Option Expiration Results

    The Covered Calls Advisor Portfolio had seven positions with November 17th, 2017 options expirations.  As posted this past Friday on this blog, two in-the-money Covered Calls positions (Best Buy Inc. and Devon Energy Corp.) were continued by rolling them out to the December 15th expiration at the same strike price they had for the November 17th expiration.

    Of the remaining five positions, two (Alibaba Group Holding Ltd. and CVS Health Corporation) closed in-the-money, so the maximum possible return-on-investment result was achieved.  Details of the transactions and results for each of these positions was:
    • Alibaba Group Holding Ltd.:  +2.2% absolute return (+31.2% annualized return) in 26 days
    • CVS Health Corporation:  +2.4% absolute return (+24.0% annualized return) in 36 days 
    The cash now available in the Covered Calls Advisor Portfolio from the closing of these two positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

    The remaining three positions (Citigroup Inc., Freeport McMoRan Inc., and Wynn Resorts Ltd.) closed yesterday with their stock price below their strike prices, so those shares will remain in the Covered Calls Advisor Portfolio (see holdings in right sidebar) until they are either sold or a continuation Covered Calls position is established. 

    The details for each of the closed positions is as follows:


    1. Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position Closed
    The implied volatility of the Call options was 39.5 when this position was established.  This is a very high level which in large part is due to the uncertainty associated with the earnings report on Nov 2nd and its annual Singles Day sale on Nov 11th.

    The transactions were as follows:
    10/23/2017 Bought 300 shares of Alibaba stock @ $174.13 per share 
    10/23/2017 Sold 3 Alibaba November 17th, 2017 $165.00 Call options @ $12.73 per share
    Note: this was a simultaneous Buy/Write transaction
    11/17/2017 3 BABA Call options assigned and 300 shares sold @ $165.00 strike price.
    Note: the price of Alibaba stock was $185.13 at options expiration.

    The overall performance result (including commissions) was as follows:
    Covered Calls Cost Basis: $48,426.96
    = ($174.13 - $12.73)* 300 shares + $6.96 commission

    Net Profit Components:
    (a) Options Income: +$3,819.00
    = ($12.73* 300 shares)
    (b) Dividend Income: +$0.00 
    (c) Capital Appreciation (BABA stock was above $165.00 strike price at Nov 17th expiration): -$2,743.95
    = ($165.00 -$174.13)* 300 shares - $4.95 commission

    Total Net Profit: +$1,075.05
    = (+$3,819.00 options income +$0.00 dividend income -$2,743.95 capital appreciation)

    Absolute Return: +2.2%
    = +$1,075.05/$48,426.96
    Equivalent Annualized Return: +31.2%
    = (+$1,075.05/$48,426.96)*(365/26 days)



    2. CVS Health Corporation (CVS) -- Covered Calls Position Closed
    The transactions were as follows:
    10/13/2017 Bought 300 shares of CVS stock @ $72.84 per share 
    10/13/2017 Sold 3 CVS Nov 17th, 2017 $70.00 Call options @ $3.99 per share
    Note: this was a simultaneous Buy/Write transaction
    10/23/2017 Ex-dividend of $150.00
    = $.50 per share x 300 shares
    11/17/2017 3 CVS Call options assigned and 300 shares sold @ $70.00 strike price.
    Note: the price of CVS stock was $70.68 at options expiration.

    The overall performance result (including commissions) was as follows:
    Covered Calls Cost Basis: $20,661.96
    = ($72.84 - $3.99)* 300 shares + $6.96 commission

    Net Profit Components:
    (a) Options Income: +$1,197.00
    = ($3.99 * 300 shares)
    (b) Dividend Income: +$150.00
    = $.50 per share * 300 shares 
    (c) Capital Appreciation (If CVS is above $70.00 strike price at Nov 17th expiration): -$856.95
    = ($70.00 -$72.84)* 300 shares - $4.95 commission

    Total Net Profit: +$490.05
    = (+$1,197.00 options income +$150.00 dividend income -$856.95 capital appreciation)

    Absolute Return: +2.4%
    = +$490.05/$20,661.96
    Equivalent Annualized Return: +24.0%
    = (+$490.05/$20,661.96)*(365/36 days)

    Friday, November 17, 2017

    Established Covered Calls Position in The Coca-Cola Company

    Today, a new Covered Calls position was established in The Coca-Cola Company (ticker KO) at the $45.00 strike price and for the December 15th, 2017 options expiration date.

    As detailed below, a potential return-on-investment is +1.4% absolute return in 29 days (equivalent to a +17.7% annualized return-on-investment).  This return includes a $.37 per share quarterly ex-dividend on November 30th plus a potential time value (i.e. extrinsic value) profit of $.27 [$.69 options income - ($45.42 stock cost - $45.00 strike price)]. 


    The Coca-Cola Company (KO) -- New Covered Calls Position
    The transactions were as follows:
    11/17/2017 Bought 400 shares of The Coca-Cola Company stock @ $45.42 per share 
    11/17/2017 Sold 4 Coca-Cola Dec 15th, 2017 $45.00 Call options @ $.69 per share
    Note: this was a simultaneous Buy/Write transaction
    11/30/2017 Upcoming Ex-Dividend of $.37 per share

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $17,899.63
    = ($45.42 - $.69)* 400 shares + $7.63 commission

    Net Profit Components:
    (a) Options Income: +$276.00
    = ($.69* 400 shares)
    (b) Dividend Income: +$148.00
    = $.37 per share * 400 shares 
    (c) Capital Appreciation (If Coca-Cola stock is above $45.00 strike price at Dec 15th expiration): -$172.95
    = ($45.00 -$45.42)* 400 shares - $4.95 commission

    Total Net Profit: +$251.05
    = (+$276.00 options income +$148.00 dividend income -$172.95 capital appreciation)

    Absolute Return: +1.4%
    = +$251.05/$17,899.63
    Equivalent Annualized Return: +17.7%
    = (+$251.05/$17,899.63)*(365/29 days)

    The downside 'breakeven price' at expiration is at $44.36 ($45.42 stock price - $.69 options income - $.37 dividend income), which is 2.3% below the current market price of $45.42.

    Rolled Out Covered Calls Position in Devon Energy Corp.

    This afternoon, with today's (i.e. Nov 17th, 2017) $36.00 strike price Covered Calls position in Devon Energy well in-the-money, the Covered Calls Advisor decided continue with this Covered Calls position that was first established six months ago.  The current position was rolled out to the Dec 15th Covered Calls at the identical $36.00 strike price.  This was done with only about $.02 time value remaining in the November Call options and a net credit in the rollout of $.41 per share was achieved ($3.14 income for December Calls sold minus $2.73 debit for Nov. 17th Calls bought-to-close).  Based on the Covered Calls Advisor's current market overall Neutral sentiment, a moderately in-the-money position was established.

    As detailed below, a potential return-on-investment result for this Devon Energy position is +12.8% absolute return for 204 days (equivalent to a +22.9% annualized return-on-investment).  


    Devon Energy Corp. (DVN) -- Continuation Covered Calls Position
    The transactions to-date have been 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
    10/20/2017 5 DVN Call options expired
    Note: the price of DVN stock was $34.92 upon expiration of the Oct 20th Call options
    10/27/2017 Sold 5 DVN November 17th, 2017 $36.00 Call options @ $.93 per share
    Note: the price of DVN stock was $35.66 today when the Nov 17th Call options were sold
    11/17/2017 Bought-to-Close 5 DVN Nov 17th $36.00 Call options @ $2.73
    11/17/2017 Sold-to-Open 5 DVN Dec 15th, 2017 $36.00 Call options @ $3.14
    12/14/2017 Upcoming Ex-Dividend of $.06 per share

    A possible overall performance result (including commissions) would be as follows:
    Cost Basis of Original Covered Calls Position Established in DVN: $17,679.95
    = ($37.45 - $2.10)*500 + $4.95 commission

    Net Profit Components:
    (a) Options Income: +$2,904.90
    = ($2.10 + $.87 + $.65 + $.89 +$.93 -$2.73 +$3.14) *500 shares - 6*$3.35 commissions
    (b) Dividend Income: +$90.00
    = ($.06 + $.06 + $.06) * 500 shares
    (c) Capital Appreciation (If DVN is above $36.00 strike price at the Dec 15th, 2017 expiration): -$729.95
    = ($36.00-$37.45)*500 shares - $4.95 commissions

    Total Net Profit (If DVN stock is above $36.00 strike price at Dec 15, 2017 options expiration): +$2,264.95
    = (+$2,904.90 options income +$90.00 dividends -$729.95 capital appreciation)

    Absolute Return: +12.8%
    = +$2,264.95/$17,679.95
    Annualized Return: +22.9%
    = (+$2,264.95/$17,679.95)*(365/204 days)

    Rolled Out Covered Calls Position in Best Buy Inc.

    This morning, when the price of Best Buy dipped to about $54.30, the Covered Calls Advisor rolled out from today's (i.e. Nov 17th) $52.50 strike price Covered Calls to the Dec 15th Covered Calls at the identical $52.50 strike price.  This was done with only about $.05 time value remaining in the November Call options and a net credit in the rollout of $.76 per share was achieved ($2.68 income for December 15th Calls sold minus $1.92 debit for Nov. 17th Calls bought-to-close).  Based on the Covered Calls Advisor's current market overall Neutral sentiment, a moderately in-the-money position was established.

    As detailed below, a potential return-on-investment result for this Best Buy position is +5.3% absolute return for 51 days (equivalent to a +37.8% annualized return-on-investment).  


    Best Buy Inc. (BBY) -- New Covered Calls Position
    The implied volatility of the Call options was 25.6 today when this position was established. 
    The transactions were as follows:
    10/25/2017 Bought 400 shares of Best Buy stock @ $55.11 per share 
    10/25/2017 Sold 4 Best Buy November 17th, 2017 $52.50 Call options @ $4.23 per share
    Note: this was a simultaneous Buy/Write transaction
    11/17/2017 Bought-to-Close 4 Nov 17th $52.50 Call options @ $1.92 per share
    11/17/2017 Sold -to-Open 4 Dec 15th, 2017 $52.50 Call options @ $2.68 per share
    Note: this was a simultaneous Net Credit transaction of $.76 when the BBY stock was at $54.30.
    12/05/2017 Upcoming ex-dividend of $.34 per share


    A possible overall performance result (including commissions) if Best Buy is in-the-money at the Dec 15th expiration would be as follows:
    Covered Calls Original Cost Basis: $20,359.63
    = ($55.11 - $4.23)* 400 shares + $7.63 commission

    Net Profit Components:
    (a) Options Income: +$1,988.37
    = ($4.23 - $1.92 + $2.68) * 400 shares) - $7.63 commissions
    (b) Dividend Income: +$136.00
    = $.34 per share * 400 shares
    (c) Capital Appreciation (If BBY stock is above $52.50 strike price at Dec 15th expiration): -$1,048.95
    = ($52.50 -$55.11)* 400 shares - $4.95 commission

    Total Net Profit: +$1,075.42
    = (+$1,988.37 options income +$136.00 dividend income -$1,048.95 capital appreciation)

    Absolute Return: +5.3%
    = +$1,075.42/$20,359.63
    Equivalent Annualized Return: +37.8%
    = (+$1,075.42/$20,359.63)*(365/51 days)

    Wednesday, November 15, 2017

    Established Covered Calls Position in Bank of America Corp.

    Today, a second Covered Calls position was established in Bank of America Corp. (ticker BAC) at the $25.00 strike price and the December 15th, 2017 options expiration date.
    The Covered Calls Advisor read today's news that Warren Buffett had increased his holdings in BAC during the 3rd quarter.  Since the stock price declined in early morning trading and based on knowledge that many investors piggyback Buffett's stock picks, I was fortunate to be able to establish this position when the stock was very near its lowest price today.  As detailed below, a potential return-on-investment is +1.8% absolute return in 31 days (equivalent to a +21.7% annualized return-on-investment).  This attractive return includes $.12 per share quarterly ex-dividend on November 30th. 



    Bank of America Corp. (BAC) -- New Covered Calls Position
    The transactions were as follows:
    11/15/2017 Bought 1,000 shares of Bank of America stock @ $25.83 per share 
    11/15/2017 Sold 10 Bank of America Dec 15th, 2017 $25.00 Call options @ $1.17 per share
    Note: this was a simultaneous Buy/Write transaction

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $24,671.65
    = ($25.83 - $1.17)* 1,000 shares + $11.65 commission

    Net Profit Components:
    (a) Options Income: +$1,170.00
    = ($1.17* 1,000 shares)
    (b) Dividend Income: +$120.00 = $.12 per share * 1,000 shares 
    (c) Capital Appreciation (If BAC is above $25.00 strike price at Dec 15th expiration): -$834.95
    = ($25.00 -$25.83)* 1,000 shares - $4.95 commission

    Total Net Profit: +$455.05
    = (+$1,170.00 options income +$120.00 dividend income -$834.95 capital appreciation)

    Absolute Return: +1.8%
    = +$450.05/$24,671.65
    Equivalent Annualized Return: +21.7%
    = (+$450.05/$24,671.65)*(365/31 days)

    The downside 'breakeven price' at expiration is at $24.54 ($25.83 stock price - $1.17 options income - $.12 dividend income), which is 5.0% below the current market price of $25.83.

    Tuesday, November 14, 2017

    Established Covered Call Weekly in Wynn Resorts Ltd.

    Today, a new Covered Calls positions was entered in Wynn Resorts Ltd. (ticker symbol WYNN) for the November 17th, 2017 options expiration and at the $152.50 strike price when the stock was at $153.90.  The Covered Calls Advisor normally establishes monthly positions, but this is a weekly position that expires this Friday.  The transactions and a potential result for this position described below includes the $.50 ex-dividend tomorrow.  Based on the Covered Calls Advisor's current Neutral sentiment, the closest in-the-money position was established.

    As detailed below, a potential return-on-investment is +0.7% absolute return in 4 days (equivalent to a +63.1% annualized return-on-investment).

    Wynn Resorts Ltd. (WYNN) -- New Covered Calls Position
    The transactions were as follows:
    11/14/2017 Bought 100 shares of Wynn Resorts stock @ $153.90 per share 
    11/14/2017 Sold 1 WYNN Nov. 17th, 2017 $152.50 Call option @ $2.00 per share
    Note: this was a simultaneous Buy/Write transaction with relatively good options liquidity of 1,754 open interest contracts.  The implied volatility of the Call options was 17.9 when this position was established. 


    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $15,195.62
    = ($153.90 - $2.00)* 100 shares + $5.62 commissions

    Net Profit Components:
    (a) Options Income: +$200.00
    = ($2.00* 100 shares)
    (b) Dividend Income: +$50.00
    = $.50/share * 100 shares 
    (c) Capital Appreciation (If WYNN stock is above $152.50 strike price at Nov 17th expiration): -$144.95
    = ($152.50 -$153.90)* 100 shares - $4.95 commission

    Total Net Profit: +$105.05
    = (+$200.00 options income +$50.00 dividend income -$144.95 capital appreciation)

    Absolute Return: +0.7%
    = +$105.05/$15,195.62
    Equivalent Annualized Return: +63.1%
    = (+$105.05/$15,195.62)*(365/4 days)


    The downside 'breakeven price' at expiration is at $151.40 ($153.90 - $.50 - $2.00), which is 1.6% below the current market price of $153.90.

    Friday, November 10, 2017

    Established Covered Calls in Blackstone Group L.P.

    Today, a new Covered Calls positions was entered in Blackstone Group L.P. (ticker BX) for the December 15th, 2017 options expiration and at the $31.00 strike price when the stock was at $31.96.  Based on the Covered Calls Advisor's current Neutral sentiment, the closest in-the-money position was established.

    As detailed below, a potential return-on-investment is +1.7% absolute return in 36 days (equivalent to a +17.3% annualized return-on-investment).

    Blackstone Group L.P. (BX) -- New Covered Calls Position
    The implied volatility of the Call options was 25.2 when this position was established.  There are no ex-dividend dates or earnings reports scheduled prior to the December 15th options expiration date.

    The transactions were as follows:
    11/10/2017 Bought 500 shares of Blackstone Group stock @ $31.96 per share 
    11/10/2017 Sold 5 BX December 15th, 2017 $31.00 Call options @ $1.49 per share
    Note: this was a simultaneous Buy/Write transaction with relatively low options liquidity at only 167 open interest contracts.

    A possible overall performance result (including commissions) would be as follows:
    Covered Calls Cost Basis: $15,243.30
    = ($31.96 - $1.49)* 500 shares + $8.30 commissions

    Net Profit Components:
    (a) Options Income: +$745.00
    = ($1.49* 500 shares)
    (b) Dividend Income: +$0.00 
    (c) Capital Appreciation (If BX stock is above $31.00 strike price at Dec 15th expiration): -$484.95
    = ($31.00 -$31.96)* 500 shares - $4.95 commission

    Total Net Profit: +$260.05
    = (+$745.00 options income +$0.00 dividend income -$484.95 capital appreciation)

    Absolute Return: +1.7%
    = +$260.05/$15,243.30
    Equivalent Annualized Return: +17.3%
    = (+$260.05/$15,243.30)*(365/36 days)

    The downside 'breakeven price' at expiration is at $30.47 ($31.96 - $1.49), which is 4.7% below the current market price of $31.96.

    The 'crossover price' at expiration is $33.45 ($31.96 + $1.49).  This is the price above which it would have been more profitable to buy-and-hold Blackstone Group stock until the December 15th, 2017 options expiration date.

    Established Covered Calls in Delta Air Lines Inc.

    Today, a Covered Calls position was established in Delta Air Lines (DAL) for the December 15th, 2017 options expiration date.  Given the Covered Calls Advisor's current neutral overall market outlook, a moderately in-the-money position was established. Also, there is an upcoming ex-dividend date next week which is taken into consideration in the calculations below.

    A potential return-on-investment result is +2.24% absolute return in 36 days (equivalent to a +22.7% annualized return-on-investment if assigned at expiration).
    Details for the Delta Air Lines position are provided below to explain the position further for those interested in understanding the type of thought processes and calculations underlying establishing these Covered Calls positions.
     
    Delta Air Lines Inc. (DAL) -- New Covered Calls Position
    First and foremost, is is essential to invest only in companies that you are bullish about.  Delta meets the Covered Calls Advisor's key quality, value, and growth metrics.  My bullish sentiment is shared by many respected analysts including their highest rating category by Argus, CFRA, and the Average Analysts' Ratings as reported by Reuters.  Also, as shown below, the potential rate-of-return exceeds the Covered Calls Advisor's desired threshold of +20% annualized return if assigned at expiration.  Another positive is the industry high annual dividend yield of 2.5% and this Covered Calls position is likely to capture Delta's next quarterly $.305 ex-dividend next week.

    Because of Put/Call parity, Covered Calls and Cash-Secured Puts are synthetically equivalent strategies (when done at the same strike price for the same expiration date).  However, subtle and temporary differences often exist, so just prior to executing the transactions, a comparison is made to see which strategy provides a better potential return.  For Delta, the chart below shows that the potential annualized return of +22.7% for the Covered Calls position is preferable to the +21.6% for a 100% Cash-Secured Puts position in this instance:
     

    Notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  The "NO" in this case means that Delta does not have a quarterly earnings report prior to the options expiration.

    Also in the chart above is a column called "Intervening Ex-Div" and "YES" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  This means that Delta will go ex-dividend sometime between today and the options expiration date and the Covered Calls Advisor's Dividend Capture Strategy spreadsheet should be completed to assess whether the pre-determined criteria are met to justify establishing a covered calls position for Delta.  The Covered Calls Advisor has established a set of eleven criteria to evaluate potential covered calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all eleven criteria are achieved for this Delta Air Lines Inc. position.


    The detailed transactions and calculations are as follows:
    11/10/2017  Bought 500 Delta Air Lines Inc. shares @ $49.19
    11/10/2017 Sold 5 DAL Dec 15, 2017 $47.00 Call options @ $2.86
    The Call options Open Interest was 680 contracts when this position was established and their Implied Volatility was 26.9
    Note: this was a simultaneous buy/write transaction.
    11/16/2017 Upcoming $.305 ex-dividend


    A possible overall performance result (including commissions) would be as follows:
    Cost Basis Purchase of 500 shares DAL: $23,138.30
    = ($49.12 -$2.86)*500 + $8.30 commissions

    Net Profit:
    (a) Options Income: +$1,430.00
    = ($2.86*500 shares)
    (b) Dividend Income: +$152.50
    = $.305 per share x 500 shares
    (c) Capital Appreciation (If DAL is above $47.00 strike price at Dec 15th expiration): -$1,064.95
    = ($47.00-$49.12)*500 shares - $4.95 commissions

    Total Net Profit (If DAL is above $47.00 strike price at Dec 15, 2017 options expiration): +$532.45
    = (+$1,430.00 options income +$152.50 dividends -$1,050.05 capital appreciation)

    Absolute Return: +2.3%
    = +$532.45/$23,138.30
    Annualized Return: +23.3%
    = (+$532.45/$23,138.30)*(365/36 days)

    The downside 'breakeven price' at expiration is at $45.955 ($49.12 - $2.86 -$.305), which is 6.4% below the current market price of $49.12. 

    Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the Dec 15th, 2017 options expiration) for this Delta Air Lines covered calls position is 70.3%, so the expected value annualized ROI of this investment (if held until expiration) is +16.4% (+23.3% * 70.3%), an attractive result for this moderately in-the-money covered calls position.

    The 'crossover price' at expiration is $51.675 ($49.12 + $2.86 -$.305).  This is the price above which it would have been more profitable to simply buy-and-hold Delta Air Lines stock until December 15th (the December monthly options expiration date) rather than establishing this Covered Calls position.