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Tuesday, March 21, 2017

Early Assignment of Las Vegas Sands Corp Covered Calls

Today, Las Vegas Sands Corp (ticker symbol LVS) is ex-dividend at $.73 per share.  The Covered Calls Advisor owned a LVS April 2017 covered calls position at the $50.00 strike price.  Early this morning (as expected), I received email and text notifications from my broker (Schwab) that the 5 LVS Call options were exercised early, so the 500 shares of LVS stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $50.00 strike price.

Details of the transactions and results for this Las Vegas Sands position are provided below.  The shares had risen from $55.35 when the position was originally established (on January 23rd) to $56.63 at yesterday's market close.  The time value remaining in the Call options was $0.75 (based on the $7.38 midpoint of the $7.05/$7.70 bid/ask spread at the market close yesterday), so I was somewhat surprised that the Call owners would immediately forfeit the $.75 per share to buy the shares to capture the dividend; but it yielded a good return-on-investment result.    

The actual return-on-investment result for this Las Vegas Sands position was a +2.6% absolute return (equivalent to +17.0% annualized return) for the 56 days holding period.  Details of the transactions and associated return-on-investment results are shown below.

Las Vegas Sands Corp (LVS) -- Position Closed
The transactions are as follows:
01/23/2017 Sold 5 LVS Feb2017 $52.50 Puts @ $.78
Note: The price of LVS was $55.35 when this transaction was executed.
02/17/2017 5 Put options assigned and 500 shares of LVS purchased at the $52.50 strike price.
Note: the price of LVS was $52.03 at market close at Feb2017 options expiration
02/21/2017 Sold 5 LVS Apr2017 $50.00 Call options @ $3.10
Note: the price of LVS was $52.14 when these Call options were sold
03/20/2017 Owner of Calls exercised their option and 500 shares were assigned at $50.00 strike price

The performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $26,256.95
= $52.50*500 - $6.95 commission

Net Profit:
(a) Options Income: +$1,931.80
= ($.78 + $3.10) *500 shares) - $8.20 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation: -$1,245.05
= ($50.00-$52.50)*500 shares - $4.95 commission

Total Net Profit: +$686.75
= (+$1,931.80 +$0.00 -$1,245.05)

Absolute Return-on-Investment: +2.6%
= +$686.75/$26,256.95
Annualized Return: +17.0%
= (+$686.75/$26,256.95)*(365/56 days)