Today, a covered calls position was established in JPMorgan Chase & Co. (ticker symbol JPM) with an Apr2017 expiration and at the $85.00 strike price. This position has an upcoming quarterly ex-dividend on April 4th of $.50 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise because the ex-dividend is prior to the April 21st options expiration date. Given the Covered Calls Advisor's current Slightly Bearish overall market outlook, an in-the-money covered calls position was established.
As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +32.0% annualized
return for the next 12 days) if the stock is assigned early (business day
prior to April 4th ex-date); OR +1.6%
absolute return (equivalent to +19.8% annualized return over the next 30
days) if the stock is assigned on the April 21, 2017 options expiration date.
JPMorgan Chase & Co. (JPM) -- New Covered Calls Position
The transactions were:
03/23/2017 Bought 400 JPM shares @ $87.21
03/23/2017 Sold 4 JPM Apr2017 $85.00 Call options @ $3.16
Note: a simultaneous buy/write transaction was executed.
04/04/2017 Upcoming quarterly ex-dividend of $.50 per share
Two possible overall performance results (including commissions) for this JPM covered calls position are as follows:
Stock Purchase Cost: $34,888.95
= ($87.21*400+$4.95 commission)
(a) Options Income: +$1,256.45
= ($3.16*400 shares) - $7.55 commissions
(b) Dividend Income (If option exercised early on business day prior to April 4th ex-div date): +$0.00; or
(b) Dividend Income (If JPM assigned at Apr2017 expiration): +$200.00
= ($.50 dividend per share x 400 shares)
outcome provides a very attractive return-on-investment result for this
investment. These returns will be achieved as long as the stock is
above the $85.00 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $83.55 ($87.21 -$3.16 -$.50)
provides 4.2% downside protection below today's purchase
The Covered Calls Advisor has established a set of eleven criteria to evaluate potential covered calls using a dividend capture strategy. The minimum threshold to establish a position is that at least nine of these eleven criteria must be achieved. As shown in the table below, nine of the eleven criteria are achieved for this JPMorgan position.