Today, a covered calls position was established in Goldman Sachs Group Inc. (ticker symbol GS) with a Jun2017 expiration and at the $205.00 strike price. This position has an upcoming quarterly ex-dividend on May 30th of $.75 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 June 16th 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 +0.6% absolute return (equivalent to +19.8% annualized
return for the next 11 days) if the stock is assigned early (business day
prior to May 30th ex-date); OR +0.9%
absolute return (equivalent to +11.9% annualized return over the next 29
days) if the stock is assigned on the June 16, 2017 options expiration date.
Goldman Sachs Group Inc. (GS) -- New Covered Calls Position
The transactions were:
05/19/2017 Bought 200 GS shares @ $216.70
05/19/2017 Sold 2 GS Jun2017 $205.00 Call options @ $13.05
Note: a simultaneous buy/write transaction was executed.
05/30/2017 Upcoming quarterly ex-dividend of $.75 per share
Two possible overall performance results (including commissions) for this GS covered calls position are as follows:
Stock Purchase Cost: $43,344.95
= ($216.70*200+$4.95 commission)
(a) Options Income: +$2,603.75
= ($13.05*200 shares) - $6.25 commissions
(b) Dividend Income (If option exercised early on business day prior to May 30th ex-div date): +$0.00; or
(b) Dividend Income (If GS assigned at Jun2017 expiration): +$150.00
= ($.75 dividend per share x 200 shares)
outcome provides a nice attractive return-on-investment result for this
investment. These returns will be achieved as long as the stock is
above the $205.00 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $202.90 ($216.70 -$13.05 -$.75)
provides 6.4% 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, only eight of the eleven criteria are achieved for this Goldman Sachs position.