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Wednesday, July 26, 2017

Continuation of Covered Calls Position in Devon Energy Corp.

Upon the July 21, 2017 options expiration last week, the Covered Calls position in Devon Energy Corp. (ticker symbol DVN) expired with the stock price below the $33.00 strike price.  So, the July Call options expired and the 500 shares of Devon stock were retained in the Covered Calls Advisor Portfolio.  Today, when Devon stock was at $33.63, a sell-to-open order was executed to sell 5 August 18th, 2017 Call options at the $35.00 strike price for $.65 per share to continue the Devon Covered Calls position.

The history of this Devon Energy position so far as well as a potential return-on-investment result is detailed below:

Devon Energy Corp. (DVN) -- Continuation Covered Calls Position
The transactions were 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

A possible overall performance result (including commissions) would be as follows:
Bought 500 shares DVN: $18,729.95
= $37.45*500 + $4.95 commission

Net Profit:
(a) Options Income: +$1,800.25
= ($2.10 + $.87+ $.65) *500 shares - 3*$3.25 commissions
(b) Dividend Income: +$30.00
= $.06 * 500 shares
(c) Capital Appreciation (If DVN is above $35.00 strike price at August 18th, 2017 expiration): -$1,229.95
= ($35.00-$37.45)*500 shares - $4.95 commissions

Total Net Profit (If DVN stock is above $35.00 strike price at August 18, 2017 options expiration): +$600.30
= (+$1,800.25 options income +$30.00 dividends -$1,229.95 capital appreciation)

Absolute Return: +3.2%
= +600.30/$18,729.95
Annualized Return: +13.8%
= (+600.30/$18,729.95)*(365/85 days)

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