As detailed below, a potential return-on-investment result is an absolute return of +2.5% which is equivalent to +100.3% annualized return over the next 9 days) if the stock is assigned on the August 25, 2017 options expiration date.
Applied Materials Posts Better-than-Expected Q3 Results, Q4 Guidance
04:04 PM EDT, 08/17/2017 (MT Newswires) -- Applied Materials (AMAT) reported Q3 revenue of $3.74 billion, up 33% year-over-year and ahead of the analyst consensus of $3.68 billion on Capital IQ. Earnings were $0.86 per share, up 72% year-over-year and topping the Street view of $0.83 per share.
For Q4, the company expects sales in the range of $3.85-$4.0 billion, vs. the analyst consensus of $3.71 billion. Non-GAAP earnings are seen at $0.86-$0.94 per share, vs. expectations for $0.82 per share.
AMAT shares are up more than 3% on 1.1 million shares in aftermarket trading as of 5:00pm today.
Details for this position as well as a possible return-on-investment outcome is provided below.
Applied Materials Inc. -- Covered Calls Position Established
The transactions were:
08/17/2017 Bought 500 AMAT shares @ $43.60
08/17/2017 Sold 5 AMAT Aug 25, 2017 $43.00 Call options @ $1.55
Note: a simultaneous buy/write transaction was executed.
08/22/2017 Upcoming quarterly ex-dividend of $.10 per share
A possible overall performance result (including commissions) for this Applied Materials covered calls position is as follows:
Covered Calls Position Cost Basis: $21,033.30
= ($43.60 stock price -$1.55 options price) *500 shares +$8.30 commissions
(a) Options Income: +$775.00
= ($1.55*500 shares)
(b) Dividend Income (If AMAT assigned at Aug 25th, 2017 expiration): +$50.00
= ($.10 dividend per share x 500 shares)
Total Net Profit (If AMAT assigned at $43.00 at options expiration): +$520.05
These returns will be achieved as long as the stock is above the $43.00 strike price at expiration. If the stock declines below the strike price, the breakeven price of $41.95 ($43.60 -$1.55 -$.10) provides 3.8% downside protection below today's $43.60 purchase price.