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Friday, October 27, 2017

Continuation of Covered Calls Position in Devon Energy Corp.

Upon the October 20th, 2017 options expiration, the Covered Calls position in Devon Energy Corp. (ticker symbol DVN) expired with the stock price below the $35.00 strike price.  So, the October Call options expired and the 500 shares of Devon stock were retained in the Covered Calls Advisor Portfolio.  Today, when both the prices of crude oil and also Devon stock had risen by more than 2.0%, a sell-to-open order was executed to sell 5 November 17th, 2017 Call options at the $36.00 strike price for $.93 per share to continue the Devon Covered Calls position.

As detailed below, a potential return-on-investment for this Devon Energy position is +11.5% absolute return in 146 days (equivalent to a +28.8% annualized return-on-investment).  

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
08/18/2017 5 DVN Call options expired
Note: the price of DVN stock was $30.40 upon expiration of the Aug 18th Call options
09/14/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
09/14/2017 Sold 5 DVN October 20th, 2017 $35.00 Call options @ $.89 per share
Note: the price of DVN stock was $34.12 today when the Oct 20th Call options were sold
10/20/2017 5 DVN Call options expired
Note: the price of DVN stock was $34.92 upon expiration of the Oct 20th Call options
10/27/2017 Sold 5 DVN November 17th, 2017 $36.00 Call options @ $.93 per share
Note: the price of DVN stock was $35.66 today when the Nov 17th Call options were sold

A possible overall performance result (including commissions) would be as follows:
Cost Basis of Purchase of 500 shares DVN: $17,679.95
= ($37.45 - $2.10)*500 + $4.95 commission

Net Profit Components:
(a) Options Income: +$2,703.25
= ($2.10 + $.87 + $.65 + $.89 +$.93) *500 shares - 5*$3.35 commissions
(b) Dividend Income: +$60.00
= ($.06 + $.06) * 500 shares
(c) Capital Appreciation (If DVN is above $36.00 strike price at the Nov 17th, 2017 expiration): -$729.95
= ($36.00-$37.45)*500 shares - $4.95 commissions

Total Net Profit (If DVN stock is above $36.00 strike price at Nov 17, 2017 options expiration): +$2,033.30
= (+$2,703.25 options income +$60.00 dividends -$729.95 capital appreciation)

Absolute Return: +11.5%
= +$2,033.30/$17,679.95
Annualized Return: +28.8%
= (+$2,033.30/$17,679.95)*(365/146 days)

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