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Wednesday, October 18, 2017

Early Close of Nucor Corp. Covered Calls

Today, the Covered Calls Advisor closed out the Nucor Corp. (ticker symbol NUE) covered calls position.  This decision was made since the price of Nucor has risen quickly from the $54.16 purchase price to $57.35 today so that there was only $.05 of time value remaining in the Call options.  Thus, the overwhelming majority of the maximum potential profit has already been achieved.  Given the stock price uncertainty inherent in tomorrow's earnings report, the Covered Calls Advisor decided to lock in the profit today.

As detailed below, the actual return-on-investment result for this closed position was a +3.1% absolute return (equivalent to +22.3% annualized return) for the 51 days holding period.  

Nucor Corp. -- Covered Calls Position is Closed
The transactions were as follows:
08/28/2017  Bought 200 Nucor Corp. shares @ $54.16
08/28/2017 Sold 2 NUE October 20, 2017 $52.50 Call options @ $2.96
Note: this was a simultaneous buy/write transaction.
09/28/2017 Ex-dividend of $.3775 per share
10/18/2017 Sold 200 Nucor Corp. shares @ $57.35 per share
10/18/2017 Bought-to-Close 2 NUE Oct 20th, 2017 $52.50 Call options @ $4.90 per share

The overall performance result (including commissions) was as follows:
Cost Basis Purchase of 200 shares NUE: $10,246.29
= ($54.16 -$2.96)*200 + $6.29 commissions

Net Profit:
(a) Options Income: -$389.34
= ($2.96 - $4.90) *200 shares - $1.34 commissions
(b) Dividend Income: +$75.50
= $.3775 per share x 200 shares
(c) Capital Appreciation: +$633.05
= ($57.35 -$54.16)*200 shares - $4.95 commissions

Total Net Profit: +$319.21
= (-$389.34 options income +$75.50 dividends +$633.05 capital appreciation)

Absolute Return: +3.1%
= +$319.21/$10,246.29
Equivalent Annualized Return: +22.3%
= (+$330.55/$10,246.29)*(365/51 days)

2 comments:

  1. This trade is working out nicely. Div is on Monday. After which it may make sense to exit early to avoid earnings if the underlying trades sideways/positive next week.

    Well done!

    ReplyDelete
  2. Sorry...previous post meant for the CVS trade.

    ReplyDelete