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Tuesday, October 3, 2017

Roll-Up of JPMorgan Chase & Co. Covered Calls

Today, the Covered Calls position in JPMorgan Chase & Co. was rolled up from the October 20th $87.50 strike price to the Oct 20th $95.50 strike price.  With an upcoming dividend of $.56 in two days and the stock deep in-the-money trading at $97.07 per share, there was only $.04 time value remaining in the short Call options.  Therefore, there is a strong likelihood that the stock would have been called away tomorrow by the owner of the Calls to capture the dividend.

The Covered Calls Advisor decided to roll-up to the $95.50 strike price (with $.54 time value remaining) to ensure that the dividend will be captured and that there is also a good possibility of also capturing the $.54 per share time value as additional profit as long as JPM stock is above the $95.50 strike price on the Oct. 20th expiration date.  If this occurs, the financial result would be a +3.2% absolute return in 46 days (equivalent to a +25.2% annualized return-on-investment) for this JPMorgan Chase position.  Details are provided below.
 
1. JPMorgan Chase & Co. (JPM) --  Covered Calls Roll-Up Continuation
The transactions were:
09/05/2017 Bought 300 JPM shares @ $89.26
09/05/2017 Sold 3 JPM October 20th, 2017 $87.50 Call options @ $3.49
Note: a simultaneous buy/write transaction was executed.
10/03/2017 Bought-to-Close 3 JPM Oct. 20th $87.50 Call options @ $9.61 per share
10/03/2017 Sold-to-Open 3 JPM Oct. 20th $95.50 Call options @ $2.11 per share
10/05/2017 Upcoming quarterly ex-dividend of $.56 per share

A possible overall performance result (including commissions) for this ongoing JPM Covered Calls position is as follows:
Stock Purchase Cost Basis: $25,735.95
= ($89.26 - $3.49) * 300 shares +$4.95 commission

Net Profit:
(a) Options Income: -$1,216.92
= ($3.49 -$9.61 +$2.11) *300 shares - 2* $6.96 commissions

(b) Dividend Income (If JPM assigned at October 20th, 2017 expiration): +$168.00
= ($.56 dividend per share x 300 shares)
(c) Capital Appreciation (If JPM assigned at $95.50 strike price): +1,867.05
+($95.50 -$89.26)*300 - $4.95 commission

Total Net Profit (If JPM assigned on Oct. 20th, 2017 at $95.50 strike price): +$818.13
= (-$1,216.92 +$168.00 +$1,867.05)

Absolute Return (If JPM assigned at $95.50 at Oct 20th, 2017 expiration): +3.2%
= +$818.13/$25,735.95
Annualized Return (If JPM assigned at $82.50 at Jul2017 expiration): +25.2%
= (+$818.13/$25,735.95)*(365/46 days)

1 comment:

  1. Thanks for posting all of these, much appreciated.

    ReplyDelete