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Monday, November 27, 2017

Covered Calls Established for General Motors Co. and Schlumberger N.V.

Today, Covered Calls positions were established with General Motors Co. (ticker GM) and Schlumberger N.V. (ticker SLB).  Given the Covered Calls Advisor's current cautious overall market outlook, moderately in-the-money Covered Calls positions were established for both positions.  Also, there are upcoming ex-dividends prior to the December 15th options expiration date for both companies which is taken into consideration in the details presented below.

As detailed below, some potential return-on-investment results are:
  • For General Motors: A +1.03% absolute return (equivalent to +37.7% annualized return for the next 11 days) if the stock is assigned early (business day prior to the December 7th ex-div date); OR A +1.93% absolute return (equivalent to +37.0% annualized return over the next 19 days) if the stock is assigned on the Dec 15th, 2017 options expiration date.
  • For Schlumberger: A +0.73% absolute return (equivalent to +33.5% annualized return for the next 9 days) if the stock is assigned early (business day prior to the December 5th ex-div date); OR A +1.57% absolute return (equivalent to +30.2% annualized return over the next 19 days) if the stock is assigned on the Dec 15th, 2017 options expiration date.
These results for both companies would well exceed the Covered Calls Advisor's target for a greater than +20% potential annualized return-on-investment.


As shown in the chart below, Covered Calls positions were established in both GM and Schluberger since their potential returns are preferable in comparison to their synthetically equivalent short 100% Cash-Secured Put options positions:
You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  The next earnings report for both companies is after the December 15th options expiration date. 

Also in the chart above is a column called "Intervening Ex-Div" and "YES" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  This means that both GM and SLB will go ex-dividend prior to the Dec 15th expiration and therefore the Covered Calls Advisor's Dividend Capture Strategy spreadsheet should be completed to determine if the pre-determined criteria are met to justify establishing these Covered Calls positions.

The Covered Calls Advisor has established a set of eleven criteria to evaluate potential Covered Calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all eleven criteria are achieved for both the GM and the Schlumberger Covered Calls positions.

4 comments:

  1. I was able to open a 43.5 GM Dec 15 covered call on the 21st. Bought 500 shares of GM at $44.97 and sold 5 $43.5 calls at $1.82.

    On Black Friday, I was able to get filled on a $44 KSS Dec 15 covered call. Bought 500 shares at $45.08 and sold 5 $44 calls for $1.80. $.55 KSS dividend on Dec 5th.

    ReplyDelete
  2. Chris,
    Interesting. Yesterday, I had a KSS Dec15th $42.50 buy/write order in at a net debit of $42.16 and it was close to filling when the stock temporarily declined to around $44.70, but the order expired unfilled. If the stock dips again today, I'll probably try again for a fill at $42.18 or less.
    Best wishes,
    Jeff

    ReplyDelete
  3. Hi Jeff,
    How are you calculating the "Time Value per Share"?
    Thanks,
    Brian

    ReplyDelete
  4. Brian,
    The Time Value per Share is also known as the 'Extrinsic Value'.
    The calculation for In-The-Money Call options is:
    Time Value per Share = [Option Price - (Stock Price - Strike Price)]
    Jeff

    ReplyDelete