As you might recall, the Covered Calls Advisor Portfolio (CCAP) was short 5 Dec. 15th $36.00 Call options and was fully covered by 500 long shares of Devon stock. So, three of the five Devon Covered Calls were exercised early by the owners of these Call options and the remaining 2 Covered Calls remain in the CCAP. The possibility of some Dec 15th $36.00 Devon Call owners choosing to exercise early to capture the $.06 ex-dividend today while other owners didn't is not surprising. There was only $0.05 per share [$2.11 midpoint of Call options' $2.03/$2.18 bid/ask price - ($38.06 current stock price - $36.00 strike price)] time value remaining in these Call options. So some Call owners were willing to immediately forego the remaining $0.05 per share time value by exercising their option to buy the shares (in order to capture today's $0.06 per share ex-dividend).
As detailed below, the actual return-on-investment result achieved for the three Devon Covered Calls that were assigned today was a +12.5% absolute return (equivalent to +22.7% annualized return) for the 202 days this position was held. The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established. The two Devon Covered Calls remaining in the Covered Calls Advisor Portfolio will likely be assigned at their Dec 15th options expiration at market close tomorrow.
Devon Energy Corp. (DVN) -- Covered Calls Position Closed by Early Assignment
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
11/17/2017 Bought-to-Close 5 DVN Nov 17th $36.00 Call options @ $2.73
11/17/2017 Sold-to-Open 5 DVN Dec 15th, 2017 $36.00 Call options @ $3.14
12/14/2017 Three DVN Call options exercised early (day prior to ex-dividend date); so stock assigned (sold) at $36.00 strike price.
Note: the closing price of Devon stock was $38.06 when these Calls were exercised
The overall performance result (including commissions) was as follows:
Cost Basis of Original Covered Calls Position Established in DVN: $10,607.97
= ($37.45 - $2.10)*300 + (3/5) * $4.95 commission
Net Profit Components:
(a) Options Income: +$1,734.90
= ($2.10 + $.87 + $.65 + $.89 +$.93 -$2.73 +$3.14) *300 shares - 6*$3.35 commissions
(b) Dividend Income: +$36.00
= ($.06 + $.06) * 300 shares
(c) Capital Appreciation: -$439.95
= ($36.00-$37.45)*300 shares - $4.95 commissions
Total Net Profit: +$1,330.95
= (+$1,734.90 options income +$36.00 dividends -$439.95 capital appreciation)
Absolute Return: +12.5%
= +$1,330.95/$10,607.97
Annualized Return: +22.7%
= (+$1,330.95/$10,607.97)*(365/202 days)
