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Tuesday, December 19, 2017

Early Close of Las Vegas Sands Corp. Covered Calls

Today, the Covered Calls Advisor closed out the Las Vegas Sands Corp. (ticker symbol LVS) Covered Calls position.  This decision was made since the price of Las Vegas Sands has risen from the $68.91 purchase price on December 6th to $71.86 today.

Tomorrow is the LVS ex-dividend date of $.73 and since there was only $.03 of time value remaining in the Call options, the short Calls were extremely likely to be assigned today prior to the market close.  I have noticed a trend with LVS wherein investors seem to purchase the stock to capture the dividend, but then sell the stock on or shortly after the ex-dividend date and the stock thus declines by more than the dividend amount.  Thus, the overwhelming majority of the maximum potential profit on this position has already been achieved after only 13 days in this potentially 44 day investment.

As detailed below, the actual return-on-investment result for this closed position was a +1.5% absolute return (equivalent to +43.4% annualized return) for the 13 days holding period.  

Las Vegas Sands Corp (LVS) -- New Covered Calls Position
The transactions were as follows:
12/06/2017  Bought 400 Las Vegas Sands Corp. shares @ $68.91
12/06/2017 Sold 4 LVS Jan 19th, 2018 $67.50 Call options @ $2.41
Note: this was a simultaneous buy/write transaction.
12/19/2017 Sold 400 LVS shares @ $71.86 per share
12/19/2017 Bought-to-Close 4 LVS Jan 19th, 2018 $67.50 Call options @ $4.30 per share

The overall performance result (including commissions) was as follows:
Cost Basis Purchase of 400 shares LVS: $26,607.63
= ($68.91 -$2.41)*400 + $7.63 commissions

Net Profit Components:
(a) Options Income: -$763.63
= ($2.41 - $4.30) *400 shares - $7.63 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation: +$1,175.05
= ($71.86 -$68.91)*400 shares - $4.95 commissions

Total Net Profit: +$411.42
= (-$763.63 options income +$0.00 dividends +$1,175.05 capital appreciation)

Absolute Return: +1.5%
= +$411.42/$26,607.63
Equivalent Annualized Return: +43.4%
= (+$411.42/$26,607.63)*(365/13 days)

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