As detailed below, a potential return-on-investment result is +0.7% absolute return (equivalent to +24.9% annualized return for the next 10 days) if the stock is assigned early (business day prior to January 4th ex-date); OR +1.2% absolute return (equivalent to +17.9% annualized return over the next 25 days) if the stock is assigned on the January 19th options expiration date.
JPMorgan Chase & Co. (JPM) -- New Covered Calls Position
The transactions were:
12/26/2017 Bought 200 JPM shares @ $106.68
12/26/2017 Sold 2 JPM 1/19/2018 $104.00 Call options @ $3.46
Note: a simultaneous buy/write transaction was executed.
01/03/2018 Upcoming quarterly ex-dividend of $.56 per share
Two possible overall performance results (including commissions) for this JPM covered calls position are as follows:
Stock Purchase Cost: $20,646.95
= ($106.68 - $3.46) *200 + $4.95 commission
(a) Options Income: +$685.71
= ($3.46*200 shares) - $6.29 commissions
(b) Dividend Income (If option exercised early on January 3rd, the business day prior to Jan 4th ex-div date): +$0.00; or
(b) Dividend Income (If JPM assigned at Jan 19th, 2018 expiration): +$112.00
= ($.56 dividend per share x 200 shares)
Either outcome provides a satisfactory return-on-investment result for this investment. These returns will be achieved as long as the stock is above the $104.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $102.66 ($106.68 -$3.46 -$.56) provides 3.8% downside protection below today's purchase price.
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, only seven of the eleven criteria are achieved for this JPMorgan position.