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Thursday, June 28, 2018

Continuation of Covered Calls Positions in Citigroup Inc.

At the June 15th, 2018 options expiration, the Covered Calls position in Citigroup Inc. (ticker C) expired with the stock price below the strike price.  So, the Call options expired and the stock shares were retained in the Covered Calls Advisor's Portfolio.  Yesterday, the Covered Calls Advisor continued this Covered Calls positions by selling the July 20th, 2018 $68.00 Call options against the current long stock position in Citigroup stock. 

The detailed transaction history and two potential return on investment results are as follows:

1.  Citigroup Inc. (C) --Roll Out Covered Calls Position 
The transactions were as follows:
04/23/2018 Bought 500 shares of Citigroup stock @ $69.73 per share 
04/23/2018 Sold 5 Citigroup May 18th, 2018 $67.50 Call options @ $3.01 per share
Note: this was a simultaneous Buy/Write transaction
05/04/2018 $160.00 ex-dividend = $.32 per share x 500 shares
05/18/2018 Bought-to-Close 5 Citi May 18th $67.50 Call options at $2.40 per share
05/18/2018 Sold-to-Open 5 Citi June 15, 2018 $67.50 Call options at $3.13 per share
Note: the price of Citi stock was $69.89 when this Call spread transaction occurred today
06/15/2018 5 Citi Call options expired with stock price below the $67.50 strike price
06/27/2018 Sold 5 Citigroup July 20, 2018 $68.00 Call options @ $1.40 to continue Citigroup Covered Calls position
Note: the price of Citi stock was $67.46 when these Calls were sold


Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $33,368.30
= ($69.73 - $3.01)* 500 shares + $8.30 commission

Net Profit Components:
(a) Options Income: +$2,553.41
= ($3.01 -$2.40 + $3.13 + $1.40) * 500 shares - 2*$8.30 commissions
(b) Dividend Income: +$160.00 = $.32 per share * 500 shares 
(c) Capital Appreciation (If Citi stock price is unchanged at $67.46 at June 15th expiration): -$1,139.95
= ($67.46 -$69.73)* 500 shares - $4.95 commission; OR
(c) Capital Appreciation (If Citi is above $68.00 strike price at June 15th expiration): -$869.95
= ($68.00 -$69.73)* 500 shares - $4.95 commission

1.  Total Net Profit (If Citi stock price is unchanged at $67.46 at June 15th expiration) : +$1,573.46
= (+$2,553.41 options income +$160.00 dividend income -$1,139.95 capital appreciation); OR
2.  Total Net Profit (If Citi is above $68.00 strike price at June 15th expiration) : +$1,843.46
= (+$2,553.41 options income +$160.00 dividend income -$869.95 capital appreciation);

1.  Absolute Return (If Citi stock price is unchanged at $67.46 at June 15th expiration): +4.7%
= +$1,573.46/$33,368.30
Equivalent Annualized Return: +19.6%
= (+$1,573.46/$33,368.30)*(365/88 days); OR
2.  Absolute Return (If Citi is above $68.00 strike price at June 15th expiration): +5.5%
= +$1,843.46/$33,368.30
Equivalent Annualized Return: +22.9%
= (+$1,843.46/$33,368.30)*(365/88 days)

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