Today, a Covered Calls position was established in JPMorgan Chase & Co. (ticker symbol JPM) with a July 20th, 2018 expiration and at the $105.00 strike price. This position uses the Covered Calls Advisor's Dividend Capture Strategy since there is an upcoming ex-dividend of $.56 on July 5th which is prior to the options expiration date. So, the potential returns-on-investment shown below includes the possibility of early assignment on the last business day prior to the ex-dividend date. The next quarterly earnings report is scheduled for July 13th, so it will be possible to capture the dividend and then decide whether to liquidate the shares prior to the earnings report or to hold the position through earnings. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a slightly in-the-money Covered Calls position was established.
As detailed below, a potential return-on-investment result is +1.4% absolute return (equivalent to +36.6% annualized
return for the next 14 days) if the stock is assigned early (business day
prior to the July 5th ex-date); OR +1.9%
absolute return (equivalent to +23.7% annualized return over the next 30
days) if the stock is assigned on the July 20th options expiration date.
JPMorgan Chase & Co. (JPM) -- New Covered Calls Position
The transactions were:
06/21/2018 Bought 500 JPM shares @ $107.23
06/21/2018 Sold 5 JPM 7/20/2018 $105.00 Call options @ $3.70
Note: a simultaneous buy/write transaction was executed.
07/05/2018 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: $51,769.95
= ($107.23 - $3.70) *500 shares + $4.95 commission
(a) Options Income: +$1,846.65
= ($3.70*500 shares) - $3.35 commissions
(b) Dividend Income (If option exercised early on July 3rd, the business day prior to July 5th ex-div date): +$0.00; or
(b) Dividend Income (If JPM assigned at Jul 20th, 2018 expiration): +$280.00
= ($.56 dividend per share x 500 shares)
outcome provides a nice return-on-investment result for this
investment. These returns will be achieved as long as the stock is
above the $105.00 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $102.97 ($107.23 -$3.70 -$.56)
provides 4.0% downside protection below today's purchase
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, ten of the eleven criteria are achieved for this JPMorgan position.