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Tuesday, July 24, 2018

Continuation Covered Calls Position in Deere & Co.

At the July 20th, 2018 options expiration, the two 100% Cash-Secured Put Options sold in Deere & Co. (ticker DE) expired with the stock price below the strike price.  So, the two Put options expired and 200 shares of John Deere stock was purchased at the $138.00 strike price.  Today, the Covered Calls Advisor continued this position and established a Covered Calls position by selling 2 Aug 17th, 2018 $140.00 Call options against the current long 200 shares held in Deere.

As detailed below, two potential return-on-investment results are:
  • +3.8% absolute return in 43 days (equivalent to a +32.5% annualized return-on-investment) if the price of Deere & Co. stock is unchanged at $137.32 at the August 17th options expiration; OR
  • +5.8% absolute return in 43 days (equivalent to a +49.0% annualized return-on-investment) if the price of John Deere stock increases above the $140.00 strike price on the Aug 17th expiration date 


  • Deere & Co. (DE) -- Continuation Covered Calls Position
    The transaction were as follows:
    07/05/2018  Sold 2 DE July 20, 2018 $138.00 100% cash-secured Put options @ $2.68
    07/20/2018 Two July 20th Put options expired with stock price below the strike price, so 200 shares of Deere stock were purchased at $138.00
    07/24/2018 Sold 2 Aug 17, 2018 $140.00 Call options @ $3.35
    Note: the price of Deere stock was $137.32 when these Calls were sold.

    Two possible overall performance result (including commissions) would be as follows:
    100% Cash-Secured Cost Basis: $27,600.00
    = $138.00*200 shares

    Net Profit:
    (a) Options Income: +$1,193.42
    = ($2.68 +$3.35) *200 shares - 2*$6.29 commissions
    (b) Dividend Income: +$0.00
    (c) Capital Appreciation (If Deere stock is unchanged at $137.32 at Aug 17,2018 expiration): -$136.00
    = ($137.32-$138.00)*200 shares; OR
    (c) Capital Appreciation (If Deere stock is above $140.00 strike price at August 17th,2018 expiration): +$400.00
    = ($140.00-$138.00)*200 shares

    1. Total Net Profit (If Deere stock price is unchanged at $137.32 at Aug 17th options expiration): +$1,057.42
    = (+$1,193.42 options income +$0.00 dividend income -$136.00 capital appreciation); OR
    2. Total Net Profit (If Deere stock price is above $140.00 strike price at Aug 17th options expiration): +$1,593.42
    = (+$1,193.42 options income +$0.00 dividend income +$400.00 capital appreciation)

    1. Absolute Return (If Deere stock is unchanged at $137.32 at Aug 17th options expiration): +3.8%
    = +$1,057.42/$27,600.00
    Annualized Return: +32.5%
    = (+$1,057.42/$27,600.00)*(365/43 days); OR
    2. Absolute Return (If Deere stock is above $140.00 strike price at Aug 17th, 2018 options expiration): +5.8%
    = +$1,593.42/$27,600.00
    Annualized Return: +49.0%
    = (+$1,593.42/$27,600.00)*(365/43 days)

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