Established Covered Calls Position in JPMorgan Chase & Co.

Yesterday, a Covered Calls position was established in JPMorgan Chase & Co. (ticker symbol JPM) with a January 18th, 2019 expiration and at the $100.00 strike price.  This is the second Covered Calls position established in JPM.  This position uses the Covered Calls Advisor's Dividend Capture Strategy since there is an upcoming ex-dividend of $.80 on January 3rd which is prior to the options expiration date.  The next quarterly earnings report is scheduled for January 18th, 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.

As detailed below, a potential return-on-investment result is +3.0% absolute return (equivalent to +36.9% annualized return for the next 30 days) if the stock is unchanged at the $96.83 purchase price on the January 18th options expiration date.


JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

Because of the recent plunge in the stock market as well as JPM stock, the Implied Volatility of 34.4 was at a very attractive level when these Call options were sold.

The transactions were:
12/20/2018 Bought 300 JPM shares @ $96.83
12/20/2018 Sold 3 JPM 1/18/2019 $100.00 Call options @ $2.08
Note: a simultaneous buy/write transaction was executed.
01/03/2019 Upcoming quarterly ex-dividend of $.80 per share

Two possible overall performance results (including commissions) for this JPM Covered Calls position are as follows:
Stock Purchase Cost: $28,429.95
= ($96.83 - $2.08) *300 shares + $4.95 commission

Net Profit:
(a) Options Income: +$621.99
= ($2.08*300 shares) - $2.01 commissions
(b) Dividend Income: +$240.00
= ($.80 dividend per share x 300 shares)

(c) Capital Appreciation (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +$0.00
+($96.83-$96.83)*300; OR
(c) Capital Appreciation (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +$946.05
+($100.00-$96.83)*300 - $4.95 commissions

1. Total Net Profit (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +$861.99

= (+$621.99 +$240.00 +$0.00); or

2. Total Net Profit (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +$1,808.04

= (+$621.99 +$240.00 +$946.05)

1. Absolute Return (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +3.0%

= +$861.99/$28,429.95

Annualized Return: +36.9%

= (+$861.99/$28,429.95)*(365/30 days); or

2. Absolute Return (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +6.4%

= +$1,808.04/$28,429.95

Annualized Return: +77.4%

= (+$1,808.04/$28,429.95)*(365/30 days)

Either outcome would provide an excellent return-on-investment result for this investment.  The breakeven price of $93.95 ($96.83 -$2.08 -$.80) provides 3.0% downside protection below today's purchase price.