Early Assignment of Caterpillar Inc. Covered Calls Position

Early this morning, the Covered Calls Advisor received notification from my broker (Schwab) that the Caterpillar Inc. (ticker symbol CAT) February 15th, 2019 Call option was exercised early, so the 100 shares of Caterpillar stock in the Covered Calls Advisor Portfolio was assigned (i.e. sold) at the $115.00 strike price. 

Caterpillar stock was $134.54 at yesterday's market close.  The Covered Calls Advisor is pleased that the Call option owner decided to exercise their option early (one day prior to CAT's ex-dividend date since there was still $.76 time value [$20.30 midpoint of Call option bid/ask price - ($134.54 current stock price - $115.00 strike price)] remaining in these Call options.  The Call owner was willing to immediately forego the remaining $0.76 per share (by exercising their option to buy the shares) in order to capture today's $.86 per share ex-dividend.  The per share stock price had increased from $121.68 when this Caterpillar position was originally established on December 22nd, 2018 to $134.54 (17.0% in-the-money) at yesterday's market close.

As detailed below, the actual return-on-investment result achieved for this Caterpillar position a +4.6% absolute return (equivalent to +62.4% annualized return) for the 27 days this position was held.  The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established, the transactions details of which will be posted on this blog site the same day they occur.

Caterpillar Inc. (CAT) -- New Covered Calls Position
The transactions were:
12/22/2018 Bought 100 Caterpillar shares @ $121.68
12/22/2018 Sold 1 CAT 2/15/2019 $115.00 Call option @ $11.82
Note: a simultaneous buy/write transaction was executed.
01/18/2019 Early assignment of 1 Call option, so 100 shares of CAT stock sold at $115.00 strike price

The overall performance result (including commissions) for this Caterpillar Covered Calls position was as follows:
Covered Calls Cost Basis: $10,990.95
= ($121.68 - $11.82) *100 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,179.99
= ($11.82*100 shares) - $2.01 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation (CAT assigned at $115.00 strike price at options expiration): -$672.95
+($115.00-$121.68)*100 shares - $4.95 commissions

Total Net Profit: +$507.04

= (+$1,179.99 Call options income +$0.00 dividend income -$672.95 capital appreciation)

Absolute Return: +4.6%

= +$507.04/$10,990.95

Annualized Return: +62.4%

= (+$507.04/$10,990.95)*(365/27 days)