Early Assignment of Delta Air Lines Inc. Covered Calls Position

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that 3 Delta Air Lines Inc. (ticker symbol DAL) March 15th, 2019 Call options were exercised early, so the 300 shares of Delta Air Lines stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $45.00 strike price.

Today is Delta's $.35 per share quarterly ex-dividend date.  This DAL Covered Calls position was established on January 23rd, 2019 when the stock was purchased at $47.01 per share (link to blog post when Delta position established).  The price has since risen to $50.43 at yesterday's market close.  In the original blog post, the Covered Calls Advisor stated: "If the current time value (i.e. extrinsic value) of $1.18 [$3.19 Call options price - ($47.01 stock price - $45.00 strike price)] remaining in the three short Call options decays substantially (down to about $.15 or less) by the business day prior to the estimated ex-dividend date, there is a possibility that the Call options owner would exercise early and therefore call the 300 Delta shares away to capture the dividend payment. Yesterday, the remaining time value was close to $0.00, so the Call owner did exercise early.   

As detailed below, the actual return-on-investment result achieved for this Delta Air Lines position was a +2.6% absolute return (equivalent to +26.6% annualized return) for the 36 days this position was held.  The Covered Calls Advisor was satisfied to allow this outcome to happen since the annualized return-on-investment result achieved of +26.6% exceeds the +24.0% that would have occurred if the stock had instead been assigned at the March 15th options expiration date.  The cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur.

Delta Air Lines Inc. (DAL) -- Early Assignment of Covered Calls Position
The transactions were:
01/23/2019 Bought 300 Delta Air Lines shares @ $47.01
01/23/2019 Sold 3 DAL 03/15/2019 $45.00 Call options @ $3.19
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was 1,551 contracts and the Implied Volatility was 31.3.
02/27/2019 Early assignment of 3 DAL Mar 15th $45.00 Call options, so 300 shares of Delta stock sold at $45.00 strike price

The overall performance results (including commissions) for this
Delta Covered Calls position was as follows:
Covered Calls Cost Basis: $13,150.95
= ($47.01 - $3.19) *300 + $4.95 commission

Net Profit Components:
(a) Options Income: +$952.99
= ($3.19*300 shares) - $4.01 commissions
(b) Dividend Income (Option exercised early on Feb 27th, the business day prior to the ex-div date): +$0.00

(c) Capital Appreciation: -$607.95
+($45.00-$47.01)*300 shares - $4.95 commissions

Total Net Profit: +$345.04

= (+$952.99 +$0.00 -$607.95)

Absolute Return: +2.6%

= +$345.04/$13,150.95

Annualized Return: +26.6%

= (+$345.04/$13,150.95)*(365/36 days)

Position Closed in Marathon Petroleum Corp.

Today was the quarterly ex-dividend date for Marathon Petroleum Corporation.  Here is the Covered Calls Advisor's blog post when this position was established (link).   The Covered Calls Advisor was very surprised (and also very pleased) this morning that this MPC Covered Calls position was not exercised early by the Calls owner in order for them to capture today's $.53 dividend.  Early exercise was expected since the time value in this position had declined to $0.00 = [$7.65 midpoint of  Call options $7.55/$7.75 bid/ask spread - ($65.15 closing stock price - $57.50 strike price)] as of last Friday's (the last trading day prior to today's ex-dividend date) market close. 

So, the Covered Calls Advisor will receive the $.53 dividend payment and with the stock higher today (after adjustment to the stock price for the dividend), the position was closed by selling the 300 MPC shares and simultaneously buying back the three shorted March 15th, 2019 $57.50 Call options.  

As detailed below, this Marathon Petroleum Corp. position achieved a return-on-investment result of +1.3% absolute return in 8 days (equivalent to a +60.1% annualized return-on-investment).  This result exceeds the +43.0% that would have been achieved if this position had been exercised early or the +20.7% that would have been achieved if assigned at expiration.


Marathon Petroleum Corp. (MPC) -- Covered Calls Position Closed
The transactions were as follows:
02/011/2019 Bought 300 Marathon Petroleum shares @ $61.78
02/11/2019 Sold 3 MPC 03/15/2019 $57.50 Call options @ $4.84
Note: a simultaneous buy/write transaction was executed and the implied volatility in the option was 34.2. 
02/19/2019 Ex-dividend of $.53 per share
02/19/2019 Closed MPC Covered Calls position by selling 300 MPC shares at $64.98 and simultaneously buying back the 3 Mar 15th $57.50 Calls at $7.79 per share.  
Note: The time value remaining in this position when it was closed out was $.31 = [$7.79 Call options price - ($64.98 stock price - $57.50 strike price)]

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $17,086.95
= ($61.78 - $4.84) *300 shares + $4.95 commission

Net Profit Components:
(a) Options Income: -$889.02
= ($4.84 - $7.79) *300 shares - $4.02 commissions
(b) Dividend Income: +$159.00
= ($.53 dividend per share x 300 shares)

(c) Capital Appreciation: +$955.05
+($64.98 - $61.78)*300 shares - $4.95 commissions

Total Net Profit: +$225.03

= (-$889.02 options income +$159.00 dividend income +$955.05 capital appreciation)

Absolute Return: +1.3%

= +$225.03/$17,086.95

Annualized Return: +60.1%

= (+$225.03/$17,086.95)*(365/8 days)

February 15th, 2019 Options Expiration Results

The Covered Calls Advisor Portfolio had nine positions with February 15th, 2019 options expirations as follows:

• Five positions were closed early (i.e. prior to Feb 15th expiration date).  The detailed results for each position were posted previously on the dates each position was closed:

1. CVS Health Corp. (Position #1) -- Early Assignment -- See link
2. Lam Research Corp. -- Closed Early -- See link
3. Citigroup Inc. -- Early Assignment -- See link
4. Boeing Inc. -- Early Assignment -- See link 
5. Blackstone Group L.P. -- Early Assignment -- See link

• On the February 15th expiration date, two positions (Alibaba Group Holding Ltd. and Alphabet Inc.) were rolled out to March 15th, 2019 Covered Call positions -- posted here.
• The remaining two positions (CVS Health Corp.-- Position #2 and Lowes Companies Inc.) closed in-the-money at the February 15th, 2019 options expiration, so those shares were assigned (sold) at their respective strike prices.  The return-on-investment results for these two positions are detailed below. 

The cash now available in the Covered Calls Advisor Portfolio from the closing of these two (CVS and Lowe's) positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  As always, any new position(s) established will be posted on this site on the same day the transactions occur.  As shown in the right sidebar, there are currently nine Covered Calls positions (all with March 15th, 2019 expirations) in the Covered Calls Advisor Portfolio.

Note: In addition to these monthly results for this February 15th options expiration month, year-to-date results will also be reported each month beginning with the March 2019 results that will be posted soon after the March 15th monthly option expiration date.

1.  CVS Health Corp. (Position #2) -- Covered Calls Position Closed

The transactions were:
01/15/2019 Bought 200 CVS shares @ $64.39
01/15/2019 Sold 2 CVS 02/15/2019 $62.50 Call options @ $3.01
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was 1,020 contracts and the Implied Volatility was 29.7.
01/24/2019 Quarterly ex-dividend of $.50 per share
02/15/2019 CVS $62.50 Call options expired in-the-money, so 200 CVS shares sold at $62.50 strike price
Note: the price of CVS shares was $69.53 at market close on Feb 15th

The overall performance result (including commissions) for this CVS Covered Calls position was as follows:
Covered Calls Cost Basis: $12,280.95
= ($64.39 - $3.01) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$600.66
= ($3.01*200 shares) - $1.34 commissions
(b) Dividend Income (CVS shares assigned at Feb 15th, 2019 expiration): +$100.00
= ($.50 dividend per share x 200 shares)

(c) Capital Appreciation (CVS shares assigned at $62.50 strike price at options expiration): -$373.05
+($62.50-$64.39)*200 shares - $4.95 commissions

Total Net Profit: +$317.71

= (+$600.66 +$100.00 -$382.95)

Absolute Return: +2.6%

= +$317.71/$12,280.95

Annualized Return: +29.5%

= (+$317.71/$12,280.95)*(365/32 days)

2.  Lowes Companies Inc. (LOW) -- Covered Calls Position Closed

The transactions were:
01/17/2019 Bought 200 Lowes shares @ $91.80
01/17/2019 Sold 2 LOW 2/15/2019 $90.00 Call options @ $3.36
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was 467 contracts and the Implied Volatility was 25.4 when this transaction was executed.
01/22/2019 Quarterly ex-dividend of $.48 per share
02/15/2019 LOW $90.00 Call options expired in-the-money, so 200 Lowes shares sold at $90.00 strike price
Note: the price of Lowes stock was $104.24 at market close on Feb 15th

The overall performance result (including commissions) for this Lowes Covered Calls position was as follows:
Covered Calls Cost Basis: $17,692.95
= ($91.80 - $3.36) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$670.66
= ($3.36*200 shares) - $1.34 commissions
(b) Dividend Income (Lowes shares assigned at Feb 15th, 2018 expiration): +$96.00
= ($.48 dividend per share x 200 shares)

(c) Capital Appreciation (LOW shares assigned at $90.00 strike price at options expiration): -$364.95
+($90.00-$91.80)*200 shares - $4.95 commissions

Total Net Profit: +$401.71

= (+$670.66 +$96.00 -$364.95)

Absolute Return: +2.3%

= +$401.71/$17,692.95

Annualized Return: +27.6%

= (+$401.71/$17,692.95)*(365/30 days)

Roll Out of Alibaba and Alphabet Covered Call Positions

Yesterday (February 15th) was the monthly options expiration for February 2019 and the Covered Calls Advisor made four transactions.  As detailed on this blog yesterday, two new Covered Call positions were established in Applied Materials Inc. and Fedex Corp., both with March 15th, 2019 expirations.

The other two positions were roll out transactions in the core holdings of Alibaba Group Holding and Alphabet Inc. from the Feb 15th expiration to the March 15th expiration date.  Both positions were originally established in 2018, but the details of these positions are shown from the beginning of 2019 to enable calculation of calendar year 2019 return-on-investment results of the Covered Calls Advisor Portfolio to be determined.  The roll out transactions for both positions were done during the final hour of trading yesterday to try to squeeze the time value remaining in the February 15th Calls down as close to $0.00 as possible.  

As detailed below, potential investment results are:

• Alibaba Group -- A +13.9% absolute return in 74 days (which is equivalent to a +68.6% annualized return-on-investment) if Alibaba stock closes above the $160.00 strike price on the March 15th options expiration date.  
• Alphabet Inc. -- A +10.5% absolute return in 74 days (which is equivalent to a +51.6% annualized return-on-investment) if Alphabet stock closes above the $1,090.00 strike price on the March 15th options expiration date. 

Please notice that all the March 15th positions in the Covered Calls Advisor's Portfolio are somewhat deeper in-the-money than has been the case in recent months.  I am in full agreement with the perspective in this Schwab Market Commentary (Link) including their well-stated summation comments that "Markets got a healthy reprieve from last year’s fourth quarter carnage as a few headwinds became tailwinds; including a more dovish Fed, some hopes on trade, strong fourth quarter earnings growth, and an end to the government shutdown. But there are lurking risks, including equities having become technically overbought, and investor sentiment having moved back into the high optimism zone."  So, I am positioning the March 15th portfolio positions more conservatively during this next month.

Note: The return-on-investment results for two other Covered Calls positions with February 15th expirations (CVS Health Corp. and Lowes Companies Inc.) will be included in another post tomorrow (Sunday) on this blog.
 
1.  Alibaba Position #1 (BABA) -- Continuing Covered Calls Position

The transactions were as follows:
01/01/2019 200 BABA shares owned at $137.07 per share
01/07/2019 2 Jan 18, 2019 $145.00 short Call options sold at $2.09 per share
01/18/2019 Bought-to-Close 2 Jan 18th $145.00 Calls @ $11.22
01/18/2019 Sold-to-Open 2 Feb 15th, 2019 $155.00 Calls @ $7.47
Note: the price of BABA stock was $156.24 when this roll out and up transaction occurred.
02/15/2019 Bought-to-Close 2 Feb 15th $155.00 Calls @ $11.15
02/15/2019 Sold-to-Open 2 Mar 15th, 2019 $160.00 Calls @ $9.05
Note: the price of BABA stock was $166.10 when this roll out and up transaction occurred.

A possible overall performance result (including commissions) if this in-the-money position is assigned at the March 15th expiration is as follows:
Cost Basis: $27,414.00
= $137.07 per share value at end of December, 2018 * 200 shares

Net Profit Components:
(a) Options Income: -$770.87
= ($2.09 - $11.22 + $7.47 - $11.15 + $9.05) * 200 shares - $18.87 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is above $160.00 strike price at March 15th expiration): +$4,581.05
= ($160.00 -$137.07) * 200 shares - $4.95 commission

Total Net Profit: +$3,810.18
= (-$770.87 options income +$0.00 dividend income +$4,581.05 capital appreciation)

Absolute Return: +13.9%
= +$3,810.18/$27,414.00
Equivalent Annualized Return: +68.6%
= (+$3,810.18/$27,414.00)*(365/74 days)

2.  Alphabet Inc. (GOOGL) -- Continuing Covered Call Position

The transactions were as follows:
01/01/2019 100 GOOGL shares owned at $1,044.96 per share
01/01/2019 1 Jan 18th, 2019 $1,085.00 short Call option valued at $19.80 per share
01/18/2019  Bought-to-Close 1 Jan 18th $1,085.00 Call option @ $19.25
01/18/2019 Sold-to-Open 1 Feb 15th, 2019 $1,095.00 Call @ $41.70
Note: the price of GOOGL stock was $1,104.73 when this roll out and up transaction occurred.
02/15/2019 Bought-to-Close 1 Feb 15th $1,095.00 Calls @ $22.40
02/15/2019 Sold-to-Open 1 Mar 15th, 2019 $1,090.00 Calls @ $44.50
Note: the price of GOOGL stock was $1,117.25 when this roll out and down transaction occurred.

A possible overall performance result (including commissions) if this in-the-money position is assigned at the March 15th expiration is as follows:
Cost Basis: $104,496.00
= $1,044.96 per share value at end of December, 2018 * 100 shares

Net Profit Components:
(a) Options Income: +$6,422.42
= (+$19.80 - $19.25 + $41.70 - $22.40 + $44.50) * 100 shares - $12.58 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If GOOGL stock is above $1,090.00 strike price at March 15th expiration): +$4,499.05
= ($1,090.00 -$1,044.96) * 100 shares - $4.95 commission

Total Net Profit: +$10,921.47
= (+$6,422.42 options income +$0.00 dividend income +$4,499.05 capital appreciation)

Absolute Return: +10.5%
= $+$10,921.47/$104,496.00
Equivalent Annualized Return: +51.6%
= ($+$10,921.47/$104,496.00)*(365/74 days)

Covered Call Position Established in Fedex Corp.

Today, a Covered Call was established in Fedex Corp. (ticker symbol FDX) with a March 15, 2019 expiration and at the $170.00 strike price.  This position has an expected upcoming quarterly ex-dividend on March 8th, 2019 of $.65 per share, so the potential return for this position includes the possibility of early exercise because the ex-dividend is prior to the March 15th, 2019 options expiration date.  Quarterly earnings will be reported after the March 15th options expiration date.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Call position was established. 

As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +18.4% annualized return for the next 21 days) if the stock is assigned early (last trading day prior to March 8th ex-dividend date); OR +1.4% absolute return (equivalent to +18.2% annualized return over the next 29 days) if the stock is assigned on the March 15th options expiration date.


Fedex Corp. (FDX) -- New Covered Calls Position

If the current time value (i.e. extrinsic value) of $1.84 = [$10.44 options premium - ($178.60 stock price - $170.00 strike price)] remaining in the one short Call option decays substantially (down to about $.15 or less) by March 7th (the last trading day prior to the ex-dividend date), there is a possibility that the Call option owner would exercise early and therefore call the 100 Fedex shares away to capture the dividend payment.

The transactions were:
02/15/2019 Bought 100 Fedex shares @ $178.60
02/15/2019 Sold 1 FDX 3/15/2019 $170.00 Call option @ $10.44
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was 380 contracts and the Implied Volatility was 26.0 when this transaction was executed.
03/08/2019 Upcoming quarterly ex-dividend of $.65 per share

Two possible overall performance results (including commissions) for this Fedex Covered Call are as follows:
Covered Call Cost Basis: $16,820.95
= ($178.60 - $10.44) *100 shares + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,043.33
= ($10.44*100 shares) - $.67 commissions
(b) Dividend Income (If option exercised early on day prior to Mar 8th ex-div date): +$0.00; or
(b) Dividend Income (If Fedex shares assigned at Mar 15th, 2018 expiration): +$65.00
= ($.65 dividend per share x 100 shares)

(c) Capital Appreciation (If FDX shares assigned early on Mar 7th): -$864.95
+($170.00-$178.60)*100 shares - $4.95 commissions; or
(c) Capital Appreciation (If Fedex assigned at $170.00 strike price at options expiration): -$864.95
+($170.00-$178.60)*100 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Mar 7th (business day prior to ex-dividend date)]: +$178.38

= (+$1,043.33 +$0.00 -$864.95); or

2. Total Net Profit (If FDX shares assigned at $170.00 at March 15, 2019 expiration): +$243.38

= (+$1,043.33 +$65.00 -$864.95)

1. Absolute Return [If Fedex option exercised on March 7th (day prior to ex-dividend date)]: +1.1%

= +$178.38/$16,820.95

Annualized Return (If option exercised early): +18.4%

= (+$178.38/$16,820.95)*(365/21 days); or

2. Absolute Return (If Fedex shares assigned at $170.00 at Mar 15th, 2019 expiration): +1.4%

= +$243.38/$16,820.95

Annualized Return (If Fedex stock assigned at $170.00 at Mar 15th, 2019 expiration): +18.2%

= (+$243.38/$16,820.95)*(365/29 days)

These returns will be achieved as long as the stock is above the $170.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $167.51 ($178.60 stock purchase price -$10.44 Call option income -$.65 dividend income) provides 6.2% downside protection below today's purchase price.  Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the March 15th, 2019 options expiration) for this Fedex Covered Call position is 76.4%, so the expected value annualized ROI of this investment (if held until expiration) is +13.9% (+18.2% * 76.4%) for this in-the-money Covered Call.

Established Covered Calls Position in Applied Materials Inc.

Today, a Covered Calls position was established in Applied Materials Inc. (ticker symbol AMAT) with a March 15th, 2019 expiration and at the $37.00 strike price.  This position has an upcoming quarterly ex-dividend next week (on February 20th) of $.20 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the March 15th options expiration date.  1st Quarter, 2019 earnings were reported yesterday, so the next earnings report won't be for three more months, well after the March expiration date. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +79.2% annualized return for the next 5 days) if the stock is assigned early (business day prior to February 20th ex-date); OR +1.6% absolute return (equivalent to +20.5% annualized return over the next 29 days) if the stock is assigned on the March 15th options expiration date.


Applied Materials Inc. -- Covered Calls Position Established
Although unlikely, if the current time value (i.e. extrinsic value) of $.42 [$2.54 options premium - ($39.12 stock price - $37.00 strike price)] remaining in the short call options decays substantially by February 19th (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 300 Applied Materials shares away to capture the dividend payment.

The transactions were:
02/15/2019 Bought 300 AMAT shares @ $39.12
02/15/2019 Sold 3 AMAT March 15, 2019 $37.00 Call options @ $2.54 per share
Note: a simultaneous buy/write transaction was executed.
02/20/2019 Upcoming quarterly ex-dividend of $.20 per share

Two possible overall performance results (including commissions) for this Applied Materials Covered Calls position are as follows:
Covered Calls Cost Basis: $10,978.95
= ($39.12 - $2.54) *300 shares + $4.95 commission

Net Profit Components:
(a) Options Income: +$759.99
= ($2.54*300 shares) - $2.01 commissions
(b) Dividend Income (If option exercised early on Feb 19th, the business day prior to Feb 20th ex-div date): +$0.00; or
(b) Dividend Income (If AMAT assigned at Mar 15th, 2019 expiration): +$60.00
= ($.20 dividend per share x 300 shares)

(c) Capital Appreciation (If AMAT assigned early on Feb 19th): -$640.95
+($37.00-$39.12)*300 shares - $4.95 commissions; or
(c) Capital Appreciation (If shares assigned at $57.50 strike price at options expiration): -$640.95
+($37.00-$39.12)*300 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Feb 19th (business day prior to Feb 20th ex-dividend date)]: +$119.04

= (+$759.99 options income +$0.00 dividend income -$640.95 capital appreciation); or

2. Total Net Profit (If Applied Materials shares assigned at $37.00 at March 15th, 2019 expiration): +$179.04

= (+$759.99 +$60.00 -$640.95)

1. Absolute Return (If option exercised on business day prior to ex-dividend date): +1.1%

= +$119.04/$10,978.95

Annualized Return (If option exercised early): +79.2%

= (+$119.04/$10,978.95)*(365/5 days); or

2. Absolute Return (If Applied Materials shares assigned at $37.00 at March 15, 2019 expiration): +1.6%

= +$179.04/$10,978.95

Annualized Return (If AMAT shares assigned at $37.00 at Mar 15, 2019 expiration): +20.5%

= (+$179.04/$10,978.95)*(365/29 days)

Either outcome provides a good return-on-investment result for this Applied Materials Inc. investment.  These returns will be achieved as long as the stock is above the $37.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $36.38 ($39.12 stock purchase price -$2.54 options income -$.20 dividend income) provides a nice 7.0% downside breakeven protection below today's purchase price.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the March 15th, 2019 options expiration) for this Applied Materials Covered Calls position is 74.6%, so the expected value annualized ROI of this investment (if held until expiration) is +15.3% (+20.5% * 74.6%), a satisfactory return for this in-the-money Covered Calls position.

As shown in the table below for the Covered Calls Advisor's Dividend Capture Strategy spreadsheet, all eleven criteria are achieved for this AMAT Covered Calls position.

Established Covered Calls Position in Marathon Petroleum Corp.

Today, a Covered Calls position was established in Marathon Petroleum Corp. (ticker symbol MPC) with a March 15th, 2019 expiration and at the $57.50 strike price.  This position has an upcoming quarterly ex-dividend on February 19th of $.53 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the March 15th options expiration date.  4th Quarter, 2018 earnings were reported last Thursday, so the next earnings report won't be for three more months, well after the March expiration date. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Calls position was established. 

According to Reuters Research, twenty of twenty-two analysts covering Marathon Petroleum rate it as either a Buy or Outperform, two rate it as a Hold, and none rate it as Underperform or Sell.  Also, the Covered Calls Advisor's customized Multifactor (Quality, Value, and Growth) screener currently ranks Marathon Petroleum in the top 6% of stocks on American exchanges. 

As detailed below, a potential return-on-investment result is +0.9% absolute return (equivalent to +43.0% annualized return for the next 8 days) if the stock is assigned early (business day prior to February 19th ex-date); OR +1.9% absolute return (equivalent to +20.7% annualized return over the next 33 days) if the stock is assigned on the March 15th options expiration date.


Marathon Petroleum Corp. (MPC) -- New Covered Calls Position

Although unlikely, if the current time value (i.e. extrinsic value) of $.56 [$4.84 options premium - ($61.78 stock price - $57.50 strike price)] remaining in the short call options decays substantially by February 18th (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 300 Marathon Petroleum shares away to capture the dividend payment.

The transactions were:
02/011/2019 Bought 300 Marathon Petroleum shares @ $61.78
02/11/2019 Sold 3 MPC 03/15/2019 $57.50 Call options @ $4.84
Note: a simultaneous buy/write transaction was executed and the implied volatility in the option was 34.2.  
02/19/2019 Upcoming quarterly ex-dividend of $.53 per share


Two possible overall performance results (including commissions) for this Marathon Petroleum Covered Calls position are as follows:
Covered Calls Cost Basis: $17,086.95
= ($61.78 - $4.84) *300 shares + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,449.99
= ($4.84*300 shares) - $2.01 commissions
(b) Dividend Income (If option exercised early on Feb 18th, the business day prior to Feb 19th ex-div date): +$0.00; or
(b) Dividend Income (If MPC assigned at Mar 15th, 2019 expiration): +$159.00
= ($.53 dividend per share x 300 shares)

(c) Capital Appreciation (If MPC assigned early on Feb 18th): -$1,288.95
+($57.50-$61.78)*300 shares - $4.95 commissions; or
(c) Capital Appreciation (If shares assigned at $57.50 strike price at options expiration): -$1,288.95
+($57.50-$61.78)*300 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Feb 18th (business day prior to Feb 19th ex-dividend date)]: +$161.04

= (+$1,449.99 options income +$0.00 dividend income -$1,288.95 capital appreciation); or

2. Total Net Profit (If Marathon Petroleum shares assigned at $57.50 at March 15th, 2019 expiration): +$320.04

= (+$1,449.99 +$159.00 -$1,288.95)

1. Absolute Return [If option exercised on Feb 18th (business day prior to ex-dividend date)]: +0.9%

= +$161.04/$17,086.95

Annualized Return (If option exercised early): +43.0%

= (+$161.04/$17,086.95)*(365/8 days); or

2. Absolute Return (If Marathon Petroleum shares assigned at $57.50 at March 15, 2019 expiration): +1.9%

= +$320.04/$17,086.95

Annualized Return (If MPC shares assigned at $57.50 at Mar 15, 2019 expiration): +20.7%

= (+$320.04/$17,086.95)*(365/33 days)

Either outcome provides a good return-on-investment result for this Marathon Petroleum investment.  These returns will be achieved as long as the stock is above the $57.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $56.41 ($61.78 -$4.84 -$.53) provides a large 8.7% downside protection below today's purchase price.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the March 15th, 2019 options expiration) for this Marathon Petroleum Covered Calls position is 77.2%, so the expected value annualized ROI of this investment (if held until expiration) is +16.0% (+20.7% * 77.2%), a satisfactory return for this in-the-money Covered Calls position.

As shown in the table below for the Covered Calls Advisor's Dividend Capture Strategy spreadsheet, all eleven criteria are achieved for this MPC Covered Calls position.

Covered Calls Established in Micron Technology Inc.

Today, a new position was established in Micron Technology Inc. (ticker MU) by purchasing 500 shares at $37.91 and selling five March 15th, 2019 Call options at the $35.00 strike price. 

The implied volatility of the Call options has increased recently to a very high level of 51.5 when this position was established; so the $4.20 price per share received when these Calls were sold is a very nice premium to receive for these moderately in-the-money options.  This level is especially high given that Micron's next earnings report is after the March expiration date and also the S&P's current Volatility Index is relatively low at 16.5.  An in-the-money strike was selected given the Covered Calls Advisor's current Overall Market Meter sentiment (see right sidebar) of "Slightly Bearish". 

There is increasingly negative sentiment among analysts regarding the semiconductor industry for 2019 which contributes to the current high implied volatility in the options.  This outlook was joined by Goldman Sachs with today's downgrading of Micron (see this article Link), which contributed to the steep sell-off in Micron today, when the price had spiked down 3.7% from yesterday's closing price.  The Covered Calls Advisor has a different outlook than Goldman Sachs for Micron.  Over time, the demand for its products should continue to grow along with the expected growth in technology (hardware, software, cloud, artificial intelligence, etc. etc.).  Micron is in an especially strong position given its memory capabilities and as a leader in leading edge semiconductor technologies (such as 3D Crosspoint).  The largest manufacturing equipment provider (Applied Materials) will not report earnings until next week, but Lam Research provided a positive overall outlook for semis for 2019 in their earnings outlook -- somewhat challenging in the first half but more positive for the second half of the year.  Micron is priced very attractively on both value and quality metrics, and it also provides a good margin of safety since its current price is well below its one-year target price based on discounted cash flow and other valuation model estimates.     

As detailed below, for this position there is potential for a +3.8% absolute return in 36 days (equivalent to a +38.5% annualized return-on-investment).


Micron Technology Inc. (MU) -- New 100% Covered Calls Position
The transaction today was as follows:
02/08/2019  Bought 500 shares MU @ $37.91
02/08/2019 Sold 5 MU March 15, 2019 $35.00 Call options @ $4.20
Note: this was a simultaneous Buy/Write transaction.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $16,863.33
= ($37.91 - $4.20) * 500 shares + $8.30 commission

Net Profit:
(a) Options Income: +$2,100.00
= ($4.20 * 500 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron Technology Inc. is above $35.00 strike price at March 15th expiration): -$1,459.95
= ($35.00-$37.91) * 500 shares - $4.95 commission

Total Net Profit (If Micron stock price is above $35.00 strike price at March 15th options expiration): +$640.05
= (+$2,100.00 options income +$0.00 dividend income -$1,459.95 capital appreciation)

Absolute Return (If Micron stock price is above $35.00 strike price at March 15th options expiration): +3.8%
= +$640.05/$16,863.33
Annualized Return: +38.5%
= (+$640.05/$16,863.33)*(365/36 days)

The downside 'breakeven price' at expiration is at $33.71 ($37.91 - $4.20), which is 11.1% below the current market price of $37.91.

The probability of making a profit (if held until the March 15, 2019 options expiration) for this Micron Technology Inc. Covered Calls position is 71.9%. This compares with a probability of profit of 50.3% for a buy-and-hold of Micron shares over the same time period. Using this probability of profit of 71.9%, the expected value annualized return-on-investment (if held until expiration) is +27.7% (+38.5% * 71.9%), a very good risk/reward profile for this relatively conservative investment.   

Early Assignment of Blackstone Group L.P. Covered Calls

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that three Blackstone Group L.P. (ticker symbol BX) February 15th, 2019 Call options were exercised early, so the 300 shares of Blackstone stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $33.00 strike price.

Today is Blackstone's $.58 per share quarterly ex-dividend date.  Early exercise by the owners of these Call options was expected since there was only $.01 time value [$1.52 (mid-point of $1.40/$1.63 Call options price - ($34.51 stock price - $33.00 strike price)] remaining in the Feb 15th $33.00 Calls.  So, the Call owners were willing to immediately forego the remaining time value per share (by exercising their option to buy the shares) in order to capture today's $.58 per share ex-dividend.  As detailed below, the per share stock price had increased from $29.81 at the end of 2018 to $34.51 at yesterday's market close. 

This Blackstone Covered Calls position was originally established in November of 2018 and the status of this position was included in the calendar year 2018 results (link) which were calculated as of Dec 31st, 2018.  Likewise, overall return-on-investment (roi) results will be determined for calendar year 2019 (Jan 1st through Dec 31st, 2019), so the roi result for this Blackstone position was determined from its Jan 1st, 2019 market values through today's closing of the position.

As detailed below, the actual return-on-investment result achieved for this Blackstone position was a +12.5% absolute return (equivalent to +120.0% annualized return) for the 38 days this position was held.   As always, the cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur. 

The Covered Calls Advisor Portfolio has had several positions since the beginning of this year that, like this Blackstone position, have experienced extraordinarily large returns.  These positions benefited from the unusually swift bull move of the stock market in January.  The Covered Calls Advisor cautions you that these types of returns are not customary for a Covered Calls investing strategy.  From my decades of Covered Calls investing experience, my expectation is that "over a long-term investing horizon (say 10+ years), a disciplined Covered Calls investor that is cognizant of the six "edges" described above, and works to take advantage of them might expect (on average over the years), to outperform a buy-and-hold benchmark by about 3% to 5% per year."  This conclusion was included as part of a post made on this blog more than 8 years ago (See Exploiting Our Covered Calls Investing "Edges"), and it continues to be an appropriate expectation today.  


Blackstone Group L.P. (BX) -- Early Assignment of Covered Calls Position
The transactions were:
01/01/2019 Market value of 300 Blackstone Group L.P. shares was $29.81
01/07/2019 Sold 3 BX February 15, 2019 $33.00 Call options @ $.58
Note: Price of BX shares was $31.06 on Jan 7th when these Call options were sold
02/07/2019 Early assignment of 3 BX Feb 15th $33.00 Call options, so 300 shares of BX stock sold at $33.00 strike price

The overall performance result (including commissions) for this Blackstone Covered Calls position was as follows:
Covered Calls Cost Basis: $8,943.00
= $29.81 * 300 shares

Net Profit Components:
(a) Options Income: +$165.03
= $.58 * 300 shares - $8.97 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation (BX assigned at $33.00 strike price): +$952.05
+($33.00-$29.81) * 300 shares - $4.95 commission

Total Net Profit: +$1,117.08

= (+$165.03 options income +$0.00 dividend income +$952.05 capital appreciation)

Absolute Return: +12.5%

= +$1,117.08/$8,943.00

Annualized Return: +120.0%

= (+$1,117.08/$8,943.00)*(365/38 days)

Early Assignment of Boeing Inc. Covered Call Position

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that one Boeing Inc. (ticker symbol BA) February 15th, 2019 Call option was exercised early, so the 100 shares of Boeing stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $375.00 strike price.

Today is Boeing's $2.055 per share quarterly ex-dividend date.  This Boeing Covered Call was established on January 22nd, 2019 when the stock was purchased at $356.41 per share (link to blog post when Boeing position was originally established).  The price has risen dramatically since its terrific quarterly earnings report and on February 1st, 2019, with the stock price at $391.26 per share, the position was rolled up to the $375.00 strike price and at the same February 15th, 2019 expiration date (link to blog post of roll up transaction).  In the original blog post, the Covered Calls Advisor stated: "If the current time value (i.e. extrinsic value) of $6.98 [$18.39 Call option price -($356.41 stock price - $345.00 strike price)] remaining in the short Call option decays substantially (down to about $.30 or less) by Feb 6th (the business day prior to the ex-dividend date), there is a possibility that the Boeing Call option owner would exercise early and therefore call the 100 Boeing shares away to capture the dividend payment."  The stock continued its strong upward move and closed at $411.11 at yesterday's market close, so (as expected) the Call owner decided to forego the remaining  time value of approximately $.11 per share [$36.20 (mid-point of $35.70/$36.70 Call options price - ($411.11 stock price - $375.00 strike price)] in the Feb 15th $375.00 Calls in order to purchase the 100 shares and to obtain today's $2.055 dividend. 

As detailed below, the actual return-on-investment result achieved for this Boeing Inc. position was a +2.5% absolute return (equivalent to +53.1% annualized return) for the 17 days this position was held.  The Covered Calls Advisor was pleased to allow this outcome to happen since the annualized return-on-investment result achieved of +53.1% exceeds the +45.0% that would have occurred if the stock had instead been assigned at the Feb 15th options expiration date.  The cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur.


Boeing Co. (BA) -- Early Assignment of Covered Call Position
The transactions were:
01/22/2019 Bought 100 Boeing shares @ $356.41
01/22/2019 Sold 1 Boeing 02/15/2019 $345.00 Call option @ $18.39
Note: A simultaneous buy/write transaction was executed.
02/01/2019  Bought-to-Close 1 BA Feb 15, 2019 $345.00 Call option @ $46.78
02/01/2019 Sold-to-Open 1 BA Feb 15, 2019 $375.00 Call option @ $18.28
Note: this was a simultaneously executed roll-up transaction executed when BA was at $391.26 per share.
02/06/2019 Early assignment of 1 BA Feb 15th $375.00 Call option, so 100 shares of BA stock sold at $375.00 strike price

The overall performance result (including commissions) for this Boeing Covered Call position was as follows:
Covered Calls Cost Basis: $33,806.95
= ($356.41 - $18.39) *100 + $4.95 commission

Net Profit Components:
(a) Options Income: -$1,017.96
= ($18.39 -$46.78 +18.28) *100 shares) - $6.96 commissions
(b) Dividend Income (Boeing shares assigned on Feb 6th -- day prior to ex-dividend date): +$0.00

(c) Capital Appreciation (BA assigned at $375.00 strike price): +$1,854.05
+($375.00-$356.41)*100 shares - $4.95 commissions

Total Net Profit: +$836.09

= (-$1,017.96 options income +$0.00 dividend income +$1,854.05 capital appreciation)

Absolute Return (Boeing shares assigned at $375.00 on day prior to February 7th options expiration date): +2.5%

= +$836.09/$33,806.95

Annualized Return: +53.1%

= (+$836.09/$33,806.95)*(365/17 days)

Early Assignment of BlackRock Inc. Covered Call Position

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that 3 Delta Air Lines Inc. (ticker symbol DAL) March 15th, 2019 Call options were exercised early, so the 300 shares of Delta Air Lines stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $45.00 strike price.

Today is Delta's $.35 per share quarterly ex-dividend date.  This DAL Covered Calls position was established on January 23rd, 2019 when the stock was purchased at $47.01 per share (link to blog post when Delta position established).  The price has since risen to $50.43 at yesterday's market close.  In the original blog post, the Covered Calls Advisor stated: "If the current time value (i.e. extrinsic value) of $1.18 [$3.19 Call options price - ($47.01 stock price - $45.00 strike price)] remaining in the three short Call options decays substantially (down to about $.15 or less) by the business day prior to the estimated ex-dividend date, there is a possibility that the Call options owner would exercise early and therefore call the 300 Delta shares away to capture the dividend payment. Yesterday, the remaining time value was close to $0.00, so the Call owner did exercise early.   

As detailed below, the actual return-on-investment result achieved for this Delta Air Lines position was a +2.6% absolute return (equivalent to +26.6% annualized return) for the 36 days this position was held.  The Covered Calls Advisor was satisfied to allow this outcome to happen since the annualized return-on-investment result achieved of +26.6% exceeds the +24.0% that would have occurred if the stock had instead been assigned at the March 15th options expiration date.  The cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur.

BlackRock Inc. (BLK) -- New Covered Calls Position

Although unlikely, if the current time value (i.e. extrinsic value) of $8.30 [$14.20 option premium - ($415.90 stock price - $410.00 strike price)] remaining in the short call options decays substantially by March 4th (the business day prior to the ex-dividend date), there is a possibility that the Call option owner would exercise early and therefore call the 100 BlackRock shares away to capture the dividend payment.

The transactions were:
02/05/2019 Bought 100 BlackRock shares @ $415.90
02/05/2019 Sold 1 BlackRock 03/15/2019 $410.00 Call option @ $14.20
Note: a simultaneous buy/write transaction was executed and the implied volatility in the Call option was 22.4.  
03/05/2019 Upcoming quarterly ex-dividend of $3.30 per share

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the March 15th, 2019 options expiration) for this BlackRock Inc. Covered Call position is 60.4%, so the expected value annualized ROI of this investment (if held until expiration) is +16.2% (+26.9% * 60.4%), a satisfactory return for this in-the-money Covered Calls position.  The bullish market so far in 2019 has been accompanied, as expected, by a decline in the CBOE Volatility Index to its current level of about 15.5.  This is well below VIX's level above 20 in late December and its lowest level since early October.  This decline in volatility means lower potential return-on-investment results for us Covered Calls investors since lower volatility is accompanied by lower options income received when sold to establish our positions.     

Two possible overall performance results (including commissions) for this BlackRock Covered Call position are as follows:
Covered Calls Cost Basis: $40,174.95
= ($415.90 - $14.20) *100 shares + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,419.33
= ($14.20*100 shares) - $0.67 commissions
(b) Dividend Income (If option exercised early on Mar 4th, the business day prior to Mar 5th ex-div date): +$0.00; or
(b) Dividend Income (If BLK assigned at Mar 15th, 2019 expiration): +$330.00
= ($3.30 dividend per share x 100 shares)

(c) Capital Appreciation (If BLK assigned early on Mar 4th): -$594.95
+($410.00-$415.90)*100 shares - $4.95 commissions; or
(c) Capital Appreciation (If assigned at $410.00 strike price at options expiration): -$594.95
+($410.00-$415.90)*100 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Mar 4th (business day prior to March 5th ex-dividend date)]: +$824.38

= (+$1,419.33 options income +$0.00 dividend income -$594.95 capital appreciation); or

2. Total Net Profit (If BlackRock shares assigned at $410.00 at March 15th, 2019 expiration): +$1,154.38

= (+$1,419.33 +$330.00 -$594.95)

1. Absolute Return [If option exercised on Mar 4th (business day prior to ex-dividend date)]: +2.1%

= +$824.38/$40,174.95

Annualized Return (If option exercised early): +26.7%

= (+$824.38/$40,174.95)*(365/28 days); or

2. Absolute Return (If BlackRock shares assigned at $410.00 at March 15, 2019 expiration): +2.9%

= +$1,154.38/$40,174.95

Annualized Return (If BLK shares assigned at $410.00 at Mar 15, 2019 expiration): +26.9%

= (+$1,154.38/$40,174.9)*(365/39 days)

Either outcome provides a good return-on-investment result for this investment.  These returns will be achieved as long as the stock is above the $410.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $398.40 ($415.90 -$14.20 -$3.30) provides 4.2% downside protection below today's purchase price.

Roll Up of Boeing Co. Covered Call

The Covered Calls Advisor recently established one Covered Call in the Boeing Co. at the February 15th, 2019 $345.00 strike price.  The price of Boeing shares spiked upward by over $26 per share in response to its very positive quarterly earnings report two days ago.  They reported record annual sales, profits, and plane deliveries for 2018.  Looking forward, they project another record year for all three of these measures in 2019 and are further bolstered by a record year-end backlog of existing orders for 5,873 future plane deliveries (a 6+ years backlog).  Boeing and Airbus provide an excellent example of a powerful duopoly in a world with ongoing increasing demands for more airplanes.  View this interesting video for a perspective on this (link).

As a result, the time value remaining in the February 15th, 2019 $345.00 strike Call option was reduced to only $.52 [$46.78 Feb 15th $345.00 Calls option value - ($391.26 share price today - $345.00 strike price)] with 15 days remaining until the expiration date. The quarterly dividend of $2.055 per share goes ex-dividend next Thursday and the Covered Calls Advisor decided to significantly increase the probability of capturing this dividend by rolling up from the $345.00 strike to the $375.00 strike at the same February 15th expiration date. The time value remaining in the Feb 15th $375.00 strike price is $2.02 [$18.28 Feb 15th $375.00 Call option value - ($391.26 share price today - $375.00 strike price)], so the hope is to capture the $2.02 time value plus the $2.055 dividend per share as profit over the 15 days remaining until the options expiration. This will occur if the Boeing stock price remains above $375.00 by the Feb 15th expiration.

As detailed below, a potential return-on-investment result for this Boeing Covered Call since its inception on January 22nd  is +3.1% absolute return in 25 days (equivalent to a +45.0% annualized return-on-investment).  By rolling up the original Covered Call, this result would exceed the 2.7% absolute return (39.9% annualized) if it is assigned upon the Feb 15th expiration.   

Boeing Co. (BA) -- Continuation Covered Calls Position
The transactions to-date are:
01/22/2019 Bought 100 Boeing shares @ $356.41
01/22/2019 Sold 1 Boeing 02/15/2019 $345.00 Call option @ $18.39
Note: A simultaneous buy/write transaction was executed.
02/01/2019  Bought-to-Close 1 BA Feb 15, 2019 $345.00 Call option @ $46.78
02/01/2019 Sold-to-Open 1 BA Feb 15, 2019 $375.00 Call option @ $18.28
Note: this was a simultaneously executed roll-up transaction executed when BA was at $391.26 per share.
02/07/2019 Upcoming quarterly ex-dividend of $2.055 per share

A possible overall performance result (including commissions) for this Boeing Co. Covered Call position is as follows:
Covered Calls Cost Basis: $33,806.95
= ($356.41 - $18.39) *100 + $4.95 commission

Net Profit Components:
(a) Options Income: -$1,017.96
= ($18.39 -$46.78 +18.28) *100 shares) - $6.96 commissions
(b) Dividend Income (If Boeing shares assigned at Feb 15th, 2019 expiration): +$205.50
= ($2.055 dividend per share x 100 shares)

(c) Capital Appreciation (If BA assigned at $375.00 strike price at options expiration): +$1,854.05
+($375.00-$356.41)*100 shares - $4.95 commissions

Total Net Profit (If Boeing shares assigned at $375.00 at Feb 15th, 2019 expiration): +$1,041.59

= (-$1,017.96 +$205.50 +$1,854.05)

Absolute Return (If Boeing shares assigned at $375.00 at Feb 15th, 2019 expiration): +3.1%

= +$1,041.59/$33,806.95

Annualized Return: +45.0%

= (+$1,041.59/$33,806.95)*(365/25 days)

Early Assignment of Citigroup Inc. Covered Calls Position

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that 3 Citigroup Inc. (ticker symbol C) February 15th, 2019 Call options were exercised early, so the 300 shares of Citigroup stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $60.00 strike price.

Today is Citigroup's $.45 per share quarterly ex-dividend date.  This Citi Covered Calls position was established on January 23rd, 2019 when the stock was purchased at $62.24 per share (link to blog post when Citigroup position established).  The price has since risen to $64.46 at yesterdays's market close.  In the original blog post, the Covered Calls Advisor stated: "if the current time value (i.e. extrinsic value) of $.61 [$2.85 Call options price - ($62.24 stock price - $60.00 strike price)] remaining in the three short Call options decays substantially (down to about $.15 or less) by January 31st (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 300 Citigroup shares away to capture the dividend payment.  Prior to yesterday's market close, the Call owners did decide to forego the remaining approximately $.12 per share time value [$4.58 (mid-point of $4.45/$4.70 Call options price - ($64.46 stock price - $60.00 strike price)] in the Feb 15th $60.00 Calls in order to purchase the 300 shares and to obtain today's $.45 dividend. 

As detailed below, the actual return-on-investment result achieved for this Citigroup Inc. position was a +1.0% absolute return (equivalent to +39.6% annualized return) for the 9 days this position was held.  The Covered Calls Advisor was pleased to allow this outcome to happen since the annualized return-on-investment result achieved of +39.6% exceeds the +26.4% that would have occurred if the stock had instead been assigned at the Feb 15th options expiration date.  The cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur.

This February 2019 monthly Covered Calls position is the third consecutive month where the Covered Calls Advisor has utilized the Dividend Capture Strategy on a money center bank stock.  Using good timing as indicated using this advisor's Dividend Capture Strategy worksheet, selling
monthly Covered Calls for one of the four biggest U.S. money center banks (Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo) each month (JPMorgan for Jan, Apr, July, and Oct options expirations; Citigroup and/or Wells Fargo for Feb, May, Aug, and Nov expirations; and Bank of America for Mar, Jun, Sep, and Dec expirations) should provide higher annualized return results than would be achieved with Covered Calls in these same stocks during their non-ex-dividend months.  For the December 2018 monthly options expiration, a Bank of America Covered Calls position was established (BAC Position Link), and a JPMorgan Chase & Co. Covered Calls position was established (JPM Position Link) for the January 2019 monthly options expiration.  For these two positions, the dividend was captured and the stocks were profitably assigned at expiration.  From the date when these two Covered Calls positions were established, the Bank of America position achieved a +29.9% annualized return-on-investment result and the JPMorgan Chase position achieved +77.4%.  

The transactions for this month's Citigroup Covered Calls position were:
01/23/2019 Bought 300 Citigroup shares @ $62.24
01/23/2019 Sold 3 Citigroup 02/15/2019 $60.00 Call options @ $2.85
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was very large at 14,920 contracts (so there is a nice, tight bid/ask spread) and the Implied Volatility was also at an attractive level of 27.5.
02/01/2019 Upcoming quarterly ex-dividend of $.45 per share

The overall performance result (including commissions) for this
Citi Covered Calls position was as follows:
Covered Calls Cost Basis: $17,821.95
= ($62.24 - $2.85) *300 + $4.95 commission

Net Profit Components:
(a) Options Income: +$850.99
= ($2.85*300 shares) - $4.01 commissions
(b) Dividend Income (3 Call options exercised early on Jan 31st, the business day prior to the ex-div date): +$0.00

(c) Capital Appreciation: -$676.95
+($60.00-$62.24)*300 shares - $4.95 commissions

Total Net Profit [3 Call options exercised on Jan 31st (business day prior to Feb 1st ex-dividend date)]: +$174.04

= (+$850.99 +$0.00 -$676.95)

Absolute Return on Investment: +1.0%

= +$174.04/$17,821.95

Annualized Return: +39.6%

= (+$174.04/$17,821.95)*(365/9 days)