Details of the transactions and the results for this Morgan Stanley position are provided below. The per share price had increased from $43.83 when the position was originally established (on July 17th) to $45.23 at yesterday's market close. The time value remaining in the Call options had declined to close to $0.00, so the owner of the Calls exercised their option to buy the shares at the $42.00 strike price in order to capture the $.35 dividend. This early assignment was the Covered Calls Advisor's preferred outcome because it resulted in a higher annualized return-on-investment (32.0% achieved) rather than if the position had instead been assigned on the August 16th options expiration date which (including the $.35 per share dividend) would have resulted in a 23.3% annualized ROI.
The detailed results for this Morgan Stanley position are provided below.
The transactions were:
07/17/2019 Bought 300 shares of Morgan Stanley stock @ $43.83 per share
07/17/2019 Sold 3 MS August 16th, 2019 $42.00 Call options @ $2.32 per share
07/29/2019 Early exercise of 3 MS August 16th, 2019 $42.00 Call options, so 300 MS shares assigned (i.e. sold) at $42.00 strike price.
The overall performance result (including commissions) for this Morgan Stanley Covered Calls position was as follows:
Covered Calls Cost Basis: $12,459.96
= ($43.83 - $2.32)* 300 shares + $6.96 commission
Net Profit Components:
(a) Options Income: +$696.00
= ($2.32* 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$553.95
= ($42.00 -$43.83)* 300 shares - $4.95 commission
Total Net Profit: +$142.05
= (+$696.00 options income +$0.00 dividend income -$553.95 capital appreciation)
Absolute Return: +1.1%
= +$142.05/$12,459.96
Equivalent Annualized Return: +32.0%
= (+$142.05/$12,459.96)*(365/13 days)
