Established Covered Calls in Valero Energy Corp. and Wells Fargo Bank N.A.

Two new Covered Calls positions have been established in Valero Energy Corp.(ticker VLO) and Wells Fargo Bank N.A.(WFC) with August 16th, 2019 options expiration dates. Two Valero Call options were sold at $2.36 for the $80.00 strike price when the stock price was $81.49 and 500 shares of Wells Fargo were purchased at $46.72 while five Calls were sold at $1.09 at the $46.00 strike price.  Both positions have upcoming ex-dividends prior to the Aug 16th options expiration which is included in the potential results shown below.  If should also be noted that neither company has an earnings report prior to the expiration date.

As detailed below, the potential return-on-investment results are: 

• Valero Energy Corp.: +2.2% absolute return in 15 days (equivalent to a +53.6% annualized return-on-investment); and

• Wells Fargo Bank N.A.: +1.8% absolute return in 15 days (equivalent to a +43.2% annualized return-on-investment) 

1. Valero Energy Corp. (VLO) -- New Covered Calls Position
The transactions were:
8/02/2019 Bought 200 shares of Valero @ $81.49 per share 
8/02/2019 Sold 2 Valero August 16th, 2019 $80.00 Call options @ $2.36 per share
Note: This was a simultaneous buy/write transaction.
08/05/2019 Upcoming ex-dividend of $.90 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $15,832.29
= ($81.49 - $2.36)* 200 shares + $6.29 commissions

Net Profit Components:
(a) Options Income: +$472.00
= ($2.36 * 200 shares)
(b) Dividend Income: +$180.00
= $.90 x 200 shares
(c) Capital Appreciation (If Valero shares are above $80.00 strike price at Aug 16th expiration): -$302.95
= ($80.00 -$81.49) * 200 shares - $4.95 commission

Potential Total Net Profit (If VLO stock assigned at expiration): +$349.05
= (+$472.00 options income +$180.00 dividend income -$302.95 capital appreciation)

Absolute Return: +2.2%
= +$349.05/$15,832.29
Equivalent Annualized Return: +53.6%
= (+$349.05/$15,832.29)*(365/15 days)


2. Wells Fargo Bank N.A. (WFC) -- New Covered Calls Position

Here is a recent interesting article that makes a good case for investing in large banks in general and Wells Fargo in particular: link

The transactions were as follows:
08/02/2019 Bought 500 shares of Wells Fargo stock @ $46.72 per share 
08/02/2019 Sold 5 Wells Fargo Aug 16th, 2019 $46.00 Call options @ $1.09 per share
Note: this was a simultaneous Buy/Write transaction
08/08/2019 Upcoming ex-dividend of $.51 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $22,823.33
= ($46.72 - $1.09) * 500 shares + $8.30 commission

Net Profit Components:
(a) Options Income: +$545.00
= ($1.09 * 500 shares)
(b) Dividend Income: +$255.00
= $.51 x 500 shares
(c) Capital Appreciation (If Wells Fargo stock is above $46.00 strike price at Aug 16th expiration): -$364.95
= ($46.00 -$46.72) * 500 shares - $4.95 commission

Total Net Profit: +$405.05
= (+$545.00 options income +$225.00 dividend income -$364.95 capital appreciation)

Absolute Return: +1.8%
= +$405.05/$22,823.33
Equivalent Annualized Return: +43.2%
= (+$405.05/$22,823.33)*(365/15 days)

The downside 'breakeven price' at expiration is at $45.12 ($46.72 - $1.09 - $.51), which is 1.9% below the current market price of $46.72.