Early Assignment of Taiwan Semiconductor Manufacturing Co. Ltd. Covered Calls

Before market open this morning, I received email and text notifications from my broker (Schwab) that all three Taiwan Semiconductor (ticker symbol TSM) Call options were exercised early, so the 300 shares of Taiwan Semiconductor stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $53.00 strike price. 

Details of the transactions and the results for this Taiwan Semiconductor position are provided below.  When this Covered Calls position was established, the time value (i.e. extrinsic value) was $.50 = [$2.46 options premium - ($54.96 stock price - $53.00 strike price)].  By yesterday's market close (the last business day prior to the June 18th, 2020 ex-dividend date), the time value had declined to $0.3705; so, the full $.50 options income profit per share potential was achieved upon the early assignment closing of this position.  The per share price has increased from $54.96 when the position was originally established (on June 8th) to $56.1795 at yesterday's market close.  The owner of the Calls exercised their option to buy the shares at the $53.00 strike price in order to capture the $.4205 dividend.  As detailed below, this early assignment provided a return-on-investment (roi) result for the Covered Calls Advisor Portfolio of +1.0% absolute return (equivalent to +34.8% annualized roi for the 10 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 (or 100% Cash-Secured Puts) position is established.  As always, the details of any new transactions will be posted on this blog site the same day that they occur.  The detailed results for this Taiwan Semiconductor position are provided below.


Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) -- Covered Calls Position Closed by Early Assignment
The transactions are:

06/08/2020 Bought 300 Taiwan Semiconductor shares @ $54.96
06/08/2020 Sold 3 TSM 6/26/2020 $53.00 Call options @ $2.46
Note: a simultaneous buy/write transaction was executed.  The Implied Volatility was 24.7 when this position was transacted.
06/17/2020 Early exercise of 3 TSM June 26th, 2020 $53.00 Call options, so 300 Taiwan Semiconductor shares were assigned (i.e. sold) at the $53.00 strike price.

The overall performance result (including commissions) for this Taiwan Semiconductor Covered Calls position was as follows:
Covered Calls Cost Basis: $15,752.02
= ($54.96 - $2.46) * 300 shares + $2.02 commission

Net Profit Components:
(a) Options Income: +$738.00
= ($2.46 * 300 shares)
(b) Dividend Income (Call options exercised early on June 17th, the business day prior to the June 18th ex-div date): +$0.00

(c) Capital Appreciation (TSM Call options assigned early on June 17th): -$588.00
+($53.00 - $54.96) * 300 shares

Total Net Profit: +$150.00

= (+$738.00 options income +$0.00 dividend income -$588.00 capital appreciation)

Absolute Return: +1.0%

= +$150.00/$15,752.02

Annualized Return: +34.8%

= (+$150.00/$15,752.02)*(365/10 days); or