As preferred by the Covered Calls Advisor, Cigna's next quarterly earnings report will be after the September 17th, 2021 options 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 with a Delta of 70.9 when the buy/write limit order was executed.
Cigna stock has an attractive valuation since its Next Fiscal Year P/E Ratio is only 9.3 compared with its prior 5-year historical average of 13. In addition, the average analysts' target price is $275.44 (+31.3% above today's stock purchase price).
Covered Calls positions were established in Barrick Gold Corp.(ticker symbol GOLD) and Tyson Foods Inc. (TSN).
For Barrick Gold, 500 shares were purchased at $20.04 and 5 September 10th, 2021 Call options were sold at $.73 per share at the $19.50 strike price. The net debit limit order at $19.31 was executed, so the time value was $.19 per share [$.73 Call options premium - ($20.04 stock purchase price - $19.50 strike price)]. There is an upcoming ex-dividend of $.23 per share ($.09 regular dividend plus a $.14 special dividend), both on August 30th, 2021. so two potential return-on-investment results for this position are detailed below and include the possibility of early exercise since the ex-dividend is prior to the September 10th, 2021 options expiration date. Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, an in-the-money Covered Calls position was established -- the Delta was 69.5, which approximates a probability of 69.5% that the Call options will be in-the-money on the options expiration date. Barrick was one of only four companies in the Materials Sector that appeared on the Covered Calls Advisor's Acquirers Multiple stock screener. The average target price of analysts covering Barrick is $28.80 which is +43.7% above today's $20.04 purchase price.
For Tyson Foods, 200 shares were purchased at $79.25 and 2 September 17th, 2021 Call options were sold at $2.35 per share at the $77.50 strike price. The Covered Calls Advisor's net debit limit order at $76.90 was executed, so the time value was $.60 per share [$2.35 Call options premium - ($79.25 stock purchase price - $77.50 strike price)]. There is an upcoming ex-dividend of $.445 per share (2.2% dividend yield) on August 31st, 2021. so two potential return-on-investment results for this position are detailed below and include the possibility of early exercise since the ex-dividend is prior to the September 17th, 2021 options expiration date. The Delta was 69.6 when this buy/write transaction was executed. Tyson Foods appeared on three of the Covered Calls Advisor's recent stock screeners (Acquirers Multiple, Large-Cap Value+Productivity+Growth, and Dividend Increases/Buybacks/and Debt Reductions). The average target price of analysts covering Tyson is $85.75 which is +8.2% above today's $79.25 purchase price. Important to the Covered Calls Advisor, neither Barrick or Tysons have quarterly earnings reports prior to their options expiration dates.
As detailed below, potential return-on-investment results are as follows:
- Barrick Gold Corp.: +0.9% absolute return (equivalent to +57.7% annualized return for the next 6 days) if the stock is assigned early (business day prior to the August 30th ex-dividend date); OR +2.1% absolute return (equivalent to +43.4% annualized return over the next 18 days) if the stock is assigned on the September 10th options expiration date.
- Tyson Foods Inc.: +0.8% absolute return (equivalent to +41.1% annualized return for the next 7 days) if the stock is assigned early (business day prior to the August 31st ex-dividend date); OR +1.4% absolute return (equivalent to +20.0% annualized return over the next 25 days) if the stock is assigned on the September 17th options expiration date.
1. Barrick Gold Corp. (GOLD) -- New Covered Calls Position
The buy/write transaction was:
08/24/2021 Sold 5 Barrick 09/10/2021 $19.50 Call options @ $.73
08/30/2021 Upcoming quarterly ex-dividend of $.23 per share
Two possible overall performance results (including commissions) for this Barrick Gold Covered Calls position are as follows:
Covered Calls Cost Basis: $9,658.35
= ($20.04 - $.73) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$361.65
= ($.73 * 500 shares) - $3.35 commission
(b) Dividend Income (If option exercised early on Aug. 27th, 2021, the business day prior to the Aug. 30th ex-div date): +$0.00; or
(b) Dividend Income (If Barrick stock assigned at Aug. 30th, 2021 options expiration): +$115.00
= ($.23 dividend per share x 500 shares)
+($19.50 strike price - $20.04 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $19.50 strike price at options expiration): -$270.00
+($19.50 - $20.04) * 500 shares
Either outcome would provide a good return-on-investment result for this Barrick Gold investment. These returns will be achieved as long as the stock is above the $19.50 strike price at assignment. If the stock declines below the strike price, the breakeven price of $19.08 ($20.04 -$.73 -$.23) provides 4.8% downside protection below today's stock purchase price.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position. As shown below with this Barrick Gold position, all nine criteria were met.
2. Tyson Foods Inc. (TSN) -- New Covered Calls Position
The buy/write transaction was:
