Covered Calls Established in Micron Technology Inc.

A Covered Calls positions was established in Micron Technology Inc. by purchasing 300 shares at $71.25 and simultaneously selling three September 3rd, 2021 $73.00 Call options at $1.00 per share. The Implied Volatility of these Calls was 30.8 when this transaction was executed and there is no quarterly earnings report prior to the options expiration date.

Micron's finances are strong and they are also very highly rated by analysts.  Reuters Research indicates that currently 31 analysts have a Buy or Outperform rating on the stock, 4 have a Hold, and none have an Underperform or Strong Sell; and their current average target price is $115.59 (+58.3% above the $73.00 strike price).  Because of Micron's bullish outlook, a slightly out-of-the-money strike price was established (stock purchased at $71.25 and with a strike price at $73.00).  

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

•  +1.4% absolute return (equivalent to +43.0% annualized return for the next 12 days) if the stock price is unchanged at options expiration at the $77.00 purchase price; OR 

• +3.9% absolute return (equivalent to +118.8% annualized return over the next 12 days) if the stock price is in-the-money (i.e. above the $73.00 strike price) and therefore assigned on the September 3rd options expiration date.

Micron Technology Inc. (MU) -- New Covered Calls Position

The Buy/Write transaction was as follows:
08/23/2021 Bought 300 shares of Micron Technology Inc. stock @ $71.25 per share 
08/23/2021 Sold 3 Micron September 3rd, 2021 $73.00 Call options @ $1.00 per share

Two possible overall performance results (including commissions) for this Micron Technology Inc. Covered Calls position are as follows:
Stock Purchase Cost: $21,077.01
= ($71.25 - $1.00) *300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$297.99
= ($1.00 *300 shares) - $2.01 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If Micron stock price unchanged at $71.25 at Sept 3rd options expiration): +$0.00
= + ($71.25 - $71.25) * 300 shares; or
(c) Capital Appreciation (If 300 Micron shares assigned at $73.00 strike price at expiration): +$525.00
+($73.00 -$71.25) * 300 shares

1. Total Net Profit (If Micron stock price unchanged at $71.25 at Sept 3rd options expiration): +$297.99

= (+$297.99 options income +$0.00 dividend income - $0.00 capital appreciation); or

2. Total Net Profit (If 300 Micron shares assigned at $73.00 strike price at expiration): +$822.99

= (+$297.99 options income +$0.00 dividend income +$525.00) capital appreciation

 

1. Absolute Return (If Micron stock price unchanged at $71.25 at Sept 3rd options expiration): +1.4%

= +$297.99/$21,077.01

Annualized Return (If Micron stock price unchanged at $71.25 at Sept 3rd options expiration): +43.0%

= (+$297.99/$21,077.01)*(365/12 days); or

2. Absolute Return (If 300 Micron shares assigned at $73.00 strike price at expiration): +3.9%

= +$822.99/$21,077.01

Annualized Return (If MU shares assigned at $73.00 at Sept 3rd, 2021 expiration): +118.8%

= (+$822.99/$21,077.01)*(365/12 days)