The time value was $3.20 per share [$145.00 strike price - ($150.43 share price - $8.63 Call option premium)] when this buy/write limit order transaction was executed. PXD also goes ex-dividend on September 29th, 2021 at $.56 per share (1.5% annualized dividend yield) so this income is included in the potential return-on-investment results detailed below. There is no quarterly earnings report prior to the October 15th, 2021 options expiration date.
Pioneer Natural Resources Company is a leading pure-play oil and gas exploration and production (E&P) company that explores for, develops, and produces oil, natural gas, natural gas liquids (NGLs) and gas within the U.S., with operations primarily in the Permian Basin in West Texas. Pioneer is known for its low breakeven costs and its strong balance sheet. The recent acquisition of Parsley Energy provides additional assets and further diversifies its operations into the Delaware Basin (in West Texas and Southeastern New Mexico), one of the most prolific basins in the U.S.
There are currently 34 analysts covering Pioneer and their average price target is $206.91 (+37.5% above today's purchase price of $150.43).
A potential return-on-investment result if this Covered Call position closes in-the-money at the October 15th options expiration date is +2.7% absolute
return in 24 days (equivalent to a +40.3% annualized
return-on-investment). The Delta was 66.5 when this position was established, which is the approximate probability that it will close in-the-money on the options expiration date in which case the maximum potential profit for this position would be achieved.
Pioneer Natural Resources Company (PXD) -- New Covered Call Position
The buy/write transaction was as follows:
9/22/2021 Bought 100 shares of Pioneer Natural Resources @ $150.43 per share
9/22/2021 Sold 1 PXD Oct. 15th, 2021 $145.00 Call option @ $8.63 per share
Note: the Implied Volatility of this Call option was 35.0 when this position was established.
9/29/2021 Ex-dividend of $.56 per share
A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $14,180.67
= ($150.43 - $8.63) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$863.00
= ($8.63 * 100 shares)
(b) Quarterly Dividend Income: +$56.00
= $.56 per share x 100 shares
(c) Capital Appreciation (If PXD is above $145.00 strike price at the October 15th, 2021 options expiration date): -$543.00
= ($145.00 -$150.43) * 100 shares
Total Net Profit: +$376.00 = ($863.00 options income +$56.00 dividend income -$543.00 capital appreciation)
Absolute Return-on-Investment: +2.7%
= +$376.00/$14,180.67
Equivalent Annualized Return-on-Investment: +40.3%
= (+$376.00/$14,180.67)*(365/24 days)
These returns will be achieved if the Pioneer Natural Resources Co. shares are
above the $145.00 strike price at the market closing on the October 15th, 2021 options expiration date. If the stock declines
below the strike price, the breakeven price of $141.24 ($150.43 -$8.63 -$.56)
provides 6.1% downside breakeven protection below today's $150.43 purchase
price.
Please email me at partlow@cox.net if you have any comments or questions related to this post or anything related to Covered Calls investing.
Regards and Godspeed,
Jeff Partlow
