As preferred by the Covered Calls Advisor, Seagate's next quarterly earnings report on October 21st, 2021 will be after the October 1st, 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 67.0 when the buy/write limit order was executed.
Seagate Technology stock has an attractive valuation since its P/E Ratio based on the next 12 months is only 10.0 compared with its prior 5-year historical average of 12.7. In addition, the average target price of the 27 analysts that cover Seagate is $104.81 (+27.4% above today's stock purchase price).
As detailed below, a potential return-on-investment result is +1.4% absolute return (equivalent to +72.2% annualized
return for the next 7 days) if the stock is assigned early (business day
prior to the September 21st ex-dividend date); OR +2.2%
absolute return (equivalent to +45.3% annualized return over the next 18
days) if the stock is assigned on the October 1st, 2021 options expiration date.
Seagate Technology Holdings PLC (STX) -- New Covered Calls Position
The simultaneous buy/write transaction today was as follows:
09/14/2021 Bought 200 Seagate Technology Holdings PLC shares @ $82.25
09/14/2021 Sold 2 Seagate 10/01/2021 $80.00 Call options @ $3.35
Note: the Implied Volatility of the Calls was 27.2 and the comparable Puts was 34.1 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 19.5.
09/21/2021 Upcoming quarterly ex-dividend of $.67 per share
Two possible overall performance results (including commissions) for this Seagate Technology Covered Calls position are as follows:
Covered Calls Cost Basis: $15,781.34
= ($82.25 - $3.35) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$668.66
= ($3.35 * 200 shares) - $1.34 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Sept 21st ex-div date): +$0.00; or
(b) Dividend Income (If Seagate shares assigned at Oct. 1st, 2021 options expiration): +$134.00
= ($.67 dividend per share x 200 shares)
(c) Capital Appreciation (If STX shares assigned early on Sept.20th): -$450.00
+($80.00 - $82.25) * 200 shares ;or
(c) Capital Appreciation (If Seagate shares assigned at $80.00 strike price at options expiration): -$450.00
+($80.00 - $82.25) * 200 shares
These returns will be achieved as long as the stock is above the $80.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $78.23 ($82.25 -$3.35 -$.67) provides 4.9% downside protection below today's purchase price.
The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy. The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved. As shown in the table below, all nine criteria are met for this Seagate Technology Holdings PLC Covered Calls position.
