For any Covered Calls position where there is an ex-dividend date prior to the options expiration date, the Covered Calls Advisor usually prefers to have the stock called away (assigned) early, normally on the day prior to the ex-div date (as it was in this case). The reason early assignment is preferred is that the Covered Calls Advisor's Dividend Capture Strategy spreadsheet was designed to identify positions where the annualized return-on-investment (aroi) from early assignment is greater than what might be achieved if the stock was instead assigned at the options expiration date.
As detailed below, the early assignment for this Cigna Corp. position provided a return-on-investment result for the Covered Calls Advisor Portfolio of
+0.7% absolute return-on-investment (equivalent to +31.2% annualized roi for the 8 days
this position was held). The Covered Calls Advisor is pleased with this early assignment since the
+31.2% annualized roi achieved exceeds the +22.6% that might have been achieved
if the position was instead assigned on the September 17th options expiration
date.
Cigna Corp. (CI) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was as follows:
08/30/2021 Bought 200 Cigna Corp. shares @ $209.83
08/30/2021 Sold 2 Cigna 9/17/2021 $205.00 Call options @ $6.23
09/03/2021 Call owners exercised their option early, so in the Covered Calls Advisor's Portfolio the 9/17/2021 $205.00 Call options expired and the 200 shares owned were sold at the $205.00 strike price.
The overall performance results (including commissions) for this Cigna Covered Calls position were as follows:
Covered Calls Cost Basis: $40,721.34
= ($209.83 - $6.23) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$1,244.66
= ($6.23 * 200 shares) - $1.34 commissions
(b) Dividend Income (Two Call options exercised early on the business day prior to the Sept 7th ex-div date): +$0.00
(c) Capital Appreciation (CI shares assigned early on Sept.3rd, the last business day prior to the Sept. 7th options expiration date): -$966.00
+($205.00 - $209.83) * 200 shares
