Today a Covered Calls position was established in Cardinal Health Inc. (ticker symbol CAH) when the Covered Calls Advisor's buy/write limit order was executed -- 300 shares were purchased at $51.50 and three October 15th, 2021 Call options were sold at $1.94 at the $50.00 strike price. CAH has a September 30th, 2021 ex-dividend of $.4908 (3.8% annual dividend yield based on today's purchase price) which is included in the return-on-investment (roi) calculations below. As preferred by the Covered Calls Advisor the next quarterly earnings report is on November 4th which is after the October 15th options expiration date. The Delta of the CAH Call options was 70.4 which approximates a 70.4% probability that the stock will be in-the-money at the Oct. 15th expiration.
Just prior to establishing this CAH Covered Calls limit order, a comparison of whether a Covered Calls or its comparable Cash-Secured Puts position would be preferable. As is normally the case when there is an intervening ex-dividend prior to options expiration, the Covered Calls position was preferable. As shown in the chart below, there are two financial advantages to Covered Calls in this case: (1) the potential Annualized ROI at expiration for Covered Calls exceeds that of 100% Cash-Secured Puts (+28.6% for CCs versus +23.1% for CSPs); and (2) Covered Calls provide an additional possibility of early assignment (normally on the day prior to the ex-dividend date) with a potential Annualized ROI of +46.3% which is better than the +28.6% AROI if assigned at expiration. When selling Cash-Secured Puts, dividends are never captured.
Note: Click on image below for a larger view.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. All nine criteria are achieved for this Cardinal Health position.
