- Nucor Corporation (NUE) -- +1.3% absolute return (equivalent to +32.8% annualized return-on-investment) for the 15 days of this investment
- Micron Technology Inc. (MU) -- +0.9% absolute return (equivalent to +32.1% annualized roi) for the 10 days of this investment
The results from both of these positions shows how hedging stocks by establishing in-the-money Covered Calls can provide nice returns despite experiencing a decline in the stock price. As detailed below, the original purchase price for Nucor was $101.14 and the stock closed today at $97.79 and the purchase price for Micron was $70.69 and its stock price closed today at $70.12.
The cash now available from the assignment (i.e. closing) of these two in-the-money positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established. Given the Covered Calls Advisor's current cautious Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at moderately in-the-money strike prices with good downside protection.
The detailed transactions and results for these two closed positions are as follows:
1. Nucor Corporation (NUE) -- Covered Calls Position Closed by Assignment at Options Expiration
The simultaneous buy/write transaction today was as follows:
09/24/2021 Bought 200 Nucor shares @ $101.14
09/24/2021 Sold 2 Nucor 10/08/2021 $95.00 Call options @ $7.01
Note: the Implied Volatility of the Calls was 36.4 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 17.7.
09/29/2021 Quarterly ex-dividend of $.405 per share
10/08/2021 Two NUE Call options expired in-the-money so 200 shares of Nucor stock were assigned (i.e. sold) at the $95.00 strike price.
The overall performance results (including commissions) for this Nucor Covered Calls position were as follows:
Covered Calls Cost Basis: $18,827.34
= ($101.14 - $7.01) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$1,400.66
= ($7.01 * 200 shares) - $1.34 commissions
(b) Dividend Income (Nucor shares assigned at the Oct. 8th, 2021 options expiration): +$81.00
= ($.405 dividend per share x 200 shares)
(c) Capital Appreciation (Nucor shares assigned at $95.00 strike price at options expiration): -$1,228.00
+($95.00 - $101.14) * 200 shares
2. Micron Technology Inc. (MU) -- Covered Calls Position Closed by Assignment at Options Expiration
The Market Order Buy/Write transaction was as follows:
09/29/2021 Bought 300 shares of Micron Technology Inc. stock @ $70.69 per share
09/29/2021 Sold 3 Micron Oct. 8th, 2021 $68.00 Call options @ $3.19 per share
10/08/2021 Three MU Call options expired in-the-money so 300 shares of
Micron stock were assigned (i.e. sold) at the $68.00 strike price.
The overall performance result (including commissions) for this Micron Technology Inc. Covered Calls position was as follows:
Stock Purchase Cost: $20,252.01
= ($70.69 - $3.19) *300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$954.99
= ($3.19 *300 shares) - $2.01 commission
(b) Dividend Income: +$30.00 = $.10 per share X 300 shares
+($68.00 -$70.69) * 300 shares
Total Net Profit (300 Micron shares assigned at $68.00 strike price at expiration): +$177.99 = (+$954.99 options income +$30.00 dividend income -$807.00) capital appreciation
