This remains a conservative in-the-money Covered Calls position since the Delta for these new Calls when this rollout transaction was executed was 77.9 which closely approximates the probability of assignment at options expiration (i.e. 77.9% probability). Also as preferred by the Covered Calls Advisor, there is no quarterly earnings report for Devon prior to the new December 23rd, 2021 options expiration date.
As detailed below, a potential return-on-investment result for this Devon Energy position is +4.8% absolute
return in 36 days (equivalent to a +48.9% annualized
return-on-investment) if the stock closes above the $43.00 strike price at the December 23rd, 2021 options expiration. This potential +48.9% exceeds the +32.4% annualized return that would have been achieved if the original Devon Energy Covered Calls position had instead been assigned early later today.
Devon Energy Corp. (DVN) -- Covered Calls Position Rolled Up-and-Out
The net debit limit order buy/write transaction was as follows:
11/18/2021 Bought 300 Devon Energy shares @ $42.08
11/18/2021 Sold 3 Devon 12/17/2021 $39.00 Call options @ $3.80 Note: the Implied Volatility of these Call options was 45.6 when this position was established and their Bid/Ask spread was $3.75/$3.90.
12/08/2021 Rolled-Up-and-Out: Bought-to-Close the 12/17 $39.00 Calls for $6.29 and simultaneously Sold-to-Open the 12/23 $43.00 Calls at $2.59.
12/09/2021 Upcoming quarterly ex-dividends of $.84 per share
An overall performance result (including commissions) for this Devon Energy Covered Calls position if assigned at the Dec. 23rd options expiration date is as follows:
Covered Calls Cost Basis: $11,486.01
= ($42.08 - $3.80) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$25.98
= ($3.80 - $6.29 + $2.59) * 300 shares - $4.02 commissions
(b) Dividend Income (If Devon shares assigned at Dec.23rd, 2021 options expiration): +$252.00
= ($.84 dividend per share x 300 shares)
(c) Capital Appreciation (If Devon shares assigned at $43.00 strike price at 12/23/2021 options expiration): +$276.00
+($43.00 - $42.08) * 300 shares
