Each month on the day after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So this post covers the period from the day after last month's April 14th, 2022 options expiration through yesterday's May 20th, 2022 monthly options expiration date. The recent decline in the overall market (as measured by the S&P 500) has been especially dramatic with weekly declines for the past seven consecutive weeks--which previously occurred 21 years ago in 2001. And during the last month (since the April 14th options expiration date), the S&P 500 has declined by 11.0%.
During this past month, the Covered Calls Advisor Portfolio held a total of fourteen positions. Seven positions were closed out at a profit, four were closed out at a loss, and three are continuing positions that expired out-of-the-money on yesterday's May 20th monthly options expiration date. A summary of results for these fourteen positions is provided below:
- Three positions expired in-the-money (stock price above the strike price) on their May 20th, 2022 monthly options expiration date with the following results:
- Blackstone Inc. (BX) Covered Calls -- +2.9% absolute return in 30 days (equivalent to +35.3% annualized return-on-investment).
- KB Home (KBH) Covered Calls -- +3.3% absolute return in 29 days (equivalent to +41.0% annualized return-on-investment).
- Pfizer Inc. (PFE) Covered Calls -- +1.7% absolute return in 16 days (equivalent to +37.8% annualized return-on-investment).
- Two deep-in-the-money Covered Calls position were closed by Early Assignment on the day prior to their ex-dividend dates with the following results:
- Exxon Mobil Corporation (XOM) -- +1.0% absolute return in 6 days (equivalent to +35.6% annualized return-on-investment).
- Wells Fargo & Company (WFC) -- +0.6%
absolute return in 6 days (equivalent to +38.8% annualized
return-on-investment).
- Five Covered Calls positions were closed early based on a decision by the Covered Calls Advisor to close out the positions. Four were closed at a loss and one was closed at a profit as follows:
- American Eagle Outfitters Inc. (AEO) -- -24.8% absolute return in 145 days (equivalent to -62.3% annualized return-on-investment).
- Boeing Company (BA) -- -6.2% absolute return in 6 days (equivalent to -378.4% annualized return-on-investment).
- First Third Bancorp (FITB) -- -8.5% absolute return in 30 days (equivalent to -102.9% annualized return-on-investment).
- Lennar Corporation (LEN) -- -15.9% absolute return in 95 days (equivalent to -61.1% annualized return-on-investment).
- Pioneer Natural Resources Company (PXD) -- +1.2% absolute return in 5 days (equivalent to +86.3% annualized return-on-investment).
- One Covered Calls position expired in-the-money on its Weekly options expiration date with the following results:
- Citigroup Inc. (C) -- +2.0% absolute return in 12 days (equivalent to +61.6% annualized return-on-investment).
- Three Covered Calls positions expired out-of-the-money on yesterday's May 20th, 2022 options expiration date. In each case, the shares remain in the Covered Calls Advisor Portfolio and are currently held at an unrealized loss. These positions are shown in the right sidebar of this blog as follows: (1) 500 shares of Ally Financial Inc.; (2) 300 shares of Micron Technology Inc.; and (3) 200 shares of Moderna Inc. Early in the upcoming week, decisions will be made to either sell these shares or to continue them as Covered Calls positions by selling future Call options against the shares currently held.
During the past year
(last 12 months) 119 of 131 positions (90.8%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit. The
Covered Calls Advisor Portfolio weighted average annualized-return-on-investment (aroi) was +24.1% during the past year and the average
holding period for these 131 closed positions was 22.0 days. In comparison, the benchmark S&P 500 returned -4.9% during the same prior one-year period. The Covered Calls strategy can be exceptionally beneficial during Neutral to Slightly Bearish time periods like we have experienced during the past year. However, this 29.0 percentage points outperformance (24.1% actual annualized-return-on-investment return minus -4.9% aroi of the S&P 500 benchmark) during the past year by the Covered Calls Advisor Portfolio exceeds that which can normally be expected using the Covered Calls investing strategy. As indicated in this post made last year on this blog site (Link) -- "by exploiting our Covered Calls investing "edges", we can expect to achieve (over a period of several years) an average annualized-return-on-investment above the S&P 500 benchmark index of at least 3 to 5 percentage points on an annualized-return-on-investment basis".
My preference is to identify opportunities to utilize my Dividend Capture Strategy (with ex-dividend dates prior to the options expiration dates) by selling moderately in-the-money strike prices for relatively low-growth dividend-paying companies in these lower-growth Sectors -- Consumer Staples, Energy, Financials, Industrials, Materials, Real Estate, and Utilities. Higher growth companies in Sectors with fewer dividend-paying companies includes the Communication Services, Consumer Discretionary, Healthcare, and Information Technology Sectors. There is a greater likelihood that Covered Calls or Cash-Secured Puts positions in these higher-growth Sectors will be established without utilizing the Dividend Capture Strategy (i.e. without ex-dividend dates prior to their options expiration dates).
As shown in the
right sidebar, there are currently five open positions in
the Covered Calls Advisor Portfolio. Future transactions and
return-on-investment results for these positions plus the details of all future newly established positions will be posted on
this blog site on the same day the transactions occur. In this current bear market, new positions are being established in companies with the following characteristics: (1) good valuation metrics (such as low P/E ratios and high free cash flow yields); (2) appear in at least one of the many stock screeners that have been developed over the years by the Covered Calls Advisor; (3) estimated next year earnings-per-share above that of their actual prior year results; and (4) analysts' average target price at least 10% above the current stock price.
This Covered Calls Advisor blog is a free service available to anyone interested in improving knowledge about the Covered Calls investing strategy. As always, I
welcome your emails whenever you have any comments or
questions related to this post or anything related to Covered Calls
investing.
Best Wishes to All,
Jeff Partlow
Covered Calls Advisor
partlow@cox.net
