Established Covered Calls in Best Buy Inc.

Today at 1:04pm, the Covered Calls Advisor's buy/write limit order in Best Buy Inc. (ticker BBY) was executed.  Two hundred Best Buy shares were purchased at $74.90 per share and two September 30th, 2022 $71.00 Call options were sold for $4.64 per share.  The Implied Volatility of these Calls was 34.6 which, as preferred, exceeds the current S&P 500 Volatility Index (VIX) of 25.6.  Based on the Covered Calls Advisor's current bearish sentiment, a moderately in-the-money position was established at a Delta of 75.8 (which approximates a 75.8% probability that the Calls will expire in-the-money on the options expiration date).  There is an upcoming ex-dividend on Monday September 19th of $.88 per share (4.7% annualized dividend yield) which is included in the potential return-on-investment results detailed below.  This is the first position in the Covered Calls Advisor Portfolio with an options expiration date after this Friday's September 16th, 2022 monthly options expiration date for September.

Two potential return-on-investment results are: (1) +1.0% absolute return (equivalent to +63.5% annualized return for the next 6 days) if the stock is assigned this Friday (the last business day prior to next Monday's September 19th, 2022 ex-dividend date; or (2) +2.3% absolute return (equivalent to +46.6% annualized return for the next 18 days) if the stock is assigned on the September 30th, 2022 options expiration date.

Best Buy Inc. (BBY) -- New Covered Calls Position
The buy/write transaction was:
9/13/2022 Bought 200 shares of Best Buy shares @ $74.90 per share 
9/13/2022 Sold 2 Best Buy September 30th, 2022 $71.00 Call options @ $4.64 per share
Note: this was a $70.26 net debit limit Buy/Write transaction
09/19/2022 Upcoming quarterly ex-dividend of $.88 per share

Two possible overall performance results (including commissions) for this Best Buy Covered Calls position are as follows:
Covered Calls Net Investment: $14,053.34
= ($74.90 - $4.64) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$926.66
= ($4.64 * 200 shares) - $1.34 commissions
(b) Dividend Income [If BBY shares assigned this Friday (the last business day prior to the September 19th ex-div date)]: +$176.00
= ($.88 dividend per share x 200 shares)
(b) Dividend Income (If BBY shares assigned at the September 30th, 2022 options expiration): +$176.00
= ($.88 dividend per share x 200 shares)
(c) Capital Appreciation (If Best Buy shares assigned early on the last business day prior to the September 19th ex-dividend date): -$780.00
= +($71.00 - $74.90) * 200 shares
(c) Capital Appreciation (If Best Buy shares assigned at $71.00 strike price at options expiration): -$780.00
+($71.00 - $74.90) * 200 shares 

1. Total Net Profit (If Best Buy shares assigned at $71.00 strike price on the last business day prior to the Sept 19th, 2022 ex-dividend date): +$146.66

= (+$926.66 options income +$0.00 dividend income - $780.00 capital appreciation); OR
2. Total Net Profit (If Best Buy shares assigned at $71.00 strike price at the September 30th, 2022 expiration): +$322.66

 = (+$926.66 options income +$176.00 dividend income - $780.00 capital appreciation)

 

1. Absolute Return-on-Investment (If BBY shares are in-the-money and therefore assigned on the last business day prior to the Sept 19th, 2022 ex-dividend date): +1.0%

= +$146.66/$14,053.34

Annualized Return-on-Investment (If Best Buy stock assigned early): +63.5%

= (+$146.66/$14,053.34) *(365/6 days); OR
2. Absolute Return-on-Investment (If BBY shares are in-the-money and therefore assigned on the last business day prior to the Sept 19th, 2022 ex-dividend date): +2.3%
= +$322.66/$14,053.34

Annualized Return-on-Investment (If Best Buy stock assigned at $71.00 at the 9/30/2022 expiration): +46.6%

= (+$322.66/$14,053.34) *(365/18 days)

These returns will be achieved as long as the stock is above the $71.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $69.38 ($74.90 -$4.64 -$.88) provides a substantial 7.4% downside protection below today's purchase price.

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.  As shown below, all nine criteria are achieved for this Best Buy Inc. Covered Calls position.