At last Friday's September 30th, 2022 options expiration, Covered Calls positions in both Cleveland-Cliffs Inc. and Meta Platforms Inc. expired with the stock price below their respective strike prices, so the Calls expired and the shares remained in the Covered Calls Advisor Portfolio. With the increase in the overall stock market (and both Cleveland-Cliffs and Meta) early this morning, I decided to close out both positions.
As detailed below, the return-on-investment results are:
- Cleveland-Cliffs Inc.: +3.4% absolute return in 22 days (equivalent to a +56.3% annualized return-on-investment; and
- Meta Platforms Inc.: +0.8% absolute
return in 20 days (equivalent to a +14.5% annualized
return-on-investment.
These two Covered Calls positions demonstrate the benefit of selling moderately in-the-money Covered Calls in bearish markets. The Cleveland-Cliffs stock price declined by 8.7% since its original purchase price just 22 days ago and Meta Platforms' price declined by 5.6% over the past 20 days. However, because of the substantial downside protection provided with in-the-money Covered Calls, profitable return-on-investment results were still achieved for both positions.
1. Cleveland-Cliffs Inc. (CLF) -- Covered Calls Position Closed
The original simultaneous buy/write transactions was as follows:
09/14/2022 Bought 500 shares of Cleveland-Cliffs stock @ $15.47 per share
09/14/2022 Sold 5 Cleveland-Cliffs Sept.30th, 2022 $14.00 Call options @ $1.81 per share
09/30/2022 5 CLF $14.00 Call options expired out-of-the-money at $13.66 per share and the 500 Cliff shares remained in the Covered Calls Advisor Portfolio.
10/03/2022 Cleveland-Cliffs position closed out by sell 500 shares at $14.1302.
The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $6,833.35
= ($15.47 - $1.81) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$901.65
= ($1.81 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Cleveland-Cliffs stock sold on 10/03/2022 @ $14.1302 per share): -$669.90
= ($14.1302 sales price - $15.47 purchase price) * 500 shares
Net Profit: +$231.75
= (+$901.65 options income +$0.00 dividend income - $669.90 capital appreciation)
Absolute Return-on-Investment: +3.4%
= +$231.75/$6,833.35
Equivalent Annualized Return-on-Investment: +56.3%
= (+$231.75/$6,833.35) * (365/22 days)
2. Meta Platforms Inc. (CLF) -- Covered Call Position Closed
The original simultaneous buy/write transactions was as follows:
09/16/2022 Sold 1 Meta Sept. 30th, 2022 $140.00 Call option @ $9.25 per share
09/30/2022 Meta stock closed below the $140.00 strike price @ $136.58 per share, so the Meta Call option expired and 100 Meta shares remained in the Covered Calls Advisor Portfolio.
10/03/2022 Closed out this Meta Covered Calls position by selling 100 shares @ $137.675 early in today's trading day.
The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $13,658.67
= ($145.83 - $9.25) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$924.33
= ($9.25 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Meta Platforms stock sold on 10/03/2022 @ $137.675 per share): -$815.50
= ($137.675 - $145.83) * 100 shares
Net Profit: +$108.83
= (+$924.33 options income +$0.00 dividend income - $815.50 capital appreciation)
Absolute Return-on-Investment: +0.8%
= +$108.83/$13,658.67
Equivalent Annualized Return-on-Investment: +14.5%
= (+$108.83/$13,658.67) * (365/20 days)
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
