Covered Call Position Established in Caterpillar Inc.

Today at 12:12 pm (EDT), a new Covered Call position was established in Caterpillar Inc. (ticker CAT) with an October 28th, 2022 options expiration date.  A buy/write limit order with a debit price of $167.26 was executed when one hundred shares of Caterpillar stock were purchased at $178.61 and one in-the-money 10/28/2022 $170.00 strike price Call option was sold for $11.35 per share.  The time value when this Covered Calls position was established was $2.74 per share = [$11.35 Call option price - ($178.61 stock price - $170.00 strike price)].  Given the Covered Calls Advisor's current cautious outlook, an in-the-money Covered Call position was established.  The Delta was 71.7 which approximates a probability of 71.7% that the Call option will be in-the-money and therefore the stock assigned (i.e. sold) on the options expiration date.  

There is a $1.20 per share ex-dividend next Friday (October 21st) which is included in the potential return-on-investment results detailed below.   There is an earnings report before market open on the October 28th options expiration date.  Because of the usual stock price volatility immediately after quarterly earnings releases, I prefer not holding positions then.  So, I will be monitoring this Caterpillar Covered Call position closely every day starting on next Friday's ex-dividend date since closing out the position on or after the ex-dividend date but prior to the earnings date is a likely possibility. 

As detailed below, a potential return-on-investment result if assigned on the Oct. 28th options expiration date is +2.4% absolute return in 15 days (equivalent to a +57.2% annualized return-on-investment). 

 
Caterpillar Inc. (CAT) -- New Covered Call Position

The simultaneous buy/write transaction was as follows:
10/14/2022 Bought 100 shares of Caterpillar stock @ $178.61 per share 
10/14/2022 Sold 1 Caterpillar October 28th, 2022 $170.00 Call option @ $11.35 per share.  Note: the Implied Volatility of this Call option was 43.8 when this buy/write transaction was executed.
10/21/2022 Upcoming $1.20 per share ex-dividend

A possible overall performance result (including commissions) if assigned on the Oct. 28th options expiration date would be as follows:
Covered Call Net Investment: $16,726.67
= ($178.61 - $11.35)* 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,134.33
= ($11.35 * 100 shares) - $.67 commission
(b) Dividend Income: +$120.00 = $1.20 per share x 100 shares 
(c) Capital Appreciation (If CAT stock is above $170.00 strike price at the Oct. 28th options expiration date): -$861.00
= ($170.00 -$178.61) * 100 shares

Total Net Profit: +$393.33
= (+$1,134.33 option income +$120.00 dividend income -$861.00 capital appreciation)

Absolute Return-on-Investment: +2.4%
= +$393.33/$16,726.67
Equivalent Annualized Return-on-Investment: +57.2%
= (+$393.33/$16,726.67) * (365/15 days)