Established Covered Calls in the D.R. Horton Company

This afternoon at 2:04pm (just after the Federal Reserve's announcement, as expected, of a quarter-point increase in the Federal Funds Rate was announced), my Covered Calls net debit limit order was entered and immediately executed in D.R. Horton Co. (ticker DHI) with a short-term February 10th, 2023 options expiration date.  Two D.R. Horton Call options were sold at $4.56 at the $93.00 strike price when the stock price was $96.84 -- the net debit was $92.28 per share and the Call options time value profit potential was $.72 [$4.56 options price - ($96.84 stock price - $93.00 strike price)].  The Delta was approximately 76.5 when this transaction was executed which is a moderately in-the-money position and consistent with the Covered Calls Advisor's current cautious market outlook. There is an intervening ex-dividend of $.25 per share (1.0% annual dividend yield) in five days on February 6th which is included in the potential return-on-investment results detailed below.

D.R. Horton is the largest homebuilder in America by market cap. Importantly, it is considered the best-in-class operator in its industry and has the highest exposure to the critically important entry-level buyers (67% of closings), lowest debt leverage, and least on-balance sheet land risk. The very recent Q4 2022 earnings report on January 24th, 2023 showed positive (+2.8%) sales but negative (-12.9%) earnings per share compared with the same prior year quarter.  Nevertheless, the current Trailing Twelve Months (TTM) P/E Ratio valuation of 6.0 is very attractive.

As detailed below, two potential return-on-investment results are: (1) +0.8% absolute return-on-investment (equivalent to a +57.0% annualized return-on-investment in 5 days if the Calls are exercised and the stock is therefore assigned on the last business day prior to the February 6th ex-dividend date; and (2) +1.1% absolute return-on-investment (equivalent to a +38.4% annualized return-on-investment in 10 days if the DHI stock is in-the-money and the stock assigned on its February 10th, 2023 options expiration date.

D.R. Horton Company (DHI) -- New Covered Calls Position
The Buy/Write transaction was as follows:
2/1/2023 Bought 200 shares of D.R. Horton Co. stock @ $96.84 per share 
2/1/2023 Sold 2 D.R. Horton February 10th, 2023 $93.00 Call options @ $4.56 per share
2/6/2023 Upcoming ex-dividend of $.25 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Position Net Investment: $18,457.34
= ($96.84 - $4.56) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$912.00
= ($4.56 * 200 shares)
(b) Dividend Income (If option exercised early on Friday, Feb. 3rd, the last business day prior to the February 6th ex-div date): +$0.00; or
(b) Dividend Income (If DHI stock assigned at the Feb. 10th, 2023 expiration): $50.00
= ($.25 dividend per share x 200 shares)
(c) Capital Appreciation (If D.R. Horton Call options assigned early on Feb. 3rd): -$768.00
+($93.00 strike price - $96.84 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $93.00 strike price at the Feb.10th options expiration): -$768.00
+($93.00 - $96.84) * 200 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Feb. 6th ex-dividend date)]: +$144.00

= (+$912.00 options income +$0.00 dividend income -$768.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $93.00 strike price at the Feb. 10th, 2023 expiration): +$194.00

= (+$912.00 options income +$50.00 dividend income -$768.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised early on Feb 3rd): +0.8%

= +$144.00/$18,457.34

Annualized Return-on-Investment: +57.0%

= (+$144.00/$18,457.34) * (365/5 days); or

2. Absolute Return-on-Investment (If D.R. Horton shares assigned at $93.00 at the Feb. 10th, 2023 options expiration date): +1.1%

= +$194.00/$18,457.34

Annualized Return-on-Investment (If shares assigned at the 2/10/2023 expiration date): +38.4%

= (+$194.00/$18,457.34) * (365/10 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this D.R. Horton Co. position, eight of the nine criteria were met.