Established Covered Calls Position in Terex Corporation

Early in this morning's trading, I entered a Covered Calls simultaneous buy/write net debit limit order in Terex Corporation (ticker TEX) for the June 16th, 2023 expiration and at the $45.00 strike price and at a net debit limit price of $44.40 per share.  The order was transacted after only about 5 minutes when 400 shares were purchased at $48.27 and four 6/16/2023 Call options were sold at the $45.00 strike price for $3.87 per share.  So, the potential time value profit from the Call options is $.60 per share [$45.00 strike price - ($48.27 stock purchase price - $3.87 Call options price)], and the Implied Volatility of these Call options was 34.2 when this transaction was executed.  

In addition to the potential time value profit of $.60 per share, there is an upcoming quarterly ex-dividend of $.15 per share (1.2% annual dividend yield) on June 5th which is included in the potential return-on-investment calculations detailed below.  When this in-the-money Covered Calls position was established this morning it had a probability of assignment on the options expiration date of 76.9%. 

Terex Corp. is a small-cap ($3.3 billion) company in the Machinery industry (within the Industrials sector) and their sales are balanced between two divisions -- Materials Processing (many brands) and Aerial Lifts and Work Platforms (Genie brand).  I am impressed with the mature and disciplined leadership of both CEO John Garrison and CFO Julie Beck.  Terex meets all five criteria I currently use for a company to be considered as a candidate for investment.

As detailed below, two potential return-on-investment results are: 

•  +1.3% absolute return (equivalent to +81.3% annualized return for the next 6 days) if the stock is assigned early (the last business day prior to the June 5th, 2023 ex-dividend date); OR 

• +1.6% absolute return (equivalent to +33.4% annualized return over the next 18 days) if the stock is assigned on the June 16th, 2023 options expiration date.

These returns will be achieved as long as the Terex stock price is above the $45.00 strike price when assigned.  If the stock declines below the strike price, the breakeven price of $44.25 per share ($48.27    stock purchase price - $3.87 Call options selling price - $.15 ex-dividend amount) provides an 8.3% downside breakeven protection if assigned on the options expiration date.
 

Terex Corporation -- New Covered Calls Position

The simultaneous buy/write transaction was:
5/30/2023 Bought 400 Terex Corporation shares @ $48.27 per share
5/30/2023 Sold 4 Terex June 16th, 2023 $45.00 Call options @ $3.87 per share
6/5/2023 Upcoming quarterly ex-dividend at $.15 per share

Two possible overall performance results (including commissions) for this Terex Corporation Covered Calls position are as follows:
Covered Calls Net Investment: $17,762.68
= ($48.27 - $3.87) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$1,545.32
= ($3.87 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on this Friday, June 2nd, 2023 which is the last business day prior to next Monday's June 5th ex-div date): +$0.00; or
(b) Dividend Income (If Terex's shares assigned at the June 16th, 2023 options expiration date): +$60.00
= ($.15 dividend per share x 400 shares)

(c) Capital Appreciation (If 400 Terex shares assigned early): -$1,308.00
+($45.00 -$48.27) * 400 shares; or
(c) Capital Appreciation (If Terex shares assigned at $45.00 strike price at options expiration): -$1,308.00
+($45.00 -$48.27) * 400 shares

1. Total Net Profit (If option exercised early): +$237.32

= (+$1,545.32 options income +$0.00 dividend income -$1,308.00 capital appreciation); or

2. Total Net Profit (If Terex stock assigned at $45.00 at the June 16th, 2023 expiration): +$297.32

= (+$1,545.32 options income +$60.00 dividend income -$1,308.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the last business day prior to the 6/5/2023 ex-dividend date): +1.3%

= +$237.32/$17,762.68

Annualized Return-on-Investment (If option exercised early): +81.3%

= (+$237.32/$17,762.68) * (365/6 days); or

2. Absolute Return-on-Investment (If Terex stock assigned at $45.00 at the June 16th, 2023 options expiration date): +1.6%

= +$297.32/$17,762.68

Annualized Return-on-Investment (If Terex shares assigned at $45.00 at the 6/16/2023 options expiration date): +33.4%

= (+$297.32/$17,762.68) *(365/18 days)

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, eight of the nine criteria are achieved for this Terex Corporation position.