Established Covered Calls Position in American International Group Inc.

At 1:57pm this afternoon, my buy/write net debit limit order in American International Group Inc. (ticker AIG) for the June 23rd, 2023 expiration and at the $55.00 strike price was transacted at my net debit limit price of $54.66 per share.  Four hundred shares were purchased at $56.18 and four 6/23/2023 Call options were sold at the $55.00 strike price for $1.52 per share.  So, the potential time value profit from the Call options is $.34 per share [$55.00 strike price - ($56.18 stock purchase price - $1.52 Call options price)]. 

In addition to the potential time value profit of $.34 per share, there is an upcoming quarterly ex-dividend of $.36 per share (2.6% annual dividend yield) on June 15th (this Thursday) which is included in the potential return-on-investment calculations detailed below.  When this in-the-money Covered Calls position was established this afternoon it had a probability of assignment on the options expiration date of 71.2%. 

American International Group is a large ($41.2 billion market cap) provider of insurance products in North America and internationally. The General Insurance segment offers traditional property and commercial insurance along with a number of specialty products. The Life & Retirement segment offers variable and fixed annuities and a family of mutual finds. The company is based in New York but with operations in more than 130 countries, and it is included in the S&P 500 index.

As shown in the table below, AIG meets all five criteria I currently use for any company to be considered as a candidate for investment.

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

•  +0.6% absolute return (equivalent to +74.2% annualized return for the next 3 days) in the relatively unlikely event that the stock is assigned early (the last business day prior to the June 15th, 2023 ex-dividend date); OR 

• +1.3% absolute return (equivalent to +38.6% annualized return over the next 12 days) if the stock is assigned on the June 23rd, 2023 options expiration date.

These returns will be achieved as long as AIG's stock price is above the $55.00 strike price when assigned.  If the stock declines below the strike price, the breakeven price of $54.30 per share ($56.18 stock purchase price - $1.52 Call options selling price - $.36 ex-dividend amount) provides 3.3% downside breakeven protection if assigned on the options expiration date.
 

American International Group Inc. - New Covered Calls Position

The simultaneous buy/write transaction was:
6/12/2023 Bought 400 American International Group Inc. shares @ $56.18 per share
6/12/2023 Sold 4 AIG June 23rd, 2023 $55.00 Call options @ $1.52 per share.  The Implied Volatility of these Calls was 19.8 which, as preferred, is well above the VIX of 14.7.
6/15/2023 Upcoming quarterly ex-dividend at $.36 per share

Two possible overall performance results (including commissions) for this American International Group Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $21,866.68
= ($56.18 - $1.52) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$605.32
= ($1.52 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early this Wednesday, June 14th, 2023 which is the last business day prior to the June 15th ex-div date): +$0.00; or
(b) Dividend Income (If AIG's shares assigned at the June 23rd, 2023 options expiration date): +$144.00
= ($.36 dividend per share x 400 shares)

(c) Capital Appreciation (If 400 AIG shares assigned early): -$472.00
+($55.00 -$56.18) * 400 shares; or
(c) Capital Appreciation (If AIG shares assigned at $55.00 strike price at options expiration): -$472.00
+($55.00 -$56.18) * 400 shares

1. Total Net Profit (If option exercised early): +$133.32

= (+$605.32 options income +$0.00 dividend income -$472.00 capital appreciation); or

2. Total Net Profit (If AIG stock assigned at $55.00 at the June 23rd, 2023 expiration): +$277.32 = (+$605.32 options income +$144.00 dividend income -$472.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the last business day prior to the 6/15/2023 ex-dividend date): +0.6%

= +$133.32/$21,866.68

Annualized Return-on-Investment (If option exercised early): +74.2%

= (+$133.32/$21,866.68) * (365/3 days); or

2. Absolute Return-on-Investment (If American International Group Inc. stock assigned at $55.00 at the June 23rd, 2023 options expiration date): +1.3%

= +$277.32/$21,866.68

Annualized Return-on-Investment (If AIG shares assigned at $55.00 at the 6/23/2023 options expiration date): +38.6%

= (+$277.32/$21,866.68) * (365/12 days)