With less than an hour remaining in today's trading session, a Covered Calls position was established in Delta Air Lines Inc. (ticker symbol DAL) when the Covered Calls Advisor's buy/write limit order was executed -- 500 shares were purchased at $47.49 and 5 August 4th, 2023 Call options were sold at $1.93 at the $46.00 strike price. The corresponding extrinsic value (i.e. time value) was $.44 per share [$1.93 Call options premium - ($47.49 stock purchase price - $46.00 strike price)]. The $.44 per share will be profit if the stock remains above the $46.00 strike price (and therefore assigned) on the August 4th options expiration date.
A moderately in-the-money Covered Calls position was
established -- the Delta was 72.1, which closely approximates the probability
that the Call option will be
in-the-money on the options expiration date. In addition, the Implied Volatility of the Call was 29.6 when the position was established (well above the current VIX of 13.9) and there is no quarterly earnings report prior to the options expiration date.
Delta's valuation is attractive since its estimated current FY 2023 P/E ratio is only 7.1 based on today's stock purchase price. Analysts' average stock target price is $60.80 (+28.0% above today's purchase price), and Delta also appears in three of my stock screeners -- Earnings Growers, Low 5-Year Forward PEG Ratio, and Analysts' Picks.
Some key numbers for this Delta Air Lines Inc. Covered Calls position are:
Covered Calls Cost Basis: $22,783.35
Profit if Assigned on Expiration Date: $216.65
Days Until August 4th, 2023 Options Expiration: 12
Absolute Return-on-Investment if Assigned at Expiration: +1.0%
Annualized Return-on-Investment if Assigned at Expiration: +28.9%
As always, I encourage your email questions on anything related to the Covered Calls investing strategy.
Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
