This Oshkosh position uses the Covered Calls Advisor's Dividend Capture Strategy since it has an upcoming quarterly ex-dividend of $.46 per share on February 14th which is two days prior to the February 16th options expiration date. This is equivalent to an absolute annual dividend yield of 1.6% and an equivalent annualized dividend yield of 18.6% = [($.46/$112.80) x (365/8 days to expiration)]. This dividend is included in the detailed return-on-investment calculations below. Either an early assignment on the last trading day prior to the ex-dividend date or on the February 16th options expiration date would be desirable to the Covered Calls Advisor given the potential annualized return on investments for either outcome. Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next quarterly earnings report will not occur until the end of April.
As detailed below, two potential return-on-investment results are:
Oshkosh Corporation (OSK) -- New Covered Calls Position
The buy/write transaction was:
2/8/2024 Bought 200 Oshkosh Corporation shares @ $112.80.
2/8/2024 Sold 2 OSK 2/16/2024 $110.00 Call options @ $3.40 per share.
Note: Implied Volatility (IV) of the Call options was at 22.6 when this position was transacted which, as preferred, is above the current VIX of 12.9.
2/14/2024 Upcoming quarterly ex-dividend of $.46 per share. The Delta of these Calls was 72.3.
Two possible overall performance results (including commissions) for this Oshkosh Covered Calls position are as follows:
Covered Calls Net Investment: $21,881.34
= ($112.80 - $3.40) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$678.66
= ($3.40 * 200 shares) - $1.34 commission
(b) Dividend Income (If OSK Call options exercised early on February 13th, 2024, the last business day prior to the Feb. 14th ex-div date): +$0.00; or
(b) Dividend Income (If Oshkosh stock assigned at the February 16th, 2024 options expiration): +$92.00
= ($.46 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $110.00 strike price at the 2/16/2024 options expiration): -$560.00
+($110.00 - $112.80) * 200 shares
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, only seven criteria are achieved for this Oshkosh Corp. Covered Calls position, but the two misses were relatively close to the threshold, so I decided to go forward with establishing this position.
As shown on the table at the bottom of this post, seven of the nine criteria of the Dividend Capture Strategy are met with this position. Even if the Oshkosh Corp. stock price declines somewhat during the next 8 days until the options expiration date, if the stock closes above the $110.00 strike price, then a very satisfactory annualized-return-on-investment of +43.9% will be achieved. The Delta for these Call options was approximately 72.3 when this position was established which approximates the probability of 72.3% that the position will be in-the-money at market close on the options expiration date.
Oshkosh Corporation is an Industrial sector company headquartered in Oshkosh, Wisconsin. They manufacture purpose-built equipment for the access, Defense, fire and emergency, refuse
collection, and concrete placement markets. I am impressed with their CEO and the company was identified in my "Future 5-Year PEG Ratios" stock screener (shown below) where all 14 filters of this screener were met by Oshkosh.
As detailed below, two potential return-on-investment results are:
- +0.5% absolute return (equivalent to +33.0% annualized
return-on-investment for the next 6 days) if the stock is assigned early (on the last business day
prior to the February 14th ex-dividend date); or
- +1.0% absolute return (equivalent to +43.9% annualized return-on-investment over the next 8 days) if the stock is assigned on the February 16th, 2024 options expiration date.
The buy/write transaction was:
2/8/2024 Bought 200 Oshkosh Corporation shares @ $112.80.
2/8/2024 Sold 2 OSK 2/16/2024 $110.00 Call options @ $3.40 per share.
Note: Implied Volatility (IV) of the Call options was at 22.6 when this position was transacted which, as preferred, is above the current VIX of 12.9.
2/14/2024 Upcoming quarterly ex-dividend of $.46 per share. The Delta of these Calls was 72.3.
Two possible overall performance results (including commissions) for this Oshkosh Covered Calls position are as follows:
Covered Calls Net Investment: $21,881.34
= ($112.80 - $3.40) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$678.66
= ($3.40 * 200 shares) - $1.34 commission
(b) Dividend Income (If OSK Call options exercised early on February 13th, 2024, the last business day prior to the Feb. 14th ex-div date): +$0.00; or
(b) Dividend Income (If Oshkosh stock assigned at the February 16th, 2024 options expiration): +$92.00
= ($.46 dividend per share x 200 shares)
(c) Capital Appreciation (If OSK's Call options assigned early on Feb. 13th): -$560.00
+($110.00 - $112.80) * 200 shares; or(c) Capital Appreciation (If shares assigned at $110.00 strike price at the 2/16/2024 options expiration): -$560.00
+($110.00 - $112.80) * 200 shares
1. Total Net Profit [If option exercised early (business day prior to the Feb. 14th ex-dividend date)]: +$118.66
= (+$678.66 options income +$0.00 dividend income -$560.00 capital appreciation); or
2. Total Net Profit (If Oshkosh's shares assigned at $110.00 at the February 16th, 2024 expiration): +$210.66
= (+$678.66 options income +$92.00 dividend income -$560.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +0.5%
= +$118.66/$21,881.34
Potential Annualized Return-on-Investment (If option exercised early): +33.0%
= (+$118.66/$21,881.34) * (365/6 days); or
2. Potential Absolute Return-on-Investment (If shares assigned on February 16th options expiration date): +1.0%
= +$210.66/$21,881.34
Potential Annualized Return-on-Investment (If Oshkosh Corporation's shares assigned at $110.00 at the Feb. 16th, 2024 expiration): +43.9%
= (+$210.66/$21,881.34) * (365/8 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, only seven criteria are achieved for this Oshkosh Corp. Covered Calls position, but the two misses were relatively close to the threshold, so I decided to go forward with establishing this position.
