Established Covered Calls Position in Oshkosh Corporation

This afternoon at 1:05pm, a Covered Calls position was established in Oshkosh Corporation (ticker OSK).  I bought 200 shares and simultaneously sold 2 Call options at the May 17th, 2024 monthly options expiration date and at the $110.00 strike price. The net debit limit price for my order was $108.62 and the 200 shares were purchased at $113.16 and 2 May 17th, 2024 Call options were sold for $4.54 per share.  Therefore, a maximum potential time value profit of $1.38 per share = [$4.54 options premium - ($113.16 stock price - $110.00 strike price)] is available for this position.  

This Oshkosh position uses the Covered Calls Advisor's Dividend Capture Strategy since it has an upcoming quarterly ex-dividend of $.46 per share on May 10th which is a week prior to the options expiration date.  This is equivalent to an absolute annual dividend yield of 1.6% and an equivalent annualized dividend yield if assigned on its 5/17 options expiration date of 8.7% = [($.46/$113.16) x (365/17)].  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 May 17th 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 July.

As shown on the table at the bottom of this post, eight of the nine criteria for my Dividend Capture Strategy are met with this position.  Even if the Oshkosh Corp. stock price declines somewhat during the next 17 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 +36.2% will be achieved.  The probability that these Call options will be in-the-money on the options expiration date was 69.8% when this Covered Calls position was established.  

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 two of my stock screeners: (1) Dividend Growth; and (2) Quantitative Value.  The results below for the Quantitative Value stock screener show that all 21 filters were met.  In addition, Oshkosh was the highest rated stock in the Industrial sector for this Quantitative Value screener.   

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

•  +1.3% absolute return (equivalent to +46.1% annualized return-on-investment for the next 10 days) if the stock is assigned early (on the last business day prior to the May 10th ex-dividend date); or  
  

• +1.7% absolute return (equivalent to +36.2% annualized return-on-investment over the next 17 days) if the stock is assigned on the May 17th, 2024 options expiration date.

Oshkosh Corporation (OSK) -- New Covered Calls Position
The buy/write transaction was:
4/30/2024 Bought 200 Oshkosh Corporation shares @ $113.16.
4/30/2024 Sold 2 OSK 5/17/2024 $110.00 Call options @ $4.54 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 15.5.   
5/10/2024 Upcoming quarterly ex-dividend of $.46 per share.  

Two possible overall performance results (including commissions) for this Oshkosh Covered Calls position are as follows:
Covered Calls Net Investment: $21,725.34
= ($113.16 - $4.54) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$906.66
= ($4.54 * 200 shares) - $1.34 commission
(b) Dividend Income (If OSK Call options exercised early on May 9th, 2024, the last business day prior to the May 10th ex-div date): +$0.00; or
(b) Dividend Income (If Oshkosh stock assigned at the May 17th, 2024 options expiration): +$92.00
= ($.46 dividend per share x 200 shares)

(c) Capital Appreciation (If OSK's Call options assigned early on May 10th): -$632.00

+($110.00 - $113.16) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $110.00 strike price at the 5/17/2024 options expiration): -$632.00

+($110.00 - $113.16) * 200 shares

1. Total Net Profit [If option exercised early (business day prior to the May 10th ex-dividend date)]: +$274.66

= (+$906.66 options income +$0.00 dividend income -$632.00 capital appreciation); or

2. Total Net Profit (If Oshkosh's shares assigned at $110.00 at the May 17th, 2024 expiration): +$366.66

= (+$906.66 options income +$92.00 dividend income -$632.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.3%

= +$274.66/$21,725.34

Potential Annualized Return-on-Investment (If option exercised early): +46.1%

= (+$274.66/$21,725.34) * (365/10 days); or

2. Potential Absolute Return-on-Investment (If shares assigned on the May 17th options expiration date): +1.7%

= +$366.66/$21,725.34

Potential Annualized Return-on-Investment (If Oshkosh Corporation's shares assigned at $110.00 at the May 17th, 2024 expiration): +36.2%

= (+$366.66/$21,725.34) * (365/17 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 metrics are achieved for this Oshkosh Corp. Covered Calls position.