Given my current "Neutral" stock market outlook, a slightly in-the-money Covered Calls position was established with a 71.2% probability that the stock will be in-the-money and therefore assigned on its June 21st, 2024 options expiration date. The Implied Volatility of the Calls was 18.0 when this position was established and, as I prefer, there is no earnings report prior to the June 21st options expiration date since the next earnings report is on August 6th, 2024. Also, the Beta (1-Year) for Lear Corporation is 1.03.
Lear Corporation supplies automotive seating and electric power management systems to global vehicle manufacturers. LSEG (Refinitiv) has an average rating of nine (out of a maximum of 10) for Lear and the average target price by the 13 analysts that follow the company is now $164.31 (+32.6% above today's stock purchase price). As desired, the next quarterly earnings report on August 6th is after the June 21st, 2024 options expiration date.
Lear Corporation (LEA) -- New Covered Calls Position
The buy/write transaction was:
5/23/2024 Bought 200 Lear Corporation shares @ $123.92.
5/23/2024 Sold 2 LEA 6/21/2024 $120.00 Call options @ $5.20 per share.
6/6/2024 Ex-dividend of $.77 per share.
As shown in the chart below, Lear meets all 21 filters of my Acquirer's Multiple stock screener.
As detailed below, two potential return-on-investment results for this Lear Corporation Covered Calls position are as follows: (a) +1.1% absolute return-on-investment (equivalent to +28.0% annualized return-on-investment) for the next 14 days if the stock is assigned early on the day prior to the June 6th ex-dividend date; or (b) +1.7% absolute return-on-investment (equivalent to +21.7% annualized return-on-investment) for the next 29 days if the stock is instead assigned on its June 21st, 2024 options expiration date.
The buy/write transaction was:
5/23/2024 Bought 200 Lear Corporation shares @ $123.92.
5/23/2024 Sold 2 LEA 6/21/2024 $120.00 Call options @ $5.20 per share.
6/6/2024 Ex-dividend of $.77 per share.
Two possible overall performance results (including commission) for this Covered Calls position are as follows:
Covered Calls Net Investment: $23,745.34
= ($123.92 - $5.20) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,038.66
= ($5.20 * 200 shares) - $1.34 commission
(b) Dividend Income: $154.00
= ($.77 per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $120.00 strike price at the 6/6/2024 options expiration date): -$784.00
+($120.00 strike price - $123.92 stock purchase price) * 200 shares
(c) Capital Appreciation (If shares assigned at $120.00 strike price at the 6/6/2024 options expiration date): -$784.00
+($120.00 strike price - $123.92 stock purchase price) * 200 shares
1. Total Net Profit (If stock shares assigned at $120.00 strike price on the day prior to the June 6th ex-dividend date): +$254.66
= (+$1,038.66 options income +$0.00 dividend income - $784.00 capital appreciation); or
2. Total Net Profit (If stock shares assigned at $120.00 strike price at the 6/21/2024 options expiration date): +$408.66
= (+$1,038.66 options income +$154.00 dividend income -$784.00 capital appreciation)
1. Potential Absolute Return-on-Investment (if assigned early on the day prior to the 6/6/2024 ex-dividend): +1.1%
= +$254.66/$23,745.34
Potential Annualized Return-on-Investment: +28.0%
= (+$254.66/$23,745.34) * (365/14 days); or
2. Potential Absolute Return-on-Investment (if assigned on the 6/21/2024 options expiration date): +1.7%
= +$408.66/$23,745.34
Potential Annualized Return-on-Investment: +21.7%
= (+$408.66/$23,745.34) * (365/29 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, all nine criteria are achieved for this Lear Corporation Covered Calls position.
