Two potential return-on-investment results for this position are highlighted below and includes the possibility of early assignment since a quarterly ex-dividend of $.55 per share (1.2% annualized dividend yield) will most likely be announced very soon and with an ex-dividend date on May 30th, 2024 (which is prior to the June 21st options expiration date). The stock would have to move up in price by the last business day prior to the ex-div date and by an amount that would cause the time value remaining in the option to decline from its $.55 value today to about $.15 or less. If this occurs, the owner of the Call option might exercise their right to purchase the stock at the $175.00 strike price, in which case the option would immediately expire worthless but the owner of the Call would then own the stock and would capture the dividend. This early assignment outcome would be desirable for me since the +48.5% annualized-return-on-investment would exceed the +21.5% annualized-return-on-investment if the assignment were to instead occur on the June 21st monthly options expiration date. But either result would be attractive since they both exceed my preferred minimum annualized return-on-investment criteria (see criteria #8 and #9 at the bottom of this post) when using the Dividend Capture Strategy. Also, as I prefer, there is no intervening quarterly earnings report since CBOE's next quarterly earnings report on August 2nd, 2024 is after the June 21st options expiration date.
As detailed below, two potential return-on-investment results are:
- +1.9% absolute return (equivalent to +48.5% annualized return for the next 14 days) if the stock is assigned early (business day prior to the estimated June 3rd ex-dividend date); OR
- +2.2% absolute return (equivalent to +21.5% annualized return over the next 37 days) if the stock is assigned on the June 21st, 2024 options expiration date.
CBOE Global Markets Inc. (CBOE) -- New Covered Call Position
The buy/write transaction was:
5/15/2024 Bought 100 CBOE shares @ $178.50
5/15/2024 Sold 1 CBOE 6/21/2024 $175.00 Call option @ $6.70. The Implied Volatility of the Call option was 18.4 when this transaction occurred.
5/30/2024 Upcoming quarterly ex-dividend of $.55 per share
Two possible overall performance results (including commissions) for this CBOE Covered Call position is as follows:
Covered Calls Net Investment: $17,180.67
= ($178.50 - $6.70) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$669.33
= ($6.70 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on May 29th, 2024, the last business day prior to the estimated May 30th ex-div date): +$0.00; or
(b) Dividend Income (If CBOE stock assigned at the June 21st, 2024 options expiration date): +$55.00
= ($.55 dividend per share x 100 shares)
(c) Capital Appreciation (If CBOE Call option assigned early): -$350.00
+($175.00 strike price - $178.50 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $175.00 strike price at options expiration): -$350.00 = +($175.00 - $178.50) * 100 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, eight of the nine criteria are achieved for this CBOE Global Markets Inc. Covered Call position.
