Early Assignment of Mondelez International Inc. and U.S. Bancorp Covered Calls Positions

Early this morning, I was notified via email from my broker (Schwab) that my Covered Calls positions in Mondelez International Inc. (MDLZ) and U.S. Bancorp (USB) were closed out by early assignment yesterday which is the day before today's ex-dividend date for both companies.  There was less than $.05 per share time value remaining in the Call options for both companies, so the Call owners decided to exercise their Calls early to buy the stocks and also capture today's ex-dividend.  So, the Calls expired worthless and the stocks were sold at their respective strike prices with the following results:

1. Mondelez International Inc. (MDLZ) -- I had owned 300 MDLZ shares and sold three July 5th, 2024 $65.00 Calls and today's ex-dividend amount is $.425 per share.  The stock price closed in-the-money yesterday at $66.47.  This position achieved +0.7% absolute return (equivalent to +23.9% annualized return-on-investment) for the 10 days of this investment.  

2. U.S. Bancorp (USB) -- I had owned 400 USB shares and sold four July 12th, 2024 $38.00 Call options and today's ex-dividend amount is $.49 per share.  The stock price closed in-the-money yesterday at $39.47.  This position achieved +1.2% absolute return (equivalent to +46.8% annualized return-on-investment) for the 9 days of this investment.  

The original blog post details when both positions were established is here.

I welcome your questions or feedback at the email address below on anything related to the Covered Calls investing strategy.  

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls in Las Vegas Sands Corporation

This morning a short-term Covered Calls position was established in Las Vegas Sands Corporation (ticker LVS). Four hundred shares were purchased at $44.49 and four July 12th, 2024 weekly Call options were sold at the $43.00 strike price at $2.05 per share--a buy/write net debit transaction of $42.44 per share which provides a $.56 per share time value profit potential.  The July 12th weekly expiration was chosen instead of the July 19th monthly to avoid holding the position during Las Vegas Sands' next earnings report on July 17th.  

The average target price of the 15 analysts following Las Vegas Sands Corp. is $61.96 which is +39.3% above today's stock purchase price and, as shown below, it also appeared today in my Stock Rover Overall stock screener by passing all 16 screener filters:

As detailed below, a potential return-on-investment result is +1.3% absolute return-on-investment (equivalent to +28.0% annualized return-on-investment for the next 17 days) if the Las Vegas Sands Corporation share price is in-the-money (i.e. above the $43.00 strike price) and therefore assigned on its July 12th, 2024 options expiration date.

 
Las Vegas Sands Corporation (LVS) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
6/25/2024 Bought 400 shares of Las Vegas Sands Corporation @ $44.49 per share.  
6/25/2024 Sold 4 LVS July 12th, 2024 $43.00 Call options @ $2.05 per share.  The Implied Volatility of these Call options was 27.5 and the probability that the Calls will expire in-the-money on the options expiration date was 70.7% when this transaction was executed today. 

A possible overall performance result (including commissions) for this Las Vegas Sands Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $16,978.68
= ($44.49 - $2.05) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$817.32
= ($2.05 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 400 Las Vegas Sands Corporation shares assigned at $43.00 strike price at expiration): -$596.00
+($43.00 - $44.49) * 400 shares

Total Net Profit Potential (If 400 Las Vegas Sands shares assigned at $43.00 strike price at expiration): +$221.32
= (+$817.32 options income +$0.00 dividend income -$596.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.3%
= +$221.32/$16,978.68
Potential Annualized Return-on-Investment: +28.0%
= (+$221.32/$16,978.68) * (365/17 days)

Continuation of Covered Calls Positions in KraneShares CSI China Internet ETF, Lear Corporation, and Schlumberger

Last Friday, the Covered Calls positions in KraneShares CSI China Internet ETF (ticker KWEB), Lear Corporation (ticker LEA), and Schlumberger (now both new name and ticker are SLB) closed out-of-the-money. So, the Calls expired and shares remained in the Covered Calls Advisor Portfolio.  This morning, I decided to continue these Covered Calls positions by selling Call options to roll out to the June 19th, 2024 monthly options expiration dates for KWEB and Lear and to the June 12th, 2024 weekly expiration for SLB. The transactions-to-date for these positions as well as the potential return-on-investment results if these positions are assigned on their respective expiration dates are as follows:

1. KraneShares CSI China Internet ETF (KWEB) -- Continuation of Covered Calls Position 

The Buy/Write transaction was as follows:
5/20/2024 Bought 1,000 shares of CSI China Internet ETF @ $31.90 per share.  
5/20/2024 Sold 10 KWEB June 21st, 2024 $30.00 Call options @ $2.44 per share.  The Implied Volatility of the Calls was 31.2 when this position was established.  

6/21/2024 Ten KWEB Calls expired out-of-the-money and the 1,000 KWEB shares remain in the Covered Calls Advisor Portfolio.

6/24/2024 Continued this Covered Calls position by selling-to-open 10 KWEB 7/19/2024 $30.00 Call options at $.33 when the KWEB price was $28.60 per share against the 1,000 KWEB shares owned.

 

A possible overall performance result (including commissions) for this CSI China Internet ETF Covered Calls position if it is in-the-money on its 7/19/2024 options expiration date is as follows: 

KWEB Covered Calls Net Investment: $29,466.70

= ($31.90 - $2.44) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$2,756.60
= ($2.44 + $.33) * 1,000 shares - $13.40 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 CSI China Internet ETF shares assigned at $30.00 strike price at the 7/19/2024 options expiration date): -$1,900.00
+($30.00 strike price - $31.90 shares purchase price) * 1,000 shares

Total Net Profit Potential (If 1,000 CSI China Internet ETF shares assigned at $30.00 strike price at expiration): +$856.60
= (+$2,756.60 options income + $0.00 dividend income - $1,900.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.9%
= +$856.60/$29,466.70
Potential Annualized Return-on-Investment: +17.7%
= (+$856.60/$29,466.70) * (365/60 days)

2. Lear Corporation (LEA) -- Continuation of 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.

6/19/2024 2 Lear Calls expired out-of-the-money and the 200 Lear Corp. shares remain in the Covered Calls Advisor Portfolio.

6/24/2024 Continued this Covered Calls position by selling-to-open 2 Lear 7/19/2024 $120.00 Call options at $2.45 when the stock price was $118.34 per share against the 200 Lear shares owned.

A possible overall performance result (including commission) for this Covered Calls position if it is in-the-money on its 7/19/2024 options expiration date is as follows:

Covered Calls Net Investment: $23,745.34
= ($123.92 - $5.20) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,527.32
= ($5.20 + $2.45) * 200 shares - $2.68 commissions
(b) Dividend Income: $154.00

= ($.77 per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $120.00 strike price at the 7/19/2024 options expiration date): -$784.00
+($120.00 strike price - $123.92 stock purchase price) * 200 shares

Total Net Profit (If stock shares assigned at $120.00 strike price at the 7/19/2024 options expiration date): +$897.32

= (+$1,527.32 options income +$154.00 dividend income -$784.00 capital appreciation)

Potential Absolute Return-on-Investment: +3.8%

= +$897.32/$23,745.34

Potential Annualized Return-on-Investment: +24.2%

= (+$897.32/$23,745.34) * (365/57 days)

3. Schlumberger Ltd. (SLB) -- Continuation of Covered Calls Position
The buy/write transaction was:

3/26/2024 Bought 300 shares of SLB stock @ $54.08 per share.  
3/26/2024 Sold 3 SLB April 19th, 2024 $52.50 Call options @ $2.48 per share.  Note: the Implied Volatility of the Calls was 26.3 when this position was established.  
4/19/2024 300 SLB shares closed out-of-the-money so 3 Calls expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 Continued Covered Calls position by selling 3 SLB 5/3/2024 Call options at the $50.00 strike price for $.76 per share when the stock price was $49.65.

5/3/2024 Three SLB Calls closed out-of-the-money at $47.77 on their options expiration date, so the Call expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This SLB Covered Calls position was continued by selling 3 May 17th, 2024 $50.00 Calls at $.27 per share when the stock was trading at $48.25. 

5/17/2024 Rolled out the 3 SLB 5/17/2024 $50.00 Calls to 3 6/21/2024 $50.00 Calls at a net credit of $.67 per share.
6/5/2024 Upcoming ex-dividend of $.275 per share. 

6/19/2024 Three SLB Calls expired out-of-the-money and the 300 SLB shares remain in the Covered Calls Advisor Portfolio.

6/24/2024 Continued this Covered Calls position by selling-to-open 3 SLB 7/12/2024 $48.00 Call options at $.48 when the stock price was $46.76 per share against the 300 SLB shares owned.

A possible overall performance result (including commissions) for this position if it is in-the-money on its 7/12/2024 options expiration date is as follows:
Covered Calls Net Investment: $15,482.01
= ($54.08 - $2.48) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,393.95
= ($2.48 + $.76 + $.27 -$.01 + $.70 + $.48) * 300 shares - $10.05 commissions
(b) Dividend Income: +$82.50
= $.275 per share x 300 shares
(c) Capital Appreciation (If SLB stock is above the $48.00 strike price at the July 12th, 2024 options expiration date): -$1,824.00
= ($48.00 strike price - $54.08 stock purchase price) * 300 shares

Potential Total Net Profit (If SLB is in-the-money and therefore assigned at expiration): -$347.55
= (+$1,393.95 options income + $82.50 dividend income - $1,824.00 capital appreciation)

Potential Absolute Return-on-Investment: -2.2% = -$347.55/$15,482.01

Potential Equivalent Annualized-Return-on-Investment: -7.6%
= (-$347.55/$15,482.01 * (365/108 days)

Jeff Partlow (The Covered Calls Advisor)

partlow@cox.net

 

Covered Calls Position Closed in Target Corporation

Last Friday, the Covered Calls position in Target Corporation (ticker TGT) closed out-of-the-money at $146.13 which was below its $148.00 strike price.  This morning, when Target's stock price had increased significantly, I decided to close out this position by selling the 200 shares at $149.89. The transactions history for this Target Covered Calls position and its associated return-on-investment results are detailed below.

Target Corporation (TGT) -- Covered Calls Position Closed Out by Decision
The buy/write transaction was:
5/7/2024 Bought 200 Target Corporation shares @ $160.06.
5/7/2024 Sold 2 TGT 5/24/2024 $150.00 Call options @ $11.99 per share.
5/14/2024 Ex-dividend of $1.10 per share.

5/24/2024 Continued this Target Corporation Covered Calls position with a rollout transaction by simultaneously buying-to-close 2 Target 5/24/2024 $150.00 Calls at $.01 per share and selling-to-open 2 6/21/2024 $148.00 Calls at $2.17 per share when the stock price was $145.48.

6/21/2024 2 TGT Calls expired out-of-the-money and the 200 Target shares remain in the Covered Calls Advisor Portfolio.

6/24/2024 Closed out this Covered Calls position by selling the 200 Target shares at $149.89 per share.

The overall performance result (including commission) for this Covered Calls position is as follows:
Covered Calls Net Investment: $29,615.34
= ($160.06 - $11.99) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,827.32
= ($11.99 -$.01 + $2.17) * 200 shares - $2.68 commissions
(b) Dividend Income: $220.00

= ($1.10 per share x 200 shares)
(c) Capital Appreciation (200 Target shares sold at $149.89 per share on 6/24/2024): -$2,034.00
+($149.89 stock sold price - $160.06 stock purchase price) * 200 shares

Total Net Profit: +$1,013.32

= (+$2,827.32 options income +$220.00 dividend income -$2,034.00 capital appreciation)

Absolute Return-on-Investment: +3.4%

= +$1,013.32/$29,615.34

Annualized Return-on-Investment: +26.0%

= (+$635.32/$29,615.34) * (365/48 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

 

Covered Calls Position Closed in Molson Coors Brewing

Today was the options expiration date for my Molson Coors Brewing (TAP) Covered Calls position. Today I decided to close out (i.e. unwind) this position.  Since establishing the position a little more than a month ago, the stock price has declined by 9.8% (from $56.4295 to $50.89).  Given the recently evolving softness in consumer discretionary spending, I decided to go ahead and realize my current loss in order to free up some capital to establish a new position in a company that I am now more bullish on.  So late in this afternoon's session, I sold-to-close the 400 Molson Coors shares at $50.89 and simultaneously bought-to-close the 4 June 21st, 2024 $55.00 Calls at $.01 per share -- a net credit for this transaction of $50.88 per share. Simply stated, I now believe this is one of those situations where, in my judgment, it is better to accept a loss and move on to another company rather than continuing to tie up my capital by rolling out this position in an attempt to repair the return-on-investment results back toward breakeven.

Molson Coors Beverage Company (TAP) -- Closed Out Covered Calls Position
The buy/write transaction was:
5/17/2024 Bought 400 Molson Coors Beverage Company shares @ $56.4295.
5/17/2024 Sold 4 TAP 6/21/2024 $55.00 Call options @ $2.11 per share.
6/6/2024 Ex-dividend of $.44 per share.

6/21/2024 Unwound this Covered Calls position by selling-to-close the 400 shares of Molson Coors stock and simultaneously buying-to-close the 4 TAP $55.00 Calls that expire today at a net credit of $50.88 per share.

The overall performance results (including commission) for this Covered Calls position are as follows:
Covered Calls Net Investment: $21,730.48
= ($56.4295 - $2.11) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$837.32
= ($2.11 - $.01) * 400 shares) - $2.68 commission
(b) Dividend Income: $176.00

= ($.44 per share x 400 shares)
(c) Capital Appreciation (400 TAP shares sold at $50.89): -$2,215.80
+($50.89 stock sales price - $56.4295 stock purchase price) * 400 shares

Total Net Loss: -$1,202.48

= (+$837.32 options income +$176.00 dividend income -$2,215.80 capital appreciation)

Absolute Return-on-Investment: -5.5%

= -$1,202.48/$21,730.48

Annualized Return-on-Investment: -57.7%

= (-$1,202.48/$21,730.48) * (365/35 days)

Established Covered Call Positions in Mondelez International and U.S. Bancorp

Today Covered Calls were established in Mondelez International (ticker symbol MDLZ) and U.S. Bancorp (ticker USB) when the Covered Calls Advisor's buy/write limit orders were executed.  For Mondelez, 300 shares were purchased at $66.04 and 3 July 5th, 2024 Call options were sold at $1.47 at the $65.00 strike price.   For U.S. Bancorp, 400 shares were purchased at $39.11 and 4 July 12th, 2024 Call options were sold at $1.55 at the $38.00 strike price.   

Given the Covered Calls Advisor's current "Neutral" Overall Market Meter outlook, moderately in-the-money Covered Calls positions were established.  The probability that the stock will be in-the-money on the options expiration dates was 71.5% for the Mondelez position and 71.6% for the U.S. Bancorp position.  Both positions have an intervening ex-dividend date, so the potential results detailed below includes the possibility of early exercise since the ex-dividends are prior to their respective options expiration dates.

1.  Mondelez International Inc. (MDLZ) -- New Covered Calls Position

The buy/write transaction was:
6/18/2024 Bought 300 Mondelez shares @ $66.04
6/18/2024 Sold 3 MDLZ 7/5/2024 $65.00 Call options @ $1.47 per share.  The Implied Volatility of these Calls was 13.2 when this position was established.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $19,373.01
= ($66.04 - $1.47) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$438.99
= ($1.47 * 300 shares) - $2.01 commission
(b) Dividend Income (If Mondelez shares assigned on the business day prior to the June 28th ex-dividend date): = +$0.00; or
(b) Dividend Income (If MDLZ shares assigned at the 7/5/2024 options expiration date): +$127.50
= $.425 per share x 300 shares
(c) Capital Appreciation (If Mondelez shares assigned early): -$312.00
= ($65.00 strike price -$66.04 stock purchase price) * 300 shares; or
(c) Capital Appreciation (If MDLZ shares assigned with stock above the $65.00 strike price at the July 5th options expiration): -$312.00
= ($65.00 -$66.04) * 300 shares

1. Potential Net Profit (If Mondelez shares assigned on 6/27/2024, the day prior to the June 28th ex-dividend date): +$126.99
= (+$438.99 options income +$0.00 dividend income - $312.00 capital appreciation)
2. Potential Net Profit (If Mondelez price is above $65.00 strike price at the July 5th options expiration): +$254.49
= (+$438.99 options income +$127.50 dividend income - $312.00 capital appreciation)

1. Absolute Return-on-Investment (If Mondelez shares assigned early on June 27th, 2024, the day prior to the ex-dividend date): +0.7%
= +$126.99/$19,373.01
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +23.9%
= (+$126.99/$19,373.01) * (365/10 days)

2. Absolute Return-on-Investment (If MDLZ price is above the $65.00 strike price at the July 5th options expiration date): +1.3%
= +$254.49/$19,373.01
Equivalent Annualized Return-on-Investment (If assigned on the 7/5/2024 options expiration date): +28.2%
= (+$254.49/$19,373.01) * (365/17 days)

2.  U.S. Bancorp (USB) -- New Covered Calls Position
The buy/write transaction was:
6/18/2024 Bought 400 U.S. Bancorp shares @ $39.11.
6/18/2024 Sold 4 USB 7/12/2024 $38.00 Call options @ $1.55 per share.
Note: Implied Volatility (IV) of the Call options was at 21.1 when this position was transacted which, as I prefer, is above the current VIX of 12.4.   
6/27/2024 Upcoming quarterly ex-dividend of $.49 per share. 

Two possible overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Covered Calls Net Investment: $15,026.68
= ($39.11 - $1.55) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$617.32
= ($1.55 * 400 shares) - $2.68 commission
(b) Dividend Income (If U.S. Bancorp Call options exercised early on June 26th, 2024, the last business day prior to the June 27th ex-div date): +$0.00; or
(b) Dividend Income (If U.S. Bancorp stock assigned at the July 12th, 2024 options expiration): +$196.00
= ($.49 dividends per share x 400 shares)

(c) Capital Appreciation (If U.S. Bancorp's Call options assigned early on June 26th): -$444.00

+($38.00 strike price - $39.11 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $38.00 strike price at the 7/12/2024 options expiration): -$444.00
+($38.00 - $39.11) * 400 shares

1. Total Net Profit [If option exercised early (business day prior to the June 27th ex-dividend date)]: +$173.32

= (+$617.32 options income +$0.00 dividend income -$444.00 capital appreciation); or

2. Total Net Profit (If 400 U.S. Bancorp shares assigned at the $38.00 strike price at the July 12th, 2024 expiration): +$369.32

= (+$617.32 options income +$196.00 dividend income -$444.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 6/27/2024 ex-dividend date]: +1.2%

= +$173.32/$15,026.68

Potential Annualized Return-on-Investment (If option exercised early): +46.8%

= (+$173.32/$15,026.68) * (365/9 days); or

2. Potential Absolute Return-on-Investment (If U.S. Bancorp's shares assigned on the July 12th options expiration date): +2.5%

= +$369.32/$15,026.68

Potential Annualized Return-on-Investment (If 400 U.S. Bancorp shares assigned at $38.00 at the July 12th, 2024 expiration): +37.4%

= (+$369.32/$15,026.68) * (365/24 days)

Established Covered Call Position in UnitedHealth Group Inc.

This afternoon a Covered Call position was established in UnitedHealth Group Inc. (ticker UNH).  One hundred shares were purchased at $494.15 and one June 28th, 2024 Call option was sold at the $480.00 strike price at $17.29 per share--a buy/write net debit transaction of $476.86 per share which provides a maximum $3.16 per share time value profit potential.  The probability of the Call being in-the-money on the options expiration date was 79.4% when this transaction occurred. In addition, there is also a $2.10 per share ex-dividend (1.7% annual dividend yield) on June 17th which is prior to the June 28th options expiration date, so this dividend is included in the potential return-on-investment results shown below. 

Two potential return-on-investment results for this UnitedHealth Group Covered Call position are as follows: (a) +0.7% absolute return-on-investment (equivalent to +48.0% annualized return-on-investment) for the next 5 days if the stock is assigned early on the last business day prior to the June 17th ex-dividend date; or (b) +1.1% absolute return-on-investment (equivalent to +25.0% annualized return-on-investment) for the next 16 days if the stock is instead assigned on its June 28th, 2024 options expiration date.

 
UnitedHealth Group Inc. (UNH) -- New Covered Call Position 

The Buy/Write transaction was as follows:
6/12/2024 Bought 100 shares of UnitedHealth Group @ $494.15 per share.  
6/12/2024 Sold 1 UNH June 28th, 2024 $480.00 Call option @ $17.29 per share.  The Implied Volatility of the Calls was 15.0 when this position was established.

6/17/2024 Upcoming ex-dividend of $2.10 per share.  

A possible overall performance result (including commissions) for this UnitedHealth Group Covered Call position is as follows: 

Covered Call Net Investment: $47,686.67

= ($494.15 - $17.29) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,728.33
= ($17.29 * 100 shares) - $.67 commission
(b) Dividend Income: $210.00

= ($2.10 per share x 100 shares)
(c) Capital Appreciation (If shares assigned at $480.00 strike price at the 6/28/2024 options expiration date): -$1,415.00
+($480.00 strike price - $494.15 stock purchase price) * 100 shares

1. Total Net Profit (If stock shares assigned at $480.00 strike price on the last business day prior to the June 17th ex-dividend date): +$313.33

= (+$1,728.33 options income +$0.00 dividend income - $1,415.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $480.00 strike price at the 6/28/2024 options expiration date): +$523.33

= (+$1,728.33 option income +$210.00 dividend income -$1,415.00 capital appreciation)

1. Potential Absolute Return-on-Investment (if assigned early on the day prior to the 6/17/2024 ex-dividend): +0.7%

= +$313.33/$47,686.67

Potential Annualized Return-on-Investment: +48.0%

= (+$313.33/$47,686.67) * (365/5 days); or

2. Potential Absolute Return-on-Investment (if assigned on the 6/28/2024 options expiration date): +1.1%

= +$523.33/$47,686.67

Potential Annualized Return-on-Investment: +25.0%

= (+$523.33/$47,686.67) * (365/16 days)