This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here) since Delta has an upcoming quarterly ex-dividend of $.15 per share (a 1.4% annual dividend yield) on July 30th which is prior to the August 9th options expiration date. 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 August 9th 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 earnings report on October 10th, 2024 is after the August 9th, 2024 options expiration date.
As detailed below, two potential return-on-investment results are:
Delta Air Lines Inc. (DAL) -- New Covered Calls Position
The buy/write transaction was:
7/22/2024 Bought 400 Delta Air Lines Inc. shares @ $44.15.
7/22/2024 Sold 4 Delta 8/9/2024 $43.00 Call options @ $1.81 per share.
7/30/2024 Upcoming quarterly ex-dividend of $.15 per share.
Two possible overall performance results (including commissions) for this Delta Air Lines Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $16,938.68
= ($44.15 - $1.81) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$721.32
= ($1.81 * 400 shares) - $2.68 commission
(b) Dividend Income (If Delta Air Lines Call options exercised early on July 29th, 2024, the last business day prior to the July 30th ex-div date): +$0.00; or
(b) Dividend Income (If Delta stock assigned at the August 9th, 2024 options expiration date): +$60.00
= ($.15 dividend per share x 400 shares)
(c) Capital Appreciation (If shares assigned at $43.00 strike price at the August 9th options expiration): -$460.00
+($43.00 - $44.15) * 400 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, all nine criteria are achieved for this Delta Air Lines Inc. Covered Calls position.
As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position. Even if the Delta Air Lines Inc. stock price declines somewhat during the next 18 days until the options expiration date, if the stock closes above the $43.00 strike price, then a satisfactory annualized-return-on-investment of +38.5% will be achieved.
The average Target Price of the analysts covering Delta Air Lines is $60.31 which is +36.6% above today's purchase price; and all 19 analysts have a "Strong Buy" rating. A primary reason for establishing this position was that Delta was highly ranked in my Stock Rover "Analysts Picks" stock screener since all 15 criteria in that screener are currently achieved by Delta (see chart below):
As detailed below, two potential return-on-investment results are:
- +1.5% absolute return (equivalent to +70.4% annualized
return-on-investment for the next 8 days) if the stock is assigned early (on the last business day
prior to the July 30th, 2024 ex-dividend date); or
- +1.9% absolute return (equivalent to +38.5% annualized return-on-investment over the next 18 days) if the stock is assigned on the August 9th, 2024 options expiration date.
The buy/write transaction was:
7/22/2024 Bought 400 Delta Air Lines Inc. shares @ $44.15.
7/22/2024 Sold 4 Delta 8/9/2024 $43.00 Call options @ $1.81 per share.
7/30/2024 Upcoming quarterly ex-dividend of $.15 per share.
Two possible overall performance results (including commissions) for this Delta Air Lines Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $16,938.68
= ($44.15 - $1.81) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$721.32
= ($1.81 * 400 shares) - $2.68 commission
(b) Dividend Income (If Delta Air Lines Call options exercised early on July 29th, 2024, the last business day prior to the July 30th ex-div date): +$0.00; or
(b) Dividend Income (If Delta stock assigned at the August 9th, 2024 options expiration date): +$60.00
= ($.15 dividend per share x 400 shares)
(c) Capital Appreciation (If Delta's Call options assigned early on July 30th): -$460.00
+($43.00 strike price - $44.15 stock purchase price) * 400 shares; or(c) Capital Appreciation (If shares assigned at $43.00 strike price at the August 9th options expiration): -$460.00
+($43.00 - $44.15) * 400 shares
1. Total Net Profit [If option exercised early (business day prior to the July 30th, 2024 ex-dividend date)]: +$261.32
= (+$721.32 options income +$0.00 dividend income -$460.00 capital appreciation); or
2. Total Net Profit (If Delta's shares assigned at $43.00 at the August 9th, 2024 expiration): +$321.32
= (+$721.32 options income +$60.00 dividend income -$460.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.5%
= +$261.32/$16,938.68
Potential Annualized Return-on-Investment (If option exercised early): +70.4%
= (+$261.32/$16,938.68) * (365/8 days); or
2. Potential Absolute Return-on-Investment (If Delta's shares assigned on August 9th options expiration date): +1.9%
= +$321.32/$16,938.68
Potential Annualized Return-on-Investment (If Delta's shares assigned at $43.00 at the August 9th, 2024 expiration): +38.5%
= (+$321.32/$16,938.68) * (365/18 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 Delta Air Lines Inc. Covered Calls position.
