Established Covered Calls in Merck & Co. Inc.

Today, a Covered Calls position was established in Merck & Co. Inc. (ticker MRK) with the purchase of 300 shares at $115.64 per share and three September 20th, 2024 Call options were sold for $3.24 per share at the $114.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 9/20/2024 options expiration date was 62.8%.  Merck goes ex-dividend at $.77 per share (2.7% dividend yield at the current stock price) on September 16th which is prior to the September 20th options expiration date -- so this dividend is included in the potential return-on-investment results shown below.  As I prefer, the next quarterly earnings report on October 31st is after the September 20th options expiration date.

As shown in my Quality+Growth stock screener results below, Merck meets all twenty filters including scores in the 90s for both the Quality Score and the Growth Score filters.  It also met all filters in 3 of my other stock screeners: Analysts Picks, StockRover Overall, and Dividend Growth.

Two potential return-on-investment results are: (a) +1.4% absolute return-on-investment (equivalent to +26.0% annualized return-on-investment for the next 20 days) if the stock is assigned early on Sept. 13th (the last trading day prior to the September 16th, 2024 ex-dividend date); OR (b) +2.1% absolute return (equivalent to +32.1% annualized return over the next 24 days) if the stock is assigned on the September 20th options expiration date. 

Merck & Co. Inc. (MRK) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
8/27/2024 Bought 300 shares of Merck & Co. stock @ $115.64 per share.  
8/27/2024 Sold 3 MRK September 20th, 2024 $114.00 Call options @ $3.24 per share.
9/16/2024 Upcoming ex-dividend of $.77 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $33,722.01
= ($115.64 - $3.24) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$972.00
= ($3.24 * 300 shares)
(b) Dividend Income (If Merck shares assigned on 9/13/2024, the business day prior to the 9/16/2024 ex-dividend date): = +$0.00; or
(b) Dividend Income (If Merck shares assigned at 9/20/2024 options expiration): +$231.00
= $.77 per share x 300 shares
(c) Capital Appreciation (If MRK shares assigned early on 9/16/2024): -$492.00
= ($114.00 strike price -$115.64 stock purchase price) * 300 shares; or
(c) Capital Appreciation (If MRK shares assigned with stock above the $114.00 strike price at the Sept. 20th options expiration date): -$492.00
= ($114.00 -$115.64) * 300 shares

1. Potential Net Profit (If Merck shares assigned on the Sept. 16th ex-dividend date): +$480.00
= (+$972.00 options income +$0.00 dividend income - $492.00 capital appreciation)
2. Potential Net Profit (If MRK price is above $114.00 strike price at the Sept. 20th options expiration): +$711.00
= (+$972.00 options income +$231.00 dividend income - $492.00 capital appreciation)

1. Absolute Return-on-Investment (If Merck shares assigned early on the Sept 16th, 2024 ex-dividend date): +1.4%
= +$480.00/$33,722.01
Equivalent Annualized Return-on-Investment (If assigned early): +26.0%
= (+$480.00/$33,722.01) * (365/20 days)

2. Absolute Return-on-Investment (If Merck price is above the $114.00 strike price at the Sept. 20th options expiration): +2.1%
= +$711.00/$33,722.01
Equivalent Annualized Return-on-Investment (If assigned on the 9/20/2024 options expiration date): +32.1%
= (+$306.00/$24,049.34) * (365/15 days)