A buy/write limit order in Dell Technologies Inc. (ticker DELL) was executed at the Covered Calls Advisor's net debit price of $107.80 per share. Three hundred shares were purchased at $118.56 and three November 1st, 2024 Call options were sold for $10.76 at the $110.00 strike price, a time value of $2.20 = [$10.76 options premium - ($118.56 stock price - $110.00 strike price)] per share.
This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here). Dell has an upcoming quarterly ex-dividend of $.445 per share that goes ex-dividend on October 22nd, 2024 which is prior to the November 1st options expiration date. This is equivalent to an absolute annual dividend yield of 1.5% (at the current $118.56 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 5.5% = [($.445/$118.56) x (365/25 days-to-expiration)] for the 25 days duration of this position. This dividend is included in the detailed potential return-on-investment calculations below. Either an early assignment on the day prior to the ex-dividend date or on the November 1st, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive annualized return-on-investment upon assignment for either outcome.
As detailed on the table at the bottom of this post, all nine criteria of
the Dividend Capture Strategy are met
with this position. The Covered Calls Advisor's current Overall Market Meter outlook is Neutral and an in-the-money strike price was used in this case. The probability that this position will be in-the-money and therefore assigned on its November 1st, 2024 expiration date was 72.6% when this position was established this afternoon. There are 19 analysts covering Dell and their average target price is $147.74 (+24.6% above today's purchase price).
As shown in my Quantitative Value (Value+Quality) stock screener results below, Dell meets all twenty-one filters:
As detailed below, two potential return-on-investment results are:
- +2.0% absolute return (equivalent to +49.5% annualized
return-on-investment for the next 15 days) if the stock is assigned early (business day
prior to the October 22nd ex-dividend date); OR
- +2.4% absolute return (equivalent to +35.7% annualized return over the next 25 days) if the stock is assigned on the November 1st options expiration date.
Dell Technologies Inc. (DELL) -- New Covered Calls Position
The simultaneous buy/write transaction was:
10/7/2024 Bought 300 Dell Technologies Inc. shares @ $118.56.
10/7/2024 Sold 3 DELL 11/01/2024 $110.00 Call options @ $10.76 per share.
Note: the Implied Volatility of the Call options was 43.2 when this position was established.
10/22/2024 Upcoming quarterly ex-dividend of $.445 per share.
Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $32,342.01
= ($118.56 - $10.76) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$3,225.99
= ($10.76 * 300 shares) - $2.01 commission
(b) Dividend Income (If options exercised early on Oct. 21st, the business day prior to the Oct. 22nd, 2024 ex-div date): +$0.00;
or
(b) Dividend Income (If Dell stock assigned on the Nov. 1st, 2024 options expiration): +$133.50
= ($.445 dividend per share x 300 shares)
(c) Capital Appreciation (If DELL Call options assigned early on October 22nd): -$2,568.00
+($110.00 - $118.56) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $110.00 strike price at options expiration): -$2,568.00
+($110.00 - $118.56) * 300 shares
1. Total Net Profit (If options exercised early): +$657.99
= (+$3,225.99 options income +$0.00 dividend income -$2,568.00 capital appreciation); or
2. Total Net Profit (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +$791.49
= (+$3,225.99 +$133.50 -$2,568.00)
1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 22nd ex-dividend date]: +2.0%
= +$657.99/$32,342.01
Annualized Return-on-Investment (If option exercised early): +49.5%
= (+$657.99/$32,342.01) * (365/15 days); or
2. Absolute Return-on-Investment (If Dell shares assigned on the Nov. 1st, 2024 options expiration date): +2.4%
= +$791.49/$32,342.01
Annualized Return-on-Investment (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +35.7%
= (+$791.49/$32,342.01) * (365/25 days)
Either
outcome provides an attractive return-on-investment result for this Dell Technologies Covered Calls investment. These returns will be achieved as long as the stock is
above the $110.00 strike price at assignment. However, if the stock declines
below the strike price, the breakeven price of $107.355 = ($118.56 stock price - $10.76 Call options price - $.445 dividend)
provides 9.5% downside protection below today's stock purchase
price.
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 in the chart below, all nine criteria are achieved for this Dell Technologies Covered Calls position.
