This position uses the Covered Calls Advisor's Dividend Capture Strategy. Wheaton Precious Metals has an upcoming quarterly ex-dividend of $.155 per share that goes ex-dividend on November 21st, 2024 which is prior to the November 29th options expiration date. This is equivalent to an absolute annual dividend yield of 1.0% (at the current $59.74 stock price). This dividend is included in the detailed potential return-on-investment calculations below. Either an early assignment on the day prior to the November 21st ex-dividend date or on the November 29th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment result for either outcome.
Wheaton Precious Metals appeared today in my newly created 'Ratings Versus Peers' stock screener. It also has Refinitiv's highest possible average score of 10, and the 13 analysts covering the company have a mean target price of $71.70 (+20.0% above today's purchase price).
The Covered Calls Advisor's current Overall Market Meter outlook remains 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 29th, 2024 expiration date was 67.2% when this position was established.
As detailed below, two potential return-on-investment results are:
- +1.5% absolute return (equivalent to +62.0% annualized return-on-investment for the next 9 days) if the stock is assigned early (business day prior to the November 21st ex-dividend date); OR
- +1.8% absolute return (equivalent to +38.6% annualized return-on-investment over the next 17 days) if the stock is assigned on the November 29th options expiration date.
The simultaneous buy/write transaction was:
11/12/2024 Bought 500 Wheaton Precious Metals Corp. shares @ $59.74.
11/12/2024 Sold 5 WPM 11/29/2024 $58.00 Call options @ $2.62 per share.
Note: The Implied Volatility of the Call options was 27.7 when this position was transacted.
11/21/2024 Upcoming quarterly ex-dividend of $.155 per share.
Two possible overall performance results (including commissions) for this Wheaton Precious Metals Covered Calls position are as follows:
Covered Calls Cost Basis: $28,563.35
= ($59.74 - $2.62) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,306.65
= ($2.62 * 500 shares) - $3.35 commission
(b) Dividend Income (If options exercised early on Nov. 20th, the business day prior to the Nov. 21st, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Wheaton Precious Metals stock assigned on the Nov. 29th, 2024 options expiration): +$77.50
= ($.155 dividend per share x 500 shares)
+($58.00 strike price - $59.74 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $58.00 strike price at options expiration): -$870.00
+($58.00 - $59.74) * 500 shares
Either outcome provides a satisfactory return-on-investment result for this WPM Covered Calls investment. These returns will be achieved as long as the stock is above the $58.00 strike price at assignment. However, if the stock declines below the strike price, the breakeven price of $56.965 = ($59.74 stock price - $2.62 Call options price - $.155 dividend) provides 4.6% downside protection below today's stock purchase price.
