Today my net debit limit order was executed and a Covered Calls position was established in Taiwan Semiconductor ADR (ticker TSM) when the Covered Calls Advisor's buy/write limit order for the March 28th, 2025 $160.00s executed at a net debit price of $156.60. Two hundred Taiwan Semi shares were purchased at $169.68 and 2 March 28th, 2025 $160.00 Calls were sold at $13.08 per share. So, the corresponding time value (aka extrinsic value) was $3.40 per share = [$13.08 Call options premium - ($169.68 stock purchase price - $160.00 strike price)]. Given the Covered Calls Advisor's current Neutral Overall Market Meter outlook, a slightly in-the-money Covered Calls position was established--the probability that the position will close in-the-money and therefore by assigned on the 3/28/2025 options expiration date was 70.2% when this position was established. In addition, the Implied Volatility of the Calls was 48.8 which, as desired, was above the VIX which is now 28.7.
Taiwan Semi goes ex-dividend in one week (on 3/18/2025) at $.6942 (a 1.6% annualized dividend yield) at today's stock purchase price. This dividend is included in the potential return-on-investment result shown below. Also, as preferred, there is no earnings report prior to the options expiration date and the analysts' current average stock target price is $234.16 per share (+38.0% above today's purchase price).
As shown in my GARP (Growth at a Reasonable Price) stock screener results below, TSM meets every filter criteria.
As detailed below a potential return-on-investment result if this Taiwan Semi Covered Calls position if the stock is assigned on its March 28th, 2025 options expiration date is +2.6% absolute return (equivalent to +56.0% annualized return-on-investment over the next 17 days).
Taiwan Semiconductor ADR (TSM) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
3/11/2025 Bought 200 shares of Taiwan Semiconductor stock @ $169.08 per share
3/11/2025 Sold 2 Taiwan Semi March 28th, 2025 $160.00 Call options @ $13.08 per share
3/18/2025 Upcoming ex-dividend at $.6942 per share
A potential overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $31,321.34
= ($169.68 - $13.08) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$2,614.66
= ($13.08 * 200 shares) - $1.34 commission
(b) Dividend Income (If TSM stock assigned on the March 28th options expiration date): +$138.84
= $.6942 dividend per share x 200 shares
(c) Capital Appreciation (If TSM stock is above the $160.00 strike price and therefore assigned at the 3/28/2025 expiration date): -$1,936.00
= ($160.00 - $169.68) * 200 shares
Potential Net Profit (If stock price is above $160.00 strike price at the 3/28/2025 options expiration): +$817.50
= (+$2,614.66 options income +$138.84 dividend income - $1,936.00 capital appreciation)
Potential Absolute Return-on-Investment: +2.6%
= +$817.50/$31,321.34
Potential Equivalent Annualized Return-on-Investment: +56.0%
= (+$817.50/$31,321.34) * (365/17 days)
