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Monday, April 14, 2025

Covered Call Position Closed in Taiwan Semiconductor ADR

Last Friday, the Covered Call position in Taiwan Semiconductor ADR (ticker TSM) closed out-of-the-money at $158.17 which was below its $162.50 strike price.  Since I prefer to avoid holding stock when a company is reporting earnings (and Taiwan Semi has a quarterly earnings report this Thursday), I decided to close out this position by selling the 100 shares at a net loss of $262.67. The transactions history for this Taiwan Semi Covered Call position and its associated return-on-investment results are detailed below.

Taiwan Semiconductor ADR (TSM) -- Covered Call Position Closed Out
The simultaneous buy/write transactions was as follows:
3/27/2025 Bought 100 shares of Taiwan Semiconductor stock @ $169.83 per share 
3/27/2025 Sold 1 Taiwan Semi April 11th, 2025 $162.50 Call option @ $10.26 per share
4/11/2025 One Taiwan Semi Call option expired out-of-the-money at $158.17 per share and the 100 TSM shares remain in the Covered Calls Advisor Portfolio.
4/14/2025 Closed out this Taiwan Semiconductor Covered Call position by selling the 100 remaining shares at $157.05. 

The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $15,957.67
= ($169.83 - $10.26) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,025.33
= ($10.26 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (TSM stock sold on 4/14/2025 at $157.05 per share): -$1,288.00
= ($157.05 stock selling price - $169.93 stock purchase price) * 100 shares

Net Loss: -$262.67
= (+$1,025.33 option income +$0.00 dividend income - $1,288.00 capital appreciation) 

Absolute Return-on-Investment: -1.6%
= -$262.67/$15,957.67
Equivalent Annualized Return-on-Investment: -42.9%
= (-$262.67/$15,957.67) * (365/18 days)