This morning a short-term Covered Calls position was established in ConocoPhillips (ticker symbol COP) when two hundred COP shares were purchased at $95.06 and two August 22nd, 2025 weekly Call
options were sold for $2.78 per share at the $93.00 strike price. The
net debit limit order at $92.28 was executed, so the potential time value profit was $.72 per share [$2.78 Call options premium - ($95.06 stock purchase price -
$93.00 strike price)]. There is an upcoming quarterly ex-dividend of $.78 per share (annual dividend yield of 3.3%) next Monday on August 18th, so potential return-on-investment results for this position, as detailed below, include the possibility of early assignment because the ex-dividend is prior to the August 22nd, 2025 options expiration date. As preferred by the Covered Calls Advisor, the next quarterly earnings report on October 30th, 2025 is after the options expiration date. A moderately in-the-money Covered Calls position was established with the probability that the Calls will be in-the-money and therefore assigned on the options expiration date was 68.8%.
As detailed below, a potential return-on-investment result is +0.8% absolute return (equivalent to +57.0% annualized
return-on-investment for the next 5 days) in the relatively unlikely event that the stock is assigned early this Friday (the last business day
prior to next Monday's August 18th ex-date); OR +1.6%
absolute return (equivalent to +65.9% annualized return over the next 9 days) if the stock is assigned on the August 22nd, 2025 options expiration date.
ConocoPhillips (COP) -- New Covered Calls Position
The transactions were:
8/13/2025 Bought 200 ConocoPhillips shares @ $95.06
8/13/2025 Sold 2 COP 8/22/2025 $93.00 Call options @ $2.78
Note: A simultaneous buy/write transaction was executed. The Implied Volatility of the Call options was 27.0 when this Covered Calls position was established (which as preferred is well above the 14.5 of the S&P 500 Volatility Index--VIX).
8/18/2025 Upcoming quarterly ex-dividend of $.78 per share
Two possible overall performance results (including commissions) for this ConocoPhillips Covered Calls position are as follows:
Covered Calls Cost Basis: $18,457.34
= ($95.06 - $2.78) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$556.00
= ($2.78 * 200 shares)
(b) Dividend Income (If option exercised early on the last business day prior to the August 18th ex-div date): +$0.00; or
(b) Dividend Income (If ConocoPhillips shares assigned at the August 22nd, 2025 expiration): +$156.00
= ($.78 dividend per share x 200 shares)
(c) Capital Appreciation (If COP assigned early on August 18th, 2025): -$412.00
+($93.00 strike price - $95.06 stock purchase price) * 200 shares ;or
(c) Capital Appreciation (If COP assigned at $93.00 strike price at the August 22nd, 2025 options expiration): -$412.00
+($93.00 - $95.06) * 200 shares
1. Total Net Profit [If option exercised on August 15th (last business day prior to the August 18th ex-dividend date)]: +$144.00
= (+$556.00 options income + $0.00 dividend income - $412.00 capital appreciation); or
2. Total Net Profit (If ConocoPhillips shares assigned at $93.00 strike price at its August 22nd, 2025 expiration): +$300.00
= (+$556.00 + $156.00 dividend income - $412.00)
1. Absolute Return [If COP options exercised on the final business day prior to the ex-dividend date]: +0.8%
= +$144.00/$18,457.34
Annualized Return-on-Investment (If option exercised early): +57.0%
= (+$144.00/$18,457.34) * (365/5 days); or
2. Absolute Return (If ConocoPhillips shares assigned at $93.00 strike price at the August 22nd, 2025 options expiration): +1.6%
= +$300.00/$18,457.34
Annualized Return (If COP stock assigned at $95.00 at the May 26, 2023 expiration): +65.9%
= (+$300.00/$18,457.34) * (365/9 days)
Either
outcome would provide an excellent return-on-investment result. These returns will be achieved as long as the stock is
above the $93.00 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $91.50 ($95.06 stock purchase price - $2.78 Call option premium received - $.78 per share ex-dividend amount)
provides 3.7% downside protection below today's purchase
price.
