Position Closed in Lowe's Companies Inc.

This morning, the Covered Calls Advisor decided to close the existing Lowe's Companies Inc. (ticker symbol LOW) Covered Calls position. This Lowe's holding was an August 16th, 2019 Covered Calls position that was not assigned at options expiration last Friday.  This morning, Lowe's stock recovered a portion of its recent declines in sympathy with the earnings beat reported this morning by Home Depot.  Lowe's reports their earnings tomorrow morning and the since I usually prefer not to hold stocks through earnings reports given the related volatility, the decision to close out the position was made.  The large cash position currently held in the Covered Calls Advisor Portfolio is invested in a Schwab money market fund yielding 2.0% and will remain there until new position(s) are established.  This current positioning is indicative of this Advisor's cautious outlook for the stock market for upcoming weeks.  As always, any new positions will be shared on this blog on the same day the transactions occur.       

As detailed below, the result was a -2.0% absolute return-on-investment (equivalent to -22.2% on an annualized basis) for the 33 days this position was held.


Lowe's Companies Inc. (LOW) -- Covered Calls Position Closed

The transactions were:
07/18/2019 Bought 200 Lowe's Companies Inc. shares @ $103.49
07/18/2019 Sold 2 Lowe's 8/16/2019 $100.00 Call options @ $4.31
Note: the Implied Volatility was 21.9 when this transaction was executed.
07/23/2019 Ex-dividend of $.55 per share
08/16/2019 Lowe's shares closed at $93.92 which was below the $100.00 strike price, so Call options expired and 200 shares of Lowe's stock were retained in the Covered Calls Advisor Portfolio
08/20/2019 Sold 200 shares of Lowe's stock at $96.66 to close out this position.

The overall performance results (including commissions) for this Lowe's Companies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $19,842.29
= ($103.49 - $4.31) * 200 shares + $6.29 commissions

Net Profit Components:
(a) Options Income: +$862.00
= ($4.31 *200 shares)

(b) Dividend Income: +$110.00
= ($.55 dividend per share x 200 shares)

(c) Capital Appreciation: -$1,370.95
+($96.66 -$103.49)* 200 shares - $4.95 commissions

Total Net Profit: -$398.95

= (+$862.00 options income +$110.00 dividend income -$1,370.95 capital appreciation)

Absolute Return: -2.0%

= -$398.95/$19,842.29

Annualized Return: -22.2%

= (-$398.95/$19,842.29)*(365/33 days)

Positions Closed in Valero Energy and Wells Fargo

This morning, the Covered Calls Advisor decided to close the existing positions in Valero Energy Group (ticker symbol VLO) and Wells Fargo Bank (ticker symbol WFC).  Both holdings were out-of-the-money Covered Calls that expired last Friday.     

As detailed below, the results were:

•  Valero Energy Corp. -- A +1.5% absolute return-on-investment (equivalent to +32.4% on an annualized basis) for the 17 days this position was held.
• Wells Fargo Bank N.A. -- A +0.3% absolute return-on-investment (equivalent to +5.6% on an annualized basis) for the 17 days this position was held.

1. Valero Energy Corp. (VLO) -- Covered Calls Position Closed
The transactions were:
8/02/2019 Bought 200 shares of Valero @ $81.49 per share 
8/02/2019 Sold 2 Valero August 16th, 2019 $80.00 Call options @ $2.36 per share
Note: This was a simultaneous buy/write transaction.
08/05/2019 Ex-dividend of $.90 per share
08/16/2019 Valero shares closed at $78.12 which was below the $80.00 strike price, so Call options expired and 200 shares of VLO stock were retained in the Covered Calls Advisor Portfolio
08/19/2019 Sold 200 shares VLO stock at $79.45 to close out position

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $15,832.29
= ($81.49 - $2.36)* 200 shares + $6.29 commissions

Net Profit Components:
(a) Options Income: +$472.00
= ($2.36 * 200 shares)
(b) Dividend Income: +$180.00
= $.90 x 200 shares
(c) Capital Appreciation: -$412.95
= ($79.45 -$81.49) * 200 shares - $4.95 commission

Total Net Profit: +$239.05
= (+$472.00 options income +$180.00 dividend income -$412.95 capital appreciation)

Absolute Return: +1.5%
= +$239.05/$15,832.29
Equivalent Annualized Return: +32.4%
= (+$239.05/$15,832.29)*(365/17 days)


2. Wells Fargo Bank N.A. (WFC) -- Covered Calls Position Closed

The transactions were as follows:
08/02/2019 Bought 500 shares of Wells Fargo stock @ $46.72 per share 
08/02/2019 Sold 5 Wells Fargo Aug 16th, 2019 $46.00 Call options @ $1.09 per share
Note: this was a simultaneous Buy/Write transaction
08/08/2019 Ex-dividend of $.51 per share
08/16/2019 Wells Fargo shares closed at $44.39 which was below the $46.00 strike price, so Call options expired and 500 shares of WFC stock were retained in the Covered Calls Advisor Portfolio
08/19/2019 Sold 500 shares WFC stock at $45.25 to close out position

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $22,823.30
= ($46.72 - $1.09) * 500 shares + $8.30 commission

Net Profit Components:
(a) Options Income: +$545.00
= ($1.09 * 500 shares)
(b) Dividend Income: +$255.00
= $.51 x 500 shares
(c) Capital Appreciation: -$739.95
= ($45.25 -$46.72) * 500 shares - $4.95 commission

Total Net Profit: +$60.05
= (+$545.00 options income +$255.00 dividend income -$739.95 capital appreciation)

Absolute Return: +0.3%
= +$60.05/$22,823.30
Equivalent Annualized Return: +5.6%
= (+$60.05/$22,823.30)*(365/17 days)

August 16th, 2019 Monthly Options Expiration Results

The Covered Calls Advisor Portfolio had seven positions since the July 19th, 2019 monthly options expiration date.  All three positions that have been closed out were profitable:

• One Covered Calls position in Bristol-Myers Squibb Co. was closed out early on July 22nd to avoid the uncertainty associated with the earnings report that was released later that week.  A  small profit was achieved in this position -- see link. 

• One Covered Calls position in Morgan Stanley was assigned early (on the day prior to the July 30th ex-dividend date) and was closed out at a profit prior to this month's August 16th options expiration date.  The detailed result for this position was detailed on this blog on the same day it was closed out -- see link.

• One Covered Calls position (Alibaba Group Holdings Ltd.) closed in-the-money on the August 16th options expiration date yesterday, so these 300 shares were assigned (sold) at the $165.00 strike price.  The details of this closed position are provided below.

Four positions (CommScope Holdings, Lowes Companies Inc., Valero Energy Corp., and Wells Fargo Bank N.A.) closed out-of-the-money (stock price below the strike price) at the August 16th, 2019 options expiration.  Therefore, their options expired and the shares owned remain in the Covered Calls Advisor Portfolio (as shown in the right sidebar).  A decision will be made soon to either sell the shares or to continue with Covered Calls positions by selling Call options against the shares currently held.  As always, the transactions and return-on-investment results for these four positions will be posted on this blog site on the same day the transactions occur.

The Covered Calls Advisor's objective is to outperform the S&P 500 benchmark and to make profitable trades on at least two-thirds of positions established.  So far in calendar year 2019, all 39 positions that have been closed out have achieved a profit.  The weighted average annualized return on investment for these completed positions is +41.9%.  The four remaining open positions will be included in this 2019 results tracking when these ongoing positions are closed.


Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position Closed

The transactions were as follows:
07/30/2019 Bought 300 shares of Alibaba stock @ $173.34 per share 
07/30/2019 Sold 3 Alibaba August 16th, 2019 $165.00 Call options @ $10.20 per share
Note: this was a simultaneous Buy/Write transaction
08/16/2019 3 Call options expired in-the-money so 300 Alibaba shares sold at $165.00 strike price.
Note: the share price closed at $174.60

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $48,948.96
= ($173.34 - $10.20) * 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$3,060.00
= ($10.20* 300 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock was above $165.00 strike price at August 16th expiration): -$2,506.95
= ($165.00 -$173.34) * 300 shares - $4.95 commission

Total Net Profit: +$553.05
= (+$3,060.00 options income +$0.00 dividend income -$2,506.95 capital appreciation)

Absolute Return: +1.1%
= +$553.05/$48,948.96
Equivalent Annualized Return: +22.9%
= (+$553.05/$48,948.96)*(365/18 days)

Established Covered Calls in Valero Energy Corp. and Wells Fargo Bank N.A.

Two new Covered Calls positions have been established in Valero Energy Corp.(ticker VLO) and Wells Fargo Bank N.A.(WFC) with August 16th, 2019 options expiration dates. Two Valero Call options were sold at $2.36 for the $80.00 strike price when the stock price was $81.49 and 500 shares of Wells Fargo were purchased at $46.72 while five Calls were sold at $1.09 at the $46.00 strike price.  Both positions have upcoming ex-dividends prior to the Aug 16th options expiration which is included in the potential results shown below.  If should also be noted that neither company has an earnings report prior to the expiration date.

As detailed below, the potential return-on-investment results are: 

• Valero Energy Corp.: +2.2% absolute return in 15 days (equivalent to a +53.6% annualized return-on-investment); and

• Wells Fargo Bank N.A.: +1.8% absolute return in 15 days (equivalent to a +43.2% annualized return-on-investment) 

1. Valero Energy Corp. (VLO) -- New Covered Calls Position
The transactions were:
8/02/2019 Bought 200 shares of Valero @ $81.49 per share 
8/02/2019 Sold 2 Valero August 16th, 2019 $80.00 Call options @ $2.36 per share
Note: This was a simultaneous buy/write transaction.
08/05/2019 Upcoming ex-dividend of $.90 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $15,832.29
= ($81.49 - $2.36)* 200 shares + $6.29 commissions

Net Profit Components:
(a) Options Income: +$472.00
= ($2.36 * 200 shares)
(b) Dividend Income: +$180.00
= $.90 x 200 shares
(c) Capital Appreciation (If Valero shares are above $80.00 strike price at Aug 16th expiration): -$302.95
= ($80.00 -$81.49) * 200 shares - $4.95 commission

Potential Total Net Profit (If VLO stock assigned at expiration): +$349.05
= (+$472.00 options income +$180.00 dividend income -$302.95 capital appreciation)

Absolute Return: +2.2%
= +$349.05/$15,832.29
Equivalent Annualized Return: +53.6%
= (+$349.05/$15,832.29)*(365/15 days)


2. Wells Fargo Bank N.A. (WFC) -- New Covered Calls Position

Here is a recent interesting article that makes a good case for investing in large banks in general and Wells Fargo in particular: link

The transactions were as follows:
08/02/2019 Bought 500 shares of Wells Fargo stock @ $46.72 per share 
08/02/2019 Sold 5 Wells Fargo Aug 16th, 2019 $46.00 Call options @ $1.09 per share
Note: this was a simultaneous Buy/Write transaction
08/08/2019 Upcoming ex-dividend of $.51 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $22,823.33
= ($46.72 - $1.09) * 500 shares + $8.30 commission

Net Profit Components:
(a) Options Income: +$545.00
= ($1.09 * 500 shares)
(b) Dividend Income: +$255.00
= $.51 x 500 shares
(c) Capital Appreciation (If Wells Fargo stock is above $46.00 strike price at Aug 16th expiration): -$364.95
= ($46.00 -$46.72) * 500 shares - $4.95 commission

Total Net Profit: +$405.05
= (+$545.00 options income +$225.00 dividend income -$364.95 capital appreciation)

Absolute Return: +1.8%
= +$405.05/$22,823.33
Equivalent Annualized Return: +43.2%
= (+$405.05/$22,823.33)*(365/15 days)

The downside 'breakeven price' at expiration is at $45.12 ($46.72 - $1.09 - $.51), which is 1.9% below the current market price of $46.72.