A buy/write limit order in Dell Technologies Inc. (ticker DELL) was executed today at the Covered Calls Advisor's net debit price of $103.18 per share. Three hundred shares were purchased at $110.04 and three January 31st, 2025 Call options were sold for $6.86 at the $105.00 strike price, a time value of $1.82 = [$6.86 options premium - ($110.04 stock price - $105.00 strike price)] per share.
This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here). Dell has an upcoming quarterly ex-dividend of $.445 per share that goes ex-dividend on January 22nd, 2025 which is prior to the January 31st options expiration date. This is equivalent to an absolute annual dividend yield of 1.6% (at the current $110.04 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 8.7% = [($.445/$110.04) x (365/17 days-to-expiration)] for the 17 days duration of this position. This dividend increases the potential annualized return-on-investment results (compared with a similar position without a dividend capture potential) and the dividend is included in the detailed potential return-on-investment calculations shown below. Either an early assignment on the day prior to the ex-dividend date or on the January 31st, 2025 options expiration date would be a desirable result given the attractive annualized return-on-investment upon assignment for either outcome. The next quarterly earnings report is not until February 27th, 2025 which, as desired, is after the January 31st options expiration date.
As detailed on the table at the bottom of this post, all nine criteria of
the Dividend Capture Strategy are met
with this position. The Covered Calls Advisor's current Overall Market Meter outlook is 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 January 31st expiration date was 69.7% when this position was established this morning. There are 20 analysts covering Dell and their average target price is $149.76 (+36.1% above today's purchase price).
As shown in my GARP (Growth at a Reasonable Price) stock screener results below, Dell meets all nineteen criteria for this screener:
As detailed below, two potential return-on-investment results are:
- +1.8% absolute return (equivalent to +80.2% annualized
return-on-investment for the next 8 days) if the stock is assigned early (business day
prior to the January 22nd ex-dividend date); OR
- +2.2% absolute return (equivalent to +47.0% annualized return over the next 17 days) if the stock is assigned on the January 31st, 2025 options expiration date.
Dell Technologies Inc. (DELL) -- New Covered Calls Position
The simultaneous buy/write transaction was:
1/14/2025 Bought 300 Dell Technologies Inc. shares @ $110.04.
1/14/2025 Sold 3 DELL 1/31/2025 $105.00 Call options @ $6.86 per share.
Note: the Implied Volatility of the Call options was 37.6 when this position was established.
1/22/2025 Upcoming quarterly ex-dividend of $.445 per share.
Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $30,956.01
= ($110.04 - $6.86) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$2,055.99
= ($6.86 * 300 shares) - $2.01 commission
(b) Dividend Income (If options exercised early on Jan. 21st, the last business day prior to the January 22nd, 2025 ex-div date): +$0.00;
or
(b) Dividend Income (If Dell stock assigned on the January 31st, 2025 options expiration -- so the dividend is captured): +$133.50
= ($.445 dividend per share x 300 shares)
(c) Capital Appreciation (If DELL Call options assigned early on January 22nd): -$1,512.00
+($105.00 - $110.04) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $105.00 strike price at options expiration): -$1,512.00
+($105.00 - $110.04) * 300 shares
1. Total Net Profit (If options exercised early): +$543.99
= (+$2,055.99 options income +$0.00 dividend income -$1,512.00 capital appreciation); or
2. Total Net Profit (If Dell shares assigned at $105.00 at the Jan. 31st, 2025 expiration): +$677.49
= (+$2,055.99 options income + $133.50 dividend income - $1,512.00 capital appreciation)
1. Absolute Return-on-Investment [If option exercised on business day prior to the Jan. 22nd ex-dividend date]: +1.8%
= +$543.99/$30,956.01
Annualized Return-on-Investment (If option exercised early): +80.2%
= (+$543.99/$30,956.01) * (365/8 days); or
2. Absolute Return-on-Investment (If Dell shares assigned on the January 31st, 2025 options expiration date): +2.2%
= +$677.49/$30,956.01
Annualized Return-on-Investment (If Dell shares assigned at $105.00 at the Jan. 31st, 2025 expiration): +47.0%
= (+$677.49/$30,956.01) * (365/17 days)
Either
outcome provides an attractive return-on-investment result for this Dell Technologies Covered Calls investment. These returns will be achieved as long as the stock is
above the $105.00 strike price at assignment. However, if the stock declines
below the strike price, the breakeven price of $102.735 = ($110.04 stock price - $6.86 Call options price - $.445 dividend)
provides 6.6% downside protection below today's stock purchase
price.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown in the chart below, all nine criteria are achieved for this Dell Technologies Covered Calls position.
