Continuation of Covered Calls Positions in Oracle Corporation and Schlumberger Ltd.

The Covered Calls positions in Oracle Corporation (ticker ORCL) and Schlumberger Ltd. (ticker SLB) closed out-of-the-money, so the Calls expired and shares remained in the Covered Calls Advisor Portfolio.  This morning, I decided to continue both of these Covered Calls positions by selling Call options to roll out to the May 17th, 2024 monthly options expiration dates. The transactions-to-date for these positions as well as the potential return-on-investment results if these positions are assigned on their May 17th expiration date are as follows:

1. Oracle Corporation (ORCL) -- Continuation of Covered Calls Position

The buy/write transaction was:
4/2/2024 Bought 200 Oracle Corporation shares @ $124.00.
4/2/2024 Sold 2 ORCL 4/19/2024 $121.00 Call options @ $4.02 per share.
Note: the Implied Volatility of the Call options was 17.7 when this buy/write transaction was executed, which (as preferred) is above the 15.2 for VIX.
4/9/2024 Upcoming quarterly ex-dividend of $.40 per share
4/19/2024 200 Oracle Corp. shares closed out-of-the-money so 2 Calls expired and 200 Oracle shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 Continued Covered Calls position by selling 2 Oracle Corp. 5/3/2024 Call options at the $117.00 strike price for $1.17 per share when the stock price was $115.16.

5/3/2024 Two Oracle Calls closed out-of-the-money at $116.38 on their options expiration date, so the Call expired and 200 Oracle shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This Oracle Corp. Covered Calls position was continued by selling 2 May 17th, 2024 $118.00 Calls at $1.42 per share when the stock was trading at $116.88. 

 

A possible overall performance result (including commissions) for this Oracle Covered Calls position if assigned on its 5/17 options expiration date is as follows:
Covered Calls Net Investment: $23,997.34
= ($124.00 - $4.02) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,317.98
= ($4.02 + $1.17 + $1.42) * 200 shares - $4.02 commissions
(b) Dividend Income: $80.00
= ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $118.00 strike price at the 5/17/2024 options expiration date): -$1,200.00
+($118.00 strike price - $124.00 stock purchase price) * 200 shares

Total Net Profit: +$197.98

= (+$1,317.98 options income +$80.00 dividend income -$1,200.00 capital appreciation)

Potential Absolute Return-on-Investment (If ORCL shares assigned at $118.00 at the 5/17/2024 options expiration date): +0.8%

= +$197.98/$23,997.34

Potential Annualized Return-on-Investment: +6.7%

= (+$197.98/$23,997.34) * (365/45 days)

2. Schlumberger Ltd. (SLB) -- Continuation of Covered Calls Position

The net debit buy/write limit order was executed as follows:

3/26/2024 Bought 300 shares of SLB stock @ $54.08 per share.  
3/26/2024 Sold 3 SLB April 19th, 2024 $52.50 Call options @ $2.48 per share.  Note: the Implied Volatility of the Calls was 26.3 when this position was established.  
4/19/2024 300 SLB shares closed out-of-the-money so 3 Calls expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 Continued Covered Calls position by selling 3 SLB 5/3/2024 Call options at the $50.00 strike price for $.76 per share when the stock price was $49.65.

5/3/2024 Three SLB Calls closed out-of-the-money at $47.77 on their options expiration date, so the Call expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This SLB Covered Calls position was continued by selling 3 May 17th, 2024 $50.00 Calls at $.27 per share when the stock was trading at $48.25. 

A possible overall performance result (including commissions) for this position if it is in-the-money on the options expiration date is as follows:
Covered Calls Net Investment: $15,482.01
= ($54.08 - $2.48) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,046.97
= ($2.48 + $.76 + $.27) * 300 shares - $6.03 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SLB stock is above the $50.00 strike price at the May 17th, 2024 options expiration date): -$1,224.00
= ($50.00 strike price - $54.08 stock purchase price) * 300 shares

Potential Total Net Loss (If SLB is in-the-money and therefore assigned at expiration): -$177.03
= (+$1,046.97 options income + $0.00 dividend income - $1,224.00 capital appreciation)

Potential Absolute Return-on-Investment (If stock price is in-the-money and therefore assigned on the 5/17/2024 options expiration date): -1.1% = -$177.03/$15,482.01

Potential Equivalent Annualized-Return-on-Investment: -8.0%
= (-$177.03/$15,482.01) * (365/52 days)

Jeff Partlow (The Covered Calls Advisor)

partlow@cox.net

 

Closed Covered Calls Positions in Aptiv PLC and Match Group Inc.

Covered Calls positions in Aptiv PLC (ticker APTV) and Match Group Inc. (MTCH) were closed out during today's trading session. 

Aptiv reported very strong quarterly earnings last Thursday and the stock price has made a nice move to a price more than $10.00 higher than its $72.50 strike price. I considered rolling up to a higher strike price, but the bid/ask spreads for the rollout spread transaction were too wide. So, with 11 days remaining until the May 17th options expiration date, I decided not to continue to wait 11 more days to capture a small additional time value profit now remaining in the Calls, but instead to close out the position today at a profit. 

With Match Group I faced a very different situation. The original Covered Calls position closed out-of-the-money at last Friday's options expiration. Instead of continuing the Covered Calls position by selling six more Calls against the current 600 MTCH shares, I decided to close out the position today at a loss since Match has an earnings report after market close tomorrow and I prefer to avoid the stock price volatility associated with earnings reports. 

Detailed transactions-to-date for both positions and the return-on-investment results are provided below.

1.  Aptiv PLC (APTV) -- Closed Out Covered Calls Position

The buy/write transaction was:
3/14/2024 Bought 200 Aptiv PLC shares @ $77.04
3/14/2024 Sold 2 APTV 4/19/2024 $75.00 Call options @ $4.40 per share.  The Implied Volatility of these Calls was 31.0 when this position was estalished.
4/19/2024 200 Aptiv PLC shares closed out-of-the-money so 2 Calls expired and 200 Aptiv shares remain in the Covered Calls Advisor Portfolio.

4/23/2024 Continued Covered Calls position by selling 2 APTV 5/17/2024 Call options at the $72.50 strike price for $2.40 per share when the stock price was $70.65.

5/6/2024 I decided to close out this Aptiv Covered Calls position early by buying-to-close the 2 May 17th, 2024 $72.50 Call options at $10.70 per share and simultaneously selling-to-close the 200 shares at $82.88 -- a net credit of $72.08 per share. 

The overall performance result (including commissions) for this Aptiv Covered Calls position is as follows:
Aptiv Covered Calls Net Investment: $14,529.34
= ($77.04 - $4.40) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: -$784.02
= ($4.40 + $2.40 - $10.70) * 200 shares - $4.02 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 200 shares)
(c) Capital Appreciation (APTV shares sold at $82.88 per share): +$1,168.00
+($82.88 - $77.04) * 200 shares

Total Net Profit: +$383.98

= (-$784.02 options income +$0.00 dividend income + $1,168.00 capital appreciation)

Absolute Return-on-Investment: +2.6%

= +$383.98/$14,529.34

Annualized Return-on-Investment: +18.2%

= (+$383.98/$14,529.34) * (365/53 days)

2.  Match Group Inc. (MTCH) -- Closed Out Covered Calls Position

The buy/write transaction was:
4/2/2024 Bought 600 Match Group Inc. shares @ $35.28.
4/2/2024 Sold 6 MTCH 4/12/2024 $34.00 Call options @ $1.68 per share.  The Implied Volatility of these Calls was 34.4 when this transaction was made.
4/12/2024 Match Group stock price was below the $34.00 strike price, so the Calls expired and the 600 MTCH shares remained in the Covered Calls Advisor Portfolio. 

4/15/2024 Continued this Match Group Covered Calls position by selling six May 3rd, 2024 $33.50 Call options @ $.80 per share when the stock was trading today at $32.75.  

5/3/2024 Match Group stock closed out-of-the-money at $32.00 per share, so 600 MTCH shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 Closed out this Covered Calls position by selling 600 shares at $32.25 per share. 

The overall performance result (including commissions) for this Match Group Covered Calls position is as follows:

Match Group Covered Calls Net Investment: $20,164.02
= ($35.28 - $1.68) * 600 shares + $4.02 commission

Net Profit:
(a) Options Income: +$1,479.96
= ($1.68 + $.80) * 600 shares - $8.04 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 600 shares)
(c) Capital Appreciation (MTCH shares closed out by selling at $32.25 per share): -$1,818.00
+($32.25 selling price per share - $35.28 stock purchase price) * 600 shares

Total Net Loss: -$338.04

= (+$1,479.96 options income +$0.00 dividend income -$1,818.00 capital appreciation)

Absolute Return-on-Investment: -1.7%

= -$338.04/$20,164.02

Annualized Return-on-Investment: -18.0%

= (-$338.04/$20,164.02) * (365/34 days)

May 3rd, 2024 Options Expiration Results

The Covered Calls Advisor Portfolio had five Covered Calls positions with May 3rd, 2024 options expirations.  Two positions (JD.com Inc. and Netease Inc. ADR) closed in-the-money so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  Three positions (Match Group Inc., Oracle Corporation, and Schlumberger Ltd.) closed out-of-the-money so the Calls expired and the shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for each of these five positions are as follows:

1. JD.com Inc. -- +8.5% absolute return (equivalent to +70.8% annualized return-on-investment) for the 44 days of this investment.  This Covered Call position was assigned at the $26.50 strike price on its 5/3/2024 options expiration date since the stock closed in-the-money at $32.87 per share.  The most recent post detailing the history of this Covered Calls position is here. 

2. Netease Inc. ADR (NTES) -- +0.4% absolute return (equivalent to +2.9% annualized return-on-investment) for the 47 days of this investment.  This Covered Calls position was assigned at the $97.00 strike price on its May 3rd options expiration date since it closed in-the-money yesterday at $103.02 per share.  The most recent post detailing the history of this Covered Calls position is here. 

3. Match Group Inc. (MTCH) -- This Covered Calls position closed yesterday at $32.00 which was below its $33.50 strike price, so the six 5/3/2024 Match Group Call options expired and 600 shares now remain in the Covered Calls Advisor Portfolio.  Since I prefer to avoid holding positions during quarterly earnings report and since Match Group's report is after market close this Tuesday, I will sell these 600 shares this Monday which will close out this Covered Calls position.  I will also post the final return-on-investment results for this position Monday after this transaction has been completed.  

4. Oracle Corporation (ORCL) -- This Covered Calls position closed yesterday at $116.38 which was below its $117.00 strike price, so the two 5/3/2024 Oracle Call options expired and 200 Oracle Corp. shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either continue with this Covered Calls position by selling two Call options against the 200 shares currently owned (my most likely decision) or close out the position by selling the 200 shares.  

4. Schlumberger Ltd. (SLB) -- This Covered Calls position closed yesterday at $47.77 which was below its $50.00 strike price, so the three 5/3/2024 SLB Call options expired and 300 SLB shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either continue with this Covered Calls position by selling three Call options against the 300 shares currently owned (my most likely decision) or close out the position by selling the 300 shares.  As always, I will post the transactions-to-date when my next transaction is executed.

I welcome your feedback at my email address shown below with your questions or topics related to this blog post specifically or anything related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in Capital One Financial Corporation

This afternoon a Covered Calls position was established in Capital One Financial Corporation (ticker symbol COF) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $142.21 and two May 17th, 2024 Call options were sold at $5.25 per share at the $138.00 strike price.  Therefore, a net debit price of $136.96 which is a time value of $1.04 per share [$5.25 Call options price - ($142.21 stock price - $138.00 strike price)].  This is a moderately in-the-money position since its probability of closing in-the-money on the 5/17 options expiration date was 76.0% when this position was established.  The current average target price of the analysts covering Capital One Financial is $152.48 (+7.2% above today's stock purchase price).  

Two potential return-on-investment results for this position are highlighted below and includes the possibility of early assignment since a quarterly ex-dividend of $.60 per share (1.7% annualized dividend yield) goes ex-dividend on May 10th (which is prior to the May 17th options expiration date).  The stock would have to move up in price by the last business day prior to the May 10th ex-div date and by an amount that would cause the time value remaining in the option to decline from its $1.04 value today to about $.20 or less.  If this occurs, the owner of the two Call options might exercise their right to purchase the stock at the $138.00 strike price, in which case the options would immediately expire worthless but the owner of the Calls would then own the stock and would capture the dividend.  This early assignment would be a desirable outcome since its +39.3% annualized return-on-investment (aroi) is greater than the +31.1% aroi that would be achieved if the position were to be instead assigned on its May 17th options expiration date.  But either result would be attractive since they both exceed my preferred minimum annualized return-on-investment criteria (see criteria #8 and #9 at the bottom of this post) when using my Dividend Capture Strategy.  Also, as I prefer, there is no intervening quarterly earnings report since Capital One's next quarterly earnings report on July 18th, 2024 is after this position's May 17th, 2024 options expiration date.

  

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

•  +0.8% absolute return (equivalent to +39.3% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the May 10th ex-dividend date); OR 

• +1.2% absolute return (equivalent to +31.1% annualized return-on-investment over the next 14 days) if the stock is assigned on the May 17th, 2022 options expiration date.

Capital One Financial Corporation (COF) -- New Covered Calls Position
The buy/write transaction was:
5/3/2024 Bought 200 Capital One Financial shares @ $142.21
5/3/2024 Sold 2 Capital One 5/17/2024 $138.00 Call options @ $5.25 per share.  The Implied Volatility of the Calls was 20.2 when this transaction occurred which, as I prefer, is well above the current S&P 500 Volatility Index (i.e. VIX) of 13.6.
5/10/2024 Upcoming quarterly ex-dividend of $.60 per share

Two possible overall performance results (including commissions) for this Capital One Covered Calls position are as follows:
Covered Calls Net Investment: $27,393.34
= ($142.21 - $5.25) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,048.66
= ($5.25 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on May 9th, the last business day prior to the May 10th ex-div date): +$0.00; or
(b) Dividend Income (If COF stock assigned at the May 17th, 2024 options expiration date): +$120.00
= ($.60 dividend per share x 200 shares)
(c) Capital Appreciation (If Capital One Call options assigned early): -$842.00
+($138.00 strike price - $142.21 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $138.00 strike price at options expiration): -$842.00 = +($138.00 - $142.21) * 200 shares

1. Total Net Profit [If options exercised early]: +$206.66

= (+$1,048.66 options income +$0.00 dividend income -$842.00 capital appreciation); or

2. Total Net Profit (If COF shares assigned at $138.00 at the May 17th expiration): +$326.66

= (+$1,048.66 options income +$120.00 dividend income -$842.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised early on May 9th (business day prior to ex-dividend date)]: +0.8%

= +$206.66/$27,393.34

Annualized Return-on-Investment (If option exercised early): +39.3%

= (+$206.66/$27,393.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Capital One shares assigned at $138.00 at the May 17th, 2024 options expiration date): +1.2%

= +$326.66/$27,393.34

Annualized Return-on-Investment (If COF shares assigned at $138.00 at the May 17th options expiration): +31.1%

= (+$326.66/$27,393.34) * (365/14 days)

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.  All nine criteria are achieved for this Capital One Financial Covered Calls position.