Covered Calls Established in Hewlett Packard Enterprise Company and Nvidia Corporation

This morning short-term Covered Calls positions were established in Hewlett Packard Enterprise Co. (ticker HPE) and NVIDIA Corporation (ticker NVDA). Five hundred shares of Hewlett Packard Enterprise were purchase at $21.54 per share and five December 27th, 2024 Call options were sold for $.70 per share at the $21.00 strike price.  A moderately in-the-money Covered Calls positions was established and the probability that the Calls will expire in-the-money on the 12/27/2024 options expiration date was 71.6% when this position was established.  

In addition to the $.16 potential time value decay profit at assignment for this position, HPE also goes ex-dividend this Friday (12/20/2024) at $.13 per share (2.4% dividend yield) which is prior to the December 27th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on March 6th, 2025 is after the Dec. 27th, 2024 options expiration date.

For Nvidia Corporation, my net debit limit order to establish a Covered Call at the December 27th, 2024 $125.00 strike price was transacted at my $121.96 net price.  One hundred shares were purchased at $127.34 and one 12/27/2024 $125.00 Call was sold at $5.38.  The probability that the Calls will expire in-the-money (and therefore be assigned) on the 12/27 options expiration date was 56.7% when this position was established.     

As detailed below, potential return-on-investment results are: (a) for Hewlett Packard Enterprises: +1.4% absolute return (equivalent to +49.6% annualized return-on-investment over the next 10 days) if the stock is assigned on the December 27th, 2024 options expiration date; and (b) for Nvidia Corporation: +2.5% absolute return (equivalent to +90.8% annualized return-on-investment over the next 10 days) if the stock is assigned on its December 27th, 2024 options expiration date

Hewlett Packard Enterprise Company (HPE) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
12/17/2024 Bought 500 shares of Hewlett Packard Enterprise Co. shares @ $21.54 per share.  
12/17/2024 Sold 5 HPE December 27th, 2024 $25.00 Call options @ $.70 per share.  The Implied Volatility of these Call options was 21.2 today when this transaction was executed. 

A possible overall performance result (including commissions) if this stock is in-the-money (and therefore the stock is assigned (i.e. sold) at the $21.00 strike price) on the Dec. 27th options expiration date is as follows:

Covered Calls Net Investment: $10,423.35
= ($21.54 - $.70) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$346.65
= ($.70 * 500 shares) - $3.35 commission
(b) Dividend Income (If assigned on the 12/27/2024 options expiration date): +$65.00
= $.13 x 500 shares
(c) Capital Appreciation (If 500 HPE shares assigned at the $21.00 strike price): -$270.00
+($21.00 strike price - $21.54 stock purchase price) * 500 shares

Total Net Profit Potential: +$141.65
= (+$346.65 options income + $65.00 dividend income - $270.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.4%
= +$141.65/$10,423.35
Potential Annualized Return-on-Investment (if HPE shares are in-the-money and therefore assigned on their 12/27/2024 options expiration date): +49.6%
= (+$141.65/$10,423.35) * (365/10 days)

Nvidia Corporation (NVDA) -- New Covered Call Position

The buy/write market order transaction was as follows:
12/17/2024 Bought 100 Nvidia Corporation shares at $127.34.

12/17/2024 Sold 1 NVDA 12/27/2024 $125.00 Call option @ $5.38 per share.  The Implied Volatility of the Calls was very high at 45.7 when this Call option was sold today.

A possible overall performance result (including commissions) for this Nvidia Corporation Covered Call position is as follows:
Covered Calls Net Investment: $12,196.67
= ($127.34 - $5.38) * 100 shares + $.67 commission

Net Profit:
(a) Option Income: +$537.33
= ($5.38 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 100 Nvidia shares assigned at the $125.00 strike price at expiration): -$234.00
+($125.00 - $127.34) * 100 shares

Total Net Profit Potential (If 100 Nvidia shares are in-the-money and therefore assigned at the $125.00 strike price at the options expiration date): +$303.33
= (+$537.33 option income + $0.00 dividend income - $234.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.5%
= +$303.33/$12,196.67
Potential Annualized Return-on-Investment: +90.8%
= (+$303.33/$12,196.67) * (365/10 days)

Update on Three Covered Calls that Expired Out-of-the-Money Last Friday

The Covered Calls Advisor Portfolio had three Covered Call positions where the expiration date of the Calls was last Friday (December 13th).  The three positions were in Bank of America Corporation, Fedex Corporation, and Schlumberger (SLB), and all three Calls expired out-of-the-money with the stock prices below their respective strike prices.  This morning, my decisions regarding the stock of each company was as follows: 

(1) Bank of America -- the stock closed last Friday at $45.67 which was below the $46.50 strike price.  I have not made a decision yet on how to proceed with the 200 BAC shares in this position but will do so sometime this week and will make a post updating my actions on the same day the transaction occurs.  

(2) Fedex Corporation -- the stock closed at $283.42 which was well below the $290.00 strike price.  A significant factor in the decline was the research report of Morgan Stanley in which they stated that they were seeing "continued volume/price/mix headwinds exacerbated by rolloff of USPS revenues, compressed peak season, and slowing DRIVE gains."  In addition, Fedex's next quarterly report is this Thursday and since my preference is to avoid holding positions through earnings reports, I decided to sell the 100 shares this morning when the stock was at $284.95.  Detailed results for this position are provided below.  

(3) Schlumberger Ltd. (SLB) -- the stock closed last Friday at $40.22 which was below the $42.00 strike price.  This morning I decided to continue this Covered Calls position for another two weeks by selling four Dec. 27th $41.50 Calls for $.50 per share when the stock was at $40.72.  Potential results for this position are detailed below.

     

Fedex Corporation (FDX) -- Closed Out Covered Call Position 

The buy/write transaction was:
12/2/2024 Bought 100 Fedex shares @ $296.04.
12/2/2024 Sold 1 FDX 12/13/2024 $290.00 Call option @ $7.94 per share.
Note: Implied Volatility (IV) of the Call options was at 14.7 when this position was transacted which, as I prefer, is above the current VIX of 13.4.   
12/9/2024 Quarterly ex-dividend of $1.38 per share. 

12/13/2024 FDX Call option expired out-of-the-money and the 100 FDX shares remain in the Covered Calls Advisor Portfolio.

12/16/2024 Sold 100 FDX shares at $284.95 per share.

The overall performance results (including commissions) for this Fedex Corp. Covered Calls position were as follows:
Covered Calls Net Investment: $28,810.67
= ($296.04 - $7.94) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$793.33
= ($7.94 * 100 shares) - $.67 commission
(b) Dividend Income: +$138.00
= ($1.38 dividends per share x 100 shares)

(c) Capital Appreciation (Fedex shares sold at $284.95): -$1,109.00

+($284.95 stock sales price - $296.04 stock purchase price) * 100 shares

Total Net Loss: -$177.67

= (+$793.33 options income +$138.00 dividend income - $1,109.00 capital appreciation)

Absolute Return-on-Investment: -0.6%

= -$177.67/$28,810.67

Annualized Return-on-Investment: -16.1%

= (-$177.67/$28,810.67) * (365/14 days)

Schlumberger Ltd. (SLB) -- Rollout of Covered Calls Position

The buy/write transaction was:
12/2/2024 Bought 400 SLB shares @ $43.22.
12/2/2024 Sold 4 USB 12/13/2024 $42.00 Call options @ $1.48 per share.
12/4/2024 Quarterly ex-dividend of $.275 per share. 

12/13/2024 Four SLB Call options expired out-of-the-money so the 400 SLB shares remain in the Covered Calls Advisor Portfolio.

12/16/2024 Continued this SLB Covered Calls position by selling 4 SLB December 27th, 2024 $41.50 Calls at $.50 per share when SLB's stock price was $40.72 per share.

Two possible overall performance results (including commissions) for this SLB Covered Calls position are as follows:
Covered Calls Net Investment: $16,698.68
= ($43.22 - $1.48) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$786.64
= ($1.48 + $.50) x 400 shares - $5.36 commissions
(b) Dividend Income: +$110.00
= ($.275 dividends per share x 400 shares)

(c) Capital Appreciation (If SLB's stock price unchanged at $40.72 on the December 27th options expiration date): -$1,000.00

+($40.72 static stock price - $43.22 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $41.50 strike price on the 12/27/2024 options expiration): -$688.00
+($41.50 strike price - $43.22 SLB stock purchase price) * 400 shares

1. Total Net Profit (If stock price unchanged at $40.72 on the 12/27/2024 options expiration date): -$103.36

= (+$786.64 options income +$110.00 dividend income - $1,000.00 capital appreciation); or

2. Total Net Profit (If 400 SLB shares assigned at the $41.50 strike price at the Dec. 27th, 2024 expiration): +$208.64

= (+$786.64 options income + $110.00 dividend income - $688.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If stock price unchanged at $40.72 on the 12/27/2024 options expiration date): -0.6%

= -$103.36/$16,698.68

Potential Annualized Return-on-Investment (If option exercised early): -9.0%

= (-$103.36/$16,698.68) * (365/25 days); or

2. Potential Absolute Return-on-Investment (If SLB's shares assigned on the Dec. 13th options expiration date): +1.2%

= +$211.32/$16,698.68

Potential Annualized Return-on-Investment (If 400 SLB shares assigned at the $41.50 strike price at the Dec. 27th, 2024 expiration): +18.2%

= (+$208.64/$16,698.68) * (365/25 days)

Early Assignment of Covered Call Position in DICK'S Sporting Goods Inc.

I was notified by Schwab early this morning that the one DICK'S Sporting Goods Inc. December 20th, 2024 Call option was exercised early yesterday.  Because DICK'S stock price increased from $211.26 when this position was established to $218.86 at yesterday's market close, the original $2.84 time value in the Call when the position was established had declined on yesterday's market close to $0.84.  So, with 7 days remaining until the December 20th options expiration date, the owner of these Calls exercised their option to buy the 100 shares at the $202.50 strike price in order to receive today's $1.10 per share ex-dividend. 

I was surprised that the owner of the Call exercised their option in this instance since they decided to immediately forego $.84 time value profit potential (which I am pleased to have received as an immediate profit addition to my return-on-investment result for this position).  I am also pleased with the +45.6% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +38.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its December 20th, 2024 options expiration date.   

The post when this DICK'S Sporting Goods Inc. Covered Call position was originally established is here.  As detailed below, the return-on-investment result for this Covered Calls position was +1.2% absolute return in 10 days (equivalent to a +45.6% annualized return-on-investment).

DICK'S Sporting Goods Inc. (DKS) -- Covered Call Position Closed Out by Early Assignment
The simultaneous buy/write transaction was:
12/3/2024 Bought 100 DICK'S Sporting Goods Inc. shares @ $211.26.
12/3/2024 Sold 1 DICK'S 12/20/2024 $202.50 Call option @ $11.60 per share.
12/12/2024 One DICK'S Sporting Goods Calls was exercised on the day prior to its December 13th, 2024 ex-dividend date, so the Call expired and the 100 Dell shares were sold at the $202.50 strike price.   

The overall performance results (including commissions) for this DICK'S Sporting Goods Inc. Covered Call position is as follows:
Covered Call Net Investment: $19,966.67
= ($211.26 - $11.60) * 100 shares + $.67 commission

Net Profit:
(a) Option Income: +$1,159.33
= ($11.60 * 100 shares) - $.67 commission
(b) Dividend Income: (DICK'S stock assigned early on the day prior to the Dec. 13th option expiration date) = +$0.00

(c) Capital Appreciation: -$910.00
+($202.50 strike price - $211.26 stock purchase price) * 100 shares

Total Net Profit: +$249.33

= (+$1,159.33 option income +$0.00 dividend income - $910.00 capital appreciation)

Absolute Return-on-Investment: +1.2%

= +$249.33/$19,966.67

Annualized Return-on-Investment: +45.6%

= (+$249.33/$19,966.67) * (365/10 days)

Covered Calls Established in Global Payments Inc.

In this afternoon's trading session, a short-term Covered Calls position was established in Global Payments Inc. (ticker GPN) with the purchase of 300 shares at $117.74 per share and three December 20th, 2024 Call options were sold for $3.72 per share at the $115.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 12/20/2024 options expiration date was 71.3%.  

In addition to the $.98 potential time value decay profit at assignment for this position, Global Payments also goes ex-dividend this Friday (12/13/2024) at $.25 per share (0.8% dividend yield) which is prior to the December 20th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on February 13th, 2025 is after the Dec. 20th, 2024 options expiration date.

As detailed below, a potential return-on-investment result is:  +1.1% absolute return (equivalent to +35.6% annualized return-on-investment over the next 11 days) if the stock is assigned on the December 20th, 2024 options expiration date.

Global Payments Inc. (GPN) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
12/9/2024 Bought 300 shares of Global Payments Inc. shares @ $117.74 per share.  
12/9/2024 Sold 3 GPN December 20th, 2024 $115.00 Call options @ $3.72 per share.  The Implied Volatility of these Call options was 21.5 today when this transaction was executed. 

A possible overall performance result (including commissions) if this stock is in-the-money (and therefore the stock is assigned (i.e. sold) at the $115.00 strike price) on the Dec. 20th options expiration date is as follows:

Covered Calls Net Investment: $34,208.01
= ($117.74 - $3.72) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,113.99
= ($3.72 * 300 shares) - $2.01 commission
(b) Dividend Income (If assigned on the 12/20/2024 options expiration date): +$75.00
= $.25 x 300 shares
(c) Capital Appreciation (If 300 Global Payments shares assigned at the $115.00 strike price): -$822.00
+($115.00 strike price - $117.74 stock purchase price) * 300 shares

Total Net Profit Potential (If 300 GPN shares assigned at the $115.00 strike price at the options expiration date): +$366.99
= (+$1,113.99 options income + $75.00 dividend income - $822.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.1%
= +$366.99/$34,208.01
Potential Annualized Return-on-Investment (if GPN shares assigned on their 12/20/2024 options expiration date): +35.6%
= (+$366.99/$34,208.01) * (365/11 days)