Early in this morning's trading session, a Covered Calls position was established in Bank of America Corp. (ticker BAC) with the purchase of 500 shares at $51.91 per share and five March 13th, 2026 Call options were sold for $2.61 per share at the $50.00 strike price. This Bank of America transaction occurred via a simultaneous buy/write transaction at my net debit limit order price of $49.30 per share. The corresponding time value (aka extrinsic value) in the Call options was $.70 per share = [$2.61 Call options premium
received - ($51.91 stock purchase price - $50.00 options strike
price)]. A moderately in-the-money Covered Calls positions was established with the probability that the stock will close in-the-money on the options expiration date was 68.8%. As preferred, the next earnings report on April 15th, 2026 is after the March 13th options expiration date.
Bank of America goes ex-dividend at $.28 per share (2.2% annualized dividend yield at the current stock price) on March 6th, 2026 which is prior to the March 13th options expiration date, so this dividend is included in the potential return-on-investment results shown below. As shown at the bottom of this post, all nine criteria in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (explained here) were met for this position.
Most companies in the Financial Sector provide only modest growth prospects, but they often provide good annual dividend yields. Consequently, the Covered Calls Advisor targets opportunities to use the Dividend Capture Strategy in all Financial Sector Covered Calls positions. This new March 13th, 2026 Bank of America Covered Calls position continues the Dividend Capture Strategy of often selling
in-the-money monthly Covered Calls for one of six megacap U.S. banks (Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Wells Fargo) for each options expiration
month:
(JPMorgan Chase quarterly for Jan, Apr, July, and Oct options expirations;
Citigroup, Morgan Stanley, and/or Wells Fargo for Feb, May, Aug, and Nov options expirations; and Bank of America and/or Goldman Sachs for Mar, Jun, Sep, and Dec options expirations).
The goal of these monthly Covered Calls in these banks is to both provide an opportunity to either: (1) potentially capture the quarterly dividend payment and if the stock price remains above the strike price at
options expiration, the maximum possible return-on-investment result on the options expiration date for the position would be achieved; or (2) have the stock assigned early on the day prior to the ex-dividend date in which case the annualized return-on-investment for early assignment is often greater than that of an assignment on the options expiration date (which is true for this BAC Covered Calls position). So far, applying this Dividend Capture Strategy has provided attractive annualized return results -- significantly better than would be achieved
if Covered Calls positions for these bank stocks were held in the Covered Calls Advisor Portfolio in the other two months each quarter when an ex-dividend date does not occur.
These returns also show that a significantly greater return-on-investment potential is available by establishing Covered Calls with intervening ex-dividends instead of establishing their comparable 100% Cash-Secured Puts positions since Covered Calls expiring on the options expiration date capture the dividend payment whereas selling Puts does not.
The current average analysts' target price for Bank of America is $60.96 (+17.4% above today's stock purchase price). BofA also appeared today on my Financial Sector stock screener by passing all criteria as shown in this table:
Two potential return-on-investment results for this Bank of America Covered Calls position are: (a) +1.4% absolute return-on-investment (equivalent to +36.7% annualized
return-on-investment for the next 14 days) in the event that the stock is assigned early [i.e. on March 5th which is the last trading day prior to the March 6th ex-dividend date]; OR (b) +2.0%
absolute return-on-investment (equivalent to +34.3% annualized return-on-investment over the next 21 days) if the stock is assigned on the March 13th, 2026 options expiration date.
Bank of America Corporation (BAC) -- New Covered Calls Position
The buy/write transaction was as follows:
2/20/2026 Bought 500 shares of Bank of America Corp. stock @ $51.91 per share
2/20/2026 Sold 5 BAC March 13th, 2026 $50.00 Call options @ $2.61 per share
Note: The Implied Volatility of these Calls was 30.2 when this position was established.
3/6/2026 Upcoming ex-dividend of $.28 per share
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $24,653.35
= ($51.91 - $2.61) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,301.65
= ($2.61 * 500 shares) - $3.35 commission
(b) Dividend Income (If BAC shares assigned on 3/5/2026, the last business day prior to the 3/6/2026 ex-dividend date): = +$0.00; or
(b) Dividend Income (If BAC shares assigned at the 3/13/2026 options expiration date): +$140.00
= $.28 per share x 500 shares
(c) Capital Appreciation (If BAC shares assigned early on 3/5/2026): -$955.00
= ($50.00 strike price - $51.91 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares above $50.00 strike price at the March 13th options expiration): -$955.00
= ($50.00 - $51.91) * 500 shares
1. Potential Net Profit (If Bank of America shares assigned on 3/5/2026, the day prior to the 3/6/2026 ex-dividend date): +$346.65
= (+$1,301.65 options income + $0.00 dividend income - $955.00 capital appreciation)
2. Potential Net Profit (If BAC price is above the $50.00 strike price at the March 13th options expiration): +$486.65
= (+$1,301.65 options income + $140.00 dividend income - $955.00 capital appreciation)
1. Absolute Return (If BAC shares assigned on 3/5/2026, the day prior to the March 6th ex-dividend date): +1.4%
= +$346.65/$24,653.35
Equivalent Annualized Return (If assigned early on day prior to ex-div date): +36.7%
= (+$346.65/$24,653.35) * (365/14 days)
2. Absolute Return (If BAC price is above $50.00 strike price at the March 13th options expiration): +2.0%
= +$486.65/$24,653.35
Equivalent Annualized Return (If assigned on the 3/13/2026 options expiration date): +34.3%
= (+$486.65/$24,653.35) * (365/21 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. As shown below, all nine criteria are achieved for this Bank of America Covered Calls position.
