A Covered Call position was established in Morgan Stanley (ticker symbol MS) yesterday using my Dividend Capture Strategy (
see here) when 100 shares were purchased at $181.43 and 1 November 6th, 2026 Call option was sold at $8.63 per share at the $175.00 strike price. The net debit limit order at $172.80 was executed, so the time value was $2.20 per share [$8.63 Call option premium - ($181.43 stock purchase price -
$175.00 strike price)]. There is also an upcoming quarterly ex-dividend of $1.15 per share on October 30th (an increase of 15% from last year and a current annual dividend yield of 2.5%), so two potential return-on-investment results for this position, as detailed below, include the possibility of early assignment because the ex-dividend is prior to the November 6th, 2026 options expiration date.
Morgan Stanley's Q3 2025 earnings report was last week so there will be no new earnings report prior to the options expiration date. The average target price of analysts following Morgan Stanley is $216 (+19.1% above the stock purchase price). An in-the-money Covered Calls position was established when the probability of the stock closing in-the-money (and therefore being assigned) on the 11/6/2026 options expiration date was 69.0%.
Most companies in the Financial Sector provide only modest growth prospects, but they often provide good annual dividend yields (such as the 2.5% annual dividend yield for this Morgan Stanley position). Consequently, the Covered Calls Advisor targets opportunities to use the Dividend Capture Strategy in all Financial Sector Covered Calls positions. This new November 6th, 2026 Morgan Stanley Covered Call 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 Call positions 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 would be achieved; or (2) have the stock assigned early on the last trading day prior to the ex-dividend date in which case the Covered Calls Advisor is usually very pleased since the Dividend Capture Strategy criteria are designed such that most often the annualized return-on-investment for early assignment is somewhat greater than what would be achieved if the stock was instead assigned on its options expiration date (which is the case for this Morgan Stanley position). So far, applying this approach has provided attractive annualized return results -- significantly better than would be achieved if Covered Calls positions for these bank stocks were instead held in the Covered Calls Advisor Portfolio in the other two non-dividend paying months each quarter.
As detailed below, two potential return-on-investment results are:
- +1.3% absolute return (equivalent to +42.1% annualized
return-on-investment for the next 11 days) if the stock is assigned early (on the last business day
prior to the October 30th, 2026 ex-dividend date); OR
- +1.9%
absolute return (equivalent to +39.2% annualized return-on-investment over the next 18 days) if the stock is assigned on the November 6th, 2026 options expiration date.
Morgan Stanley (MS) -- New Covered Call Position
The buy/write transaction was:
10/19/2026 Bought 100 Morgan Stanley shares @ $181.43
10/19/2026 Sold 1 Morgan Stanley 11/6/2026 $175.00 Call option @ $8.63
Note: the Implied Volatility of the Call option was 30.2 when this buy/write transaction was executed.
10/30/2026 Upcoming quarterly ex-dividend of $1.15 per share
Two possible overall performance results (including commissions) for this Morgan Stanley Covered Call position are as follows:
Covered Call Cost Basis: $17,280.67
= ($181.43 - $8.63) * 100 shares + $.67 commission
Net Profit Components:
(a) Option Income: +$862.33
= ($8.63 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on October 29th, the last business day prior to the October 30th, 2026 ex-div date): +$0.00;
or
(b) Dividend Income (If Morgan Stanley stock assigned at the November 6th, 2026 expiration): +$115.00
= ($1.15 dividend per share x 100 shares)
(c) Capital Appreciation (If Morgan Stanley Call option is assigned early on Oct. 30th): -$643.00
+($175.00 strike price - $181.43 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $175.00 strike price at the 11/6/2026 options expiration): -$643.00
+($175.00 - $181.43) * 100 shares
1. Total Net Profit [If option exercised early on the last business day prior to the October 30th ex-dividend date)]: +$219.33
= (+$862.33 option income + $0.00 dividend income - $643.00 capital appreciation); or
2. Total Net Profit (If Morgan Stanley shares assigned at $175.00 strike price at the November 6th, 2026 expiration): +$334.33
= (+$862.33 + $115.00 - $643.00)
1. Potential Absolute Return-on-Investment (If option exercised early on Oct. 30th): +1.3%
= +$219.33/$17,280.67
Potential Annualized Return-on-Investment: +42.1%
= (+$219.33/$17,280.67) * (365/11 days); or
2. Potential Absolute Return-on-Investment (If Morgan Stanley shares assigned at $175.00 at the Nov. 6th, 2026 options expiration date): +1.9%
= +$334.33/$17,280.67
Potential Annualized Return-on-Investment (If Morgan Stanley shares assigned at the November 6th options expiration date): +39.2%
= (+$334.33/$17,280.67) * (365/18 days)
Either
outcome would provide an attractive return-on-investment result for this
Morgan Stanley investment. These returns will be achieved as long as the stock is
above the $175.00 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $171.65 ($181.43 - $8.63 - $1.15)
provides 5.4% downside protection below the stock purchase
price.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position. As shown below with this Morgan Stanley position, all nine criteria were met.
