Established Covered Calls Position in Delta Air Lines Inc.

Today, a covered calls position was established in Delta Air Lines Inc. (ticker symbol DAL) with a Feb2016 expiration.  This position includes consideration of an upcoming $.135 quarterly dividend with an ex-div date of Feb 12th.  Given the Covered Calls Advisor's current Slightly Bearish overall market outlook, a conservative in-the-money covered call position was established with the strike price of $41.00 below the stock purchase price of $43.46.

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

If Early Assignment: +0.9% absolute return (equivalent to +42.3% annualized return for the next 8 days) if the stock is assigned early (business day prior to Feb 12 ex-date); OR

If Dividend Capture: +1.2% absolute return (equivalent to +28.2% annualized return over the next 16 days) if the stock is assigned at the Feb2016 expiration on February 19th.

1. Delta Air Lines Inc. (DAL) -- New Covered Calls Position

The $.135 dividend of Dec 12th is included in the potential results analysis below.  Although unlikely, if the current time value (i.e. extrinsic value) of $.45 [$2.91 option premium - ($43.46 stock price - $41.00 strike price)] remaining in the short call option decays substantially by February 11th (the business day prior to the ex-div date), then it is possible that the call options owner would exercise early and call the Delta Air Lines shares away to capture the dividend.

The transactions were:
02/04/2016 Bought 400 Delta Air Lines shares @ $43.46
02/04/2016 Sold 4 DAL Feb2016 $41.00 Call options @ $2.91
Note: a simultaneous buy/write transaction was executed.
02/12/2016 Upcoming dividend of $.135 per share

Two possible overall performance results (including commissions) for this Delta Air Lines covered calls position are as follows:
Stock Purchase Cost: $17,391.95
= ($43.46*400+$7.95 commission)

Net Profit:
(a) Options Income: +$1,153.05
= ($2.91*400 shares) - $10.95 commissions
(b) Dividend Income (If option exercised early on business day prior to Feb 12th ex-dividend date): +$0.00; or
(b) Dividend Income (If DAL assigned at Feb2016 expiration): +$54.00
= ($.135 dividend per share x 400 shares)

(c) Capital Appreciation (If DAL assigned early on Feb 11th): -$991.95
+($41.00-$43.46)*400 - $7.95 commissions; or
(c) Capital Appreciation (If DAL assigned at $41.00 at Feb2016 expiration): -$991.95
+($41.00-$43.46)*400 - $7.95 commissions

Total Net Profit (If option exercised on day prior to Dec 12 ex-div date): +$161.10

= (+$1,153.05 +$0.00 -$991.95); or

Total Net Profit (If PCAR assigned at $45.00 at Jan2016 expiration): +$215.10

= (+$1,153.05 +$54.00 -$991.95)

1. Absolute Return [If option exercised on Feb 11th (business day prior to ex-dividend date)]: +0.9%

= +$161.10/$17,391.95

Annualized Return (If option exercised early): +42.3%

= (+$161.10/$17,391.95)*(365/8 days); OR

2. Absolute Return (If DAL assigned at $41.00 at Feb2016 expiration): +1.2%

= +$215.10/$17,391.95

Annualized Return: +28.2%

= (+$215.10/$17,391.95)*(365/16 days)

Either outcome would provide a very attractive return-on-investment result for this investment.  These returns will be achieved as long as the stock is above the $41.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $40.55 ($43.46 -$2.91) provides 6.7% downside protection below today's purchase price.