As detailed below, a potential return is +3.0% absolute return in 37 days (equivalent to a +29.9% annualized return-on-investment)
Note: This potential result is above the Covered Calls Advisor's desired threshold of 20% annualized return-on-investment.
AmTrust Financial Services Inc. (AFSI) -- New Covered Calls Position
03/16/2017 Bought 1,000 AmTrust Financial Services shares @ $21.55
03/16/2017 Sold 10 AFSI Apr2017 $20.00 Call options @ $2.05
Note: this was a simultaneous buy/write transaction.
03/30/2017 Ex-dividend of $170.00 ($.17 x 1,000 shares)
A possible overall performance result (including commissions) would be as follows:
Bought 1,000 shares AFSI: $21,554.95
= $21.55*1,000 + $4.95 commission
Net Profit:
(a) Options Income: +$2,038.55
= ($2.05*1,000 shares) - $11.45 commissions
(b) Dividend Income: +$170.00
= $.17 * 1,000 shares
(c) Capital Appreciation (If AFSI is above $20.00 strike price at Apr2017 expiration): -$1,554.95
= ($20.00-$21.55)*1,000 shares - $4.95 commissions
Total Net Profit (If AFSI is above $20.00 strike price at Apr2017 options expiration): +$652.60
= (+$2,038.55 options income +$170.00 dividends -$1,554.95 capital appreciation)
Absolute Return (If AFSI is above $20.00 strike price at Apr2017 options expiration): +3.0%
= +$652.60/$21,554.95
Annualized Return: +29.9%
= (+$652.60/$21,554.95)*(365/37 days)
The downside 'breakeven price' at expiration is at $19.33 ($21.55 - $.17 -$2.05), which is 10.3% below the current market price of $21.55.
