Established Covered Calls Position in Skyworks Solutions Inc.

Today, a Covered Calls position was established in Skyworks Solutions Inc. (ticker SWKS) for the January 19th, 2018 expiration and at the $90.00 strike price.  The stock was purchased today at $95.56.  Skyworks' stock has experienced a precipitous decline since its earnings report one month ago when it was trading at $116 per share just prior to its earnings release.  The extent of the decline does not seem justified because of the ongoing increase in both revenues and earnings and the prospect for this continuing into 2018 since Skyworks should benefit as a supplier to Apple's iPhones, including the just released Apple X phone.  Although Skyworks is improving the diversification of its customer base, currently almost 40% of their revenues are from Apple.  One result of this stock price decline is that the 90-day historic volatility of the stock has spiked from 26.4 to 35.1 today when this position was established.   

One of the Screeners developed by the Covered Calls Advisor called the 'Multifactor Model' uses a combination of factors in the categories of Value, Profitability, Growth, Capital Allocation, and Quality of Earnings.  Skyworks is one of the stocks that was identified by this screen. 

As detailed below, a potential return-on-investment result is +2.59% absolute return (equivalent to +21.5% annualized return for the next 44 days) if the stock is assigned on the January 19th, 2018 options expiration date.

 
Skyworks Solutions Inc. (SWKS) -- New Covered Calls Position

Call options liquidity was good with 976 open interest contracts in the Jan 19th $90.00 Calls.

As shown in the chart below, a Covered Calls positions was chosen instead of its synthetically equivalent short 100% Cash-Secured Put options position in this instance:

You will notice in the chart above (click on chart to view a larger and more legible version) that there is a column titled "Intervening Earnings" and "NO*" with an indication that "If 'YES' then consider avoiding position".  Skyworks' next quarterly earnings report is after the January 19, 2018 options expiration date.
Also in the chart above is a column called "Intervening Ex-Div" and "NO" with an indication that "If 'YES' then complete Dividend Capture Strategy spreadsheet".  Skyworks' next ex-dividend date is after the January 19, 2018 options expiration date, so the potential for applying a Dividend Capture Strategy is not relevant in this instance.

For this position, the downside 'breakeven price' at expiration is at $87.70 ($95.56 - $7.86), which is 8.2% below the current market price of $95.56. 

The 'crossover price' at expiration is $103.42 ($95.56 + $7.86).  This is the price above which it would have been more profitable to simply buy-and-hold Skyworks Solutions stock until January 19th (the January monthly options expiration date) rather than establishing this Covered Calls position.

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