December 21, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had twelve positions [Alibaba Group Holding Ltd.(2 positions), Alphabet Inc., Anadarko Petroleum Corp, Bank of America, Blackstone Group, Citigroup Inc., Fluor Corp, JPMorgan Chase & Co., Lam Research, Las Vegas Sands, and Occidental Petroleum] with December 21st, 2018 options expirations:  

• Ten of the twelve Covered Calls positions closed with their stock prices below the strike prices, so their respective Call options expired and their underlying shares remain in the Covered Calls Advisor Portfolio.  Decisions will be made for each position to either: (1) Sell Call options against the long stock position to re-establish another Covered Calls position at the January 18, 2019 options expiration date; or (2) Sell the stock to close out the position.  As always, all transactions will be posted on this blog on the same day they occur.  
• The remaining two December 21, 2018 positions were closed out early (prior to their Dec. 21st expiration date) and these results were detailed on this blog on the same day they were closed.  In summary, their return-on-investment results were: (1) Citigroup Inc: +4.3% absolute return in 20 days (+78.2% annualized roi); and (2) Las Vegas Sands Corp: +3.0% absolute return in 31 days (+35.8% annualized roi)

So far in 2018, forty of fifty-two (76.9%) positions have been closed at a profit.  This exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  For the forty positions closed out so far in 2018, the average annualized return-on-investment is +30.2%. 

None of the remaining twelve positions [Alibaba Group Holding Ltd. (two positions), Alphabet Inc., Anadarko Petroleum, Bank of America Corp, Blackstone Group, Fluor Corp, JPMorgan Chase & Co. (two positions), Lam Research Inc., Occidental Petroleum, and U.S. Steel Corp.] have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.  As a result of the precipitous market decline during the past two months, each of these positions are now held at a net loss.  The current market value of these 12 positions (as of December 31st, 2018) will be included along with the 40 other previously closed positions held in 2018 in the Covered Calls Advisor's end-of-year summary post which I intend will be posted on this blog during the first week of January, 2019).   
   

Established Covered Calls in AT&T Inc. and Caterpillar Inc.

Yesterday, the following Covered Calls positions were established:
1. Bought 500 AT&T shares @ $28.63
    Sold 5 January 18, 2019 $28.00 Call options @ $1.18
    Notes: Ex-dividend of $.51 on 1/9/2019; No earnings report prior to options expiration
2. Bought 100 Caterpillar Inc. shares @ $121.68
    Sold 1 February 15, 2019 $115.00 Call option @ $11.82
    Notes: Ex-dividend of $.86 on 1/18/2019; No earnings report prior to option expiration

Given the many Christmas preparation activities on my "Honey-Do" list today, I will forego taking the time to write the details related to these transactions. 

I do plan to post Dec 21st, 2018 options expiration results on this blog tomorrow.  Should be another easy post given the precipitous market decline of the past month; so, none of the Covered Calls Advisor's stocks were assigned (since all stocks closed below their strike prices).

Best Wishes to All and Merry Christmas!

Jeff

Established Covered Calls Position in JPMorgan Chase & Co.

Yesterday, a Covered Calls position was established in JPMorgan Chase & Co. (ticker symbol JPM) with a January 18th, 2019 expiration and at the $100.00 strike price.  This is the second Covered Calls position established in JPM.  This position uses the Covered Calls Advisor's Dividend Capture Strategy since there is an upcoming ex-dividend of $.80 on January 3rd which is prior to the options expiration date.  The next quarterly earnings report is scheduled for January 18th, so it will be possible to capture the dividend and then decide whether to liquidate the shares prior to the earnings report or to hold the position through earnings.

As detailed below, a potential return-on-investment result is +3.0% absolute return (equivalent to +36.9% annualized return for the next 30 days) if the stock is unchanged at the $96.83 purchase price on the January 18th options expiration date.


JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

Because of the recent plunge in the stock market as well as JPM stock, the Implied Volatility of 34.4 was at a very attractive level when these Call options were sold.

The transactions were:
12/20/2018 Bought 300 JPM shares @ $96.83
12/20/2018 Sold 3 JPM 1/18/2019 $100.00 Call options @ $2.08
Note: a simultaneous buy/write transaction was executed.
01/03/2019 Upcoming quarterly ex-dividend of $.80 per share

Two possible overall performance results (including commissions) for this JPM Covered Calls position are as follows:
Stock Purchase Cost: $28,429.95
= ($96.83 - $2.08) *300 shares + $4.95 commission

Net Profit:
(a) Options Income: +$621.99
= ($2.08*300 shares) - $2.01 commissions
(b) Dividend Income: +$240.00
= ($.80 dividend per share x 300 shares)

(c) Capital Appreciation (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +$0.00
+($96.83-$96.83)*300; OR
(c) Capital Appreciation (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +$946.05
+($100.00-$96.83)*300 - $4.95 commissions

1. Total Net Profit (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +$861.99

= (+$621.99 +$240.00 +$0.00); or

2. Total Net Profit (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +$1,808.04

= (+$621.99 +$240.00 +$946.05)

1. Absolute Return (If JPM unchanged at $96.83 at 1/18/2019 options expiration): +3.0%

= +$861.99/$28,429.95

Annualized Return: +36.9%

= (+$861.99/$28,429.95)*(365/30 days); or

2. Absolute Return (If JPM in-the-money and thus assigned at $100.00 strike price at expiration): +6.4%

= +$1,808.04/$28,429.95

Annualized Return: +77.4%

= (+$1,808.04/$28,429.95)*(365/30 days)

Either outcome would provide an excellent return-on-investment result for this investment.  The breakeven price of $93.95 ($96.83 -$2.08 -$.80) provides 3.0% downside protection below today's purchase price.

Early Assignment of Las Vegas Sands Corp.

This morning, the Covered Calls Advisor received notification from my broker (Schwab) that the 3 Las Vegas Sands Corp. (ticker symbol LVS) December 21st, 2017 Call options were exercised early, so the 300 shares of Las Vegas Sands stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $50.00 strike price. 

Las Vegas Sands stock was $54.84 at yesterday's market close.  Early exercise by the owners of these Call options was not expected since there was $.19 time value [$5.03 midpoint of Call options bid/ask price - ($54.84 current stock price - $50.00 strike price)] remaining in these Call options.  But the Call owners were willing to immediately forego the remaining $0.19 per share (by exercising their option to buy the shares) in order to capture next Monday's $.75 per share ex-dividend.  The per share stock price had increased from $52.90 when this Las Vegas Sands Corp. position was originally established on November 16th to $54.84 (9.7% in-the-money) at yesterday's market close.

As detailed below, the actual return-on-investment result achieved for this Las Vegas Sands position a +3.0% absolute return (equivalent to +35.8% annualized return) for the 31 days this position was held.  The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls position is established, the transactions details of which will be posted on this blog site the same day they occur.

Las Vegas Sands Corp. (LVS) -- New Covered Calls Position
The transactions were:
11/16/2018 Bought 300 Las Vegas Sands shares @ $52.90
11/16/2018 Sold 3 LVS 12/21/2018 $50.00 Call options @ $4.40
Note: a simultaneous buy/write transaction was executed, and the Open Interest in these Call options was 328 contracts.
12/14/2018 Early assignment of 3 Call options so 300 shares of LVS stock sold at $50.00 strike price

The overall performance result (including commissions) for this Las Vegas Sands Covered Calls position was as follows:
Covered Calls Cost Basis: $14,554.95
= ($52.90 - $4.40) *300 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,317.99
= ($4.40*300 shares) - $2.01 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation (LVS assigned at $50.00 strike price at options expiration): -$874.95
+($50.00-$52.90)*300 shares - $4.95 commissions

Total Net Profit: +$443.04

= (+$1,317.99 Call options income +$0.00 dividend income -$874.95 capital appreciation)

Absolute Return: +3.0%

= +$443.04/$14,554.95

Annualized Return: +35.8%

= (+$443.04/$14,554.95)*(365/31 days)

Covered Calls Established in Fluor Corp.

Today, a Covered Calls position was established by buying 200 shares of Fluor Corp. (ticker symbol FLR) stock at $36.25 and selling 2 December 21st, 2018 $35.00 Call options at $2.05.   The Implied Volatility of these Call options spiked to 41.9 when this position was established, a very high level historically for Fluor given that the next earnings report is after the Dec 21st options expiration date.  Given the Covered Calls Advisor's current Overall Market Meter sentiment of Slightly Bearish, a slightly in-the-money position was established.

As detailed below, a potential outcome for this investment is +2.3% absolute return-on-investment for the next 15 days (equivalent to +55.1% on an annualized return basis) if the stock closes above the $35.00 strike price on the Dec 21st options expiration date.


Fluor Corp.(FLR) -- New Covered Calls Position

The transactions were as follows:
12/07/2018 Bought 200 shares of Fluor stock @ $36.25 per share 
12/07/2018 Sold 2 Fluor Dec 21st, 2018 $35.00 Call options @ $2.05 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $6,846.29
= ($36.25 - $2.05)* 200 shares + $6.29 commission

Net Profit Components:
(a) Option Income: +$410.00
= ($2.05 * 200 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Fluor stock is above $35.00 strike price at Dec 21st expiration): -$254.95
= ($35.00 -$36.25)* 200 shares - $4.95 commission

Potential Total Net Profit (If Fluor assigned at expiration): +$155.05
= (+$410.00 option income +$0.00 dividend income -$254.95 capital appreciation)

Absolute Return: +2.3%
= +$155.05/$6,846.29
Equivalent Annualized Return: +55.1%
= (+$155.05/$6,846.29)*(365/15 days)

The downside 'breakeven price' at expiration is at $34.20 ($36.25 - $2.05), which is 5.7% below the current market price of $36.25.  This is good protection given the very high +55.1% potential annualized ROI for this investment.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the December 21st, 2018 options expiration) for this Fluor Corp. Covered Calls position is 66.3%, so the expected value annualized ROI of this investment (if held until expiration) is +36.5% (+55.1% * 66.3%), an attractive expected value profit for this in-the-money Covered Calls position.   

Covered Calls Established in JPMorgan Chase & Co.

Today, a Covered Calls position was established by buying 200 shares of JPMorgan Chase & Co. (ticker symbol JPM) stock at $104.07 and selling 2 December 21st, 2018 $100.00 Call options at $5.55.   The Implied Volatility of these Call options was 36.0 when this position was established, a relatively high level given that the next earnings report is after the Dec 21st options expiration date as well as the large market capitalization and underlying strength of JPMorgan's finances.  Given the Covered Calls Advisor's current Overall Market Meter sentiment of Slightly Bearish, a slightly in-the-money position was established.


As detailed below, a potential outcome for this investment is +1.5% absolute return-on-investment for the next 16 days (equivalent to +33.7% on an annualized return basis) if the stock closes above the $100.00 strike price on the Dec 21st options expiration date.

JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

The transactions were as follows:
12/06/2018 Bought 200 shares of JPMorgan stock @ $104.07 per share 
12/06/2018 Sold 2 JPM Dec 21st, 2018 $100.00 Call options @ $5.55 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $19,710.29
= ($104.07 - $5.55)* 200 shares + $6.29 commission

Net Profit Components:
(a) Option Income: +$1,110.00
= ($5.55 * 200 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If JPMorgan is above $100.00 strike price at Dec 21st expiration): -$818.95
= ($100.00 -$104.07)* 200 shares - $4.95 commission

Potential Total Net Profit (If JPM assigned at expiration): +$291.05
= (+$1,110.00 option income +$0.00 dividend income -$818.95 capital appreciation)

Absolute Return: +1.5%
= +$291.05/$19,710.29
Equivalent Annualized Return: +33.7%
= (+$291.05/$19,710.29)*(365/16 days)

The downside 'breakeven price' at expiration is at $98.52 ($104.07 - $5.55), which is 5.3% below the current market price of $104.07.  This is good protection given the relatively high +33.7% potential annualized ROI for this investment.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the December 21st, 2018 options expiration) for this JPMorgan Chase & Co. Covered Calls position is 71.1%, so the expected value annualized ROI of this investment (if held until expiration) is +24.0% (+33.7% * 71.1%), an attractive expected value profit for this in-the-money Covered Calls position.   

Covered Calls Established in Anadarko Petroleum Corporation

Today, a Covered Calls position was established in Anadarko Petroleum Corp. (ticker APC) for the December 21st, 2018 expiration and at the $50.00 strike price when the stock was at $51.25.   Given the Covered Calls Advisor's current Overall Market Meter sentiment of Slightly Bearish, a relatively conservative slightly in-the-money position was established. There is an upcoming ex-dividend of $.30 on December 11th which is included in the analysis below. 

As detailed below, a potential outcome for this investment is +3.3% absolute return-on-investment for the next 16 days (equivalent to +75.6% on an annualized return basis) if Anadarko stock closes above the $50.00 strike price on the Dec. 21st options expiration date.



Anadarko Petroleum Corp. (APC) -- New Covered Calls Position
The transactions were:
12/06/2018 Bought 300 shares of Anadarko Petroleum Corp stock @ $51.25 per share 
12/06/2018 Sold 3 APC Dec 21st, 2018 $50.00 Call options @ $2.58 per share
Note: The Implied Volatility has risen to a very attractive 50.0 considering there is no earnings report prior to the options expiration date
12/11/2018 Upcoming ex-dividend of $.30 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $14,607.96
= ($51.25 - $2.58)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$774.00
= ($2.58* 300 shares)
(b) Dividend Income: +$90.00
= $.30 per share * 300 shares 
(c) Capital Appreciation (If Anadarko Petroleum stock is above $50.00 strike price at Dec 21st expiration): -$379.95
= ($50.00 -$51.25)* 300 shares - $4.95 commission

Potential Total Net Profit (If Anadarko Petroleum Corp stock assigned at expiration): +$484.05
= (+$774.00 options income +$90.00 dividend income -$379.95 capital appreciation)

Absolute Return: +3.3%
= +$484.05/$14,607.96
Equivalent Annualized Return: +75.6%
= (+$484.05/$14,607.96)*(365/16 days)

The downside 'breakeven price' at expiration is at $48.37 ($51.25 - $2.58 - $.30), which is 5.6% below the current market price of $51.25.  This is good downside protection given the very high potential of +75.6% annualized ROI for this investment.

Continuation of Covered Calls Position in Lam Research Corp.

Upon the September 21st, 2018 options expiration, the Covered Calls position in Lam Research Corp. (ticker symbol LRCX) expired with the stock price below the $165.00 strike price.  So, the September Call options expired and the 200 shares of Lam Research stock were retained in the Covered Calls Advisor Portfolio.  Today, with the price of Lam Research stock at $152.26, a sell-to-open order was executed to sell 2 December 21st, 2018 Call options at the $150.00 strike price for $5.80 per share to continue this Covered Calls position.

As detailed below, a potential return-on-investment for this Lam Research position is -1.5% absolute return in 127 days (equivalent to a -4.4% annualized return-on-investment).  

This position has an upcoming quarterly ex-dividend next Tuesday (Dec. 4th) of $1.10 per share which is included in the potential return-on-investment result for this position.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an at-the-money Covered Calls position was established.  The Covered Calls Advisor expects LRCX stock to move higher in the months ahead and will continue to sell at-the-money or slightly out-of-the-money monthly Call options going forward in an effort to return this position to profitability. 


Lam Research Corp. (LRCX) -- Continuation Covered Calls Position
The transactions to-date are:
08/17/2018 Bought 200 Lam Research Corp. shares @ $168.14
08/17/2018 Sold 2 LRCX 09/21/2018 $165.00 Call options @ $7.74
Note: a simultaneous buy/write transaction was executed.
09/06/2018 Quarterly ex-dividend of $1.10 per share
11/28/2018 Sold 2 LRCX December 21, 2018 $150.00 Call options @ $5.80
Note: price of LRCX stock was at $152.26 when these options were sold
12/04/2018 Upcoming quarterly ex-dividend of $1.10 per share


A possible overall performance result (including commissions) for this Lam Research Covered Calls position is as follows:
Covered Calls Cost Basis: $32,084.95
= ($168.14 - $7.74) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$2,705.32
= ($7.74 +$5.80) *200 shares - 2*$1.34 commissions

(b) Dividend Income (If Lam Research shares assigned at Dec 21st, 2018 expiration): +$440.00
= ($1.10 dividend per share x 200 shares x 2 dividends)

(c) Capital Appreciation (If LRCX assigned at $150.00 strike price at options expiration): -$3,632.95
=($150.00-$168.14)*200 shares - $4.95 commissions

Total Net Profit (If Lam Research shares assigned at $150.00 at Dec 21, 2018 expiration): -$487.63

= (+$2,705.32 +$440.00 -$3,632.95)

Absolute Return (If Lam Research shares assigned at $150.00 at Dec 21, 2018 expiration): -1.5%

= -$487.63/$32,084.95

Annualized Return (If LRCX stock assigned at $150.00 at Dec 21, 2018 expiration): -4.4%

= (-$487.63/$32,084.95)*(365/127 days)

Continuation of Two Alibaba Covered Calls Positions

Today, both Covered Calls positions in Alibaba Group Holding Ltd. (ticker BABA) were continued by selling December 21st, 2018 $160.00 Call options against the current Alibaba shares owned.  The Covered Calls Advisor considers Alibaba as a core hold and is continuing the pattern of prior months by establishing monthly Covered Calls positions in Alibaba. 

The two Alibaba holdings are now as follows:

• Position #1 -- Long 200 shares BABA stock and short 2 Dec 21, 2018 $160.00 Call options

• Position #2 -- Long 200 shares BABA stock and short 2 Dec 21, 2018 $160.00 Call options

As detailed below, these two positions differ in their original cost basis as well as the options income that has been received to-date.  Alibaba shares in the first position were purchased at $160.00 and at $140.375 in the second position.

1. Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position #1

The transactions have been as follows:
10/04/2018 Sold-to-Open 2 Alibaba Oct. 19th, 2018 $160.00 Put options @ $4.60 per share
Note: the price of BABA stock was $156.17 when these Put options were sold
10/19/2018 Put options expired with BABA at $142.93, so 200 shares of BABA were purchased at the $160.00 strike price
10/22/2018 Sold 2 Alibaba Nov 16th, 2018 $155.00 Call options @ $4.55 per share when the BABA shares were at $147.75
11/16/2018 2 BABA $155.00 Call options expired with 200 shares priced at $154.10
11/26/2018 Sold 2 BABA Dec 21, 2018 $160.00 Call options @ $4.50 per share
Note: the price of BABA shares was $154.60 when these 2 Call options were sold

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $31,086.29
= ($160.00 - $4.60)* 200 shares + $6.29 commission

Net Profit Components:
(a) Options Income: +$1,797.42
= ($4.55 + $4.50)* 200 shares - $6.29 * 2 transactions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is at current $154.60 strike price at Dec 21st expiration): -$1,080.00
= ($154.60 -$160.00)* 200 shares; OR
(d) Capital Appreciation (If BABA stock is above $160.00 strike price at Dec 21st expiration): -$4.95 = ($160.00 -$160.00)* 200 shares - $4.95 commission

Total Net Profit:
(a) If BABA stock is at current $154.60 strike price at Dec 21st expiration: +$717.42
= (+$1,797.42 options income +$0.00 dividend income -$1,080.00 capital appreciation); OR
(b) If BABA stock is above $160.00 strike price at Dec 21st expiration: +$1,792.47
= (+$1,797.42 options income +$0.00 dividend income -$4.95 capital appreciation)

Two Possible Return-on-Investment Results:
(a) Absolute Return (If BABA stock is at current $154.60 strike price at Dec 21st expiration): +2.3%
= +$717.42/$31,086.29
Equivalent Annualized Return: +10.7%
= (+$717.42/$31,086.29)*(365/79 days); OR
(b) Absolute Return (If BABA stock is above $160.00 strike price at Dec 21st expiration): +5.8%
= +$1,792.47/$31,086.29
Equivalent Annualized Return: +26.6%
= (+$1,792.47/$31,086.29)*(365/79 days)


2. Alibaba Group Holding Ltd. (BABA) -- Covered Calls Position #2

The transactions were as follows:
10/10/2018 Bought 200 shares of Alibaba stock @ $140.375 per share 
10/22/2018 Sold 2 Alibaba Nov 16th, 2018 $155.00 Call options @ $4.55 per share
Note: the price of BABA shares was $147.75 when these 2 Call options were sold
11/16/2018 2 BABA $155.00 Call options expired with 200 shares priced at $154.10
11/26/2018 Sold 2 BABA Dec 21, 2018 $160.00 Call options @ $4.50 per share
Note: the price of BABA shares was $154.60 when these 2 Call options were sold
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $28,081.29
= $140.375 * 200 shares + $6.29 commission

Net Profit Components:
(a) Options Income: +$1,797.42
= ($4.55 + $4.50)* 200 shares - $6.29 * 2 transactions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is at current $154.60 strike price at Dec 21st expiration): +$2,845.00
= ($154.60 -$140.375)* 200 shares; OR
(d) Capital Appreciation (If BABA stock is above $160.00 strike price at Dec 21st expiration): +$3,920.05
= ($160.00 -$140.375)* 200 shares - $4.95 commission

Two Possible Total Net Profit Results:
(a) Total Net Profit (If BABA stock is at current $154.60 strike price at Dec 21st expiration): +$4,642.42
= (+$1,797.42 options income +$0.00 dividend income +$2,845.00 capital appreciation)
(b) Total Net Profit (If BABA stock is above $160.00 strike price at Dec 21st expiration): +$5,717.47
= (+$1,797.42 options income +$0.00 dividend income +$3,920.05 capital appreciation)

Two Possible Return-on-Investment Results:
(a) Absolute Return (If BABA stock is at current $154.60 strike price at Dec 21st expiration): +16.5%
= +$4,642.42/$28,081.29
Equivalent Annualized Return: +82.7%
= (+$4,642.42/$28,081.29)*(365/73 days); OR
(b) Absolute Return (If BABA stock is above $160.00 strike price at Dec 21st expiration): +20.4%
= +$5,717.47/$28,081.29
Equivalent Annualized Return: +101.8%
= (+$5,717.47/$28,081.29)*(365/73 days)

Covered Calls Established in Occidental Petroleum Corp. Using Dividend Capture Strategy

Today, a Covered Calls position was established in Occidental Petroleum Corp. (ticker symbol OXY) with a December 21st, 2018 expiration and at the $67.50 strike price.  This position has an expected upcoming quarterly ex-dividend on December 7th of $.78 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise because the ex-dividend is prior to the Dec 21st, 2018 options expiration date.  Quarterly earnings were reported recently, so the next earnings report will not be until mid February 2019.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a slightly in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +2.1% absolute return (equivalent to +54.0% annualized return for the next 14 days) if the stock is assigned early (business day prior to December 7th ex-date); OR +3.2% absolute return (equivalent to +40.9% annualized return over the next 29 days) if the stock is assigned on the September 21st options expiration date.


Occidental Petroleum Corp. (OXY) -- New Covered Calls Position
Although unlikely, if the current time value (i.e. extrinsic value) of $1.82 ($69.32 stock price - $67.50 strike price) remaining in the two short Call options decays substantially (down to about $.15 or less) by Dec 6th (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 200 Occidental Petroleum shares away to capture the dividend payment.

The transactions were:
11/23/2018 Bought 200 Occidental Petroleum shares @ $69.32
11/23/2018 Sold 2 OXY 12/21/2018 $67.50 Call options @ $3.22
Note: A simultaneous buy/write transaction was executed.   The Open Interest in these Calls was 317 contracts and the Implied Volatility was very attractive at 34.6 considering the large size and relative predictability of Oxy's business.
12/07/2018 Expected upcoming quarterly ex-dividend of $.78 per share

Two possible overall performance results (including commissions) for this Occidental Petroleum Covered Calls position are as follows:
Covered Calls Cost Basis: $13,224.95
= ($69.32 - $3.22) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$642.66
= ($3.22*200 shares) - $1.34 commissions
(b) Dividend Income (If option exercised early on Dec 6th, the business day prior to Dec 7th ex-div date): +$0.00; or
(b) Dividend Income (If Occidental Petroleum shares assigned at Dec 21st, 2018 expiration): +$156.00
= ($.78 dividend per share x 200 shares)

(c) Capital Appreciation (If OXY assigned early on Dec 6th): -$368.95
+($67.50-$69.32)*200 shares - $4.95 commissions; or
(c) Capital Appreciation (If OXY assigned at $67.50 strike price at options expiration): -$368.95
+($67.50-$69.312)*200 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Dec 6th (business day prior to Dec 7th ex-dividend date)]: +$273.71

= (+$642.66 +$0.00 -$368.95); or

2. Total Net Profit (If Occidental Petroleum shares assigned at $67.50 at Dec 21st, 2018 expiration): +$429.71

= (+$642.66 +$156.00 -$368.95)

1. Absolute Return [If OXY option exercised on Dec 6th (business day prior to ex-dividend date)]: +2.1%

= +$273.71/$13,224.95

Annualized Return (If option exercised early): +54.0%

= (+$273.71/$13,224.95)*(365/14 days); or

2. Absolute Return (If Occidental Petroleum shares assigned at $67.50 at Dec 21, 2018 expiration): +3.2%

= +$429.71/$13,224.95

Annualized Return (If OXY stock assigned at $67.50 at Dec 21, 2018 expiration): +40.9%

= (+$429.71/$13,224.95)*(365/29 days)

Either outcome would provide an excellent return-on-investment result.  These returns will be achieved as long as the stock is above the $67.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $65.32 ($69.32 -$3.22 -$.78) provides 5.8% downside protection below today's purchase price.

The Covered Calls Advisor has established a set of eleven criteria to evaluate potential Covered Calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all of the eleven criteria are achieved for this Occidental Petroleum Corp. Covered Calls position.

Covered Calls Established in Bank of America Corp.

Today, a Covered Calls position was established in Bank of America Corp. (ticker BAC) for the December 21st, 2018 expiration and at the $27.00 strike price when the stock was at $27.67.   Given the Covered Calls Advisor's current Overall Market Meter sentiment of Slightly Bearish, a relatively conservative slightly in-the-money position was established.

There is an upcoming ex-dividend of $.15 on December 6th which is included in the analysis below.  This investment is very similar to the Citigroup investment last month using a dividend capture strategy.  It seems that interest rates have bottomed and have now begun an increasing trajectory which will continue to benefit bank earnings.  Selling in-the-money or near-the-money monthly Covered Calls using this dividend capture strategy for one of the four biggest U.S. money center banks (Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo) each month (JPMorgan for Jan, Apr, July, and Oct options expirations; Citigroup and/or Wells Fargo for Feb, May, Aug, and Nov expirations; and Bank of America for Mar, Jun, Sep, and Dec expirations) should result in approximately a +4.0% higher annualized return than would be achieved with Covered Calls in these same stocks during non-ex-dividend months.    

As detailed below, a potential outcome for this investment is +2.7% absolute return-on-investment for the next 33 days (equivalent to +29.9% on an annualized return basis) if Bank of America stock closes above the $27.00 strike price on the Dec. 21st options expiration date.

Bank of America Corp. (BAC) -- New Covered Calls Position
The transactions were:
11/19/2018 Bought 1,000 shares of Bank of America stock @ $27.67 per share 
11/19/2018 Sold 10 BAC Dec 21st, 2018 $27.00 Call options @ $1.24 per share
Note: The Open Interest in these Calls was a very liquid 18,507 contracts and the Implied Volatility was 28.4 (very attractive) considering the relative predictability of BofA's financials.
12/06/2018 Upcoming ex-dividend of $.15 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $26,441.65
= ($27.67 - $1.24)* 1,000 shares + $11.65 commission

Net Profit Components:
(a) Options Income: +$1,240.00
= ($1.24* 1,000 shares)
(b) Dividend Income: +$150.00
= $.15 per share * 1,000 shares 
(c) Capital Appreciation (If Bank of America stock is above $27.00 strike price at Dec 21st expiration): -$674.95
= ($27.00 -$27.67)* 1,000 shares - $4.95 commission

Potential Total Net Profit (If BAC stock assigned at expiration): +$715.05
= (+$1,240.00 options income +$150.00 dividend income -$674.95 capital appreciation)

Absolute Return: +2.7%
= +$715.05/$26,441.65
Equivalent Annualized Return: +29.9%
= (+$715.05/$26,441.65)*(365/33 days)

The downside 'breakeven price' at expiration is at $26.28 ($27.67 - $1.24 - $.15), which is 5.0% below the current market price of $27.67.  This is good downside protection given the attractive potential +29.9% annualized ROI for this investment.

Closed Postion in Citigroup Inc.

Last Friday, the November 16th, 2018 Covered Calls position in Citigroup Inc. (ticker symbol C) expired with the stock price at $64.95, below the $65.00 strike price -- so the Call options expired and the 500 shares were retained in the Covered Calls Advisor's Portfolio.  The stock moved higher today and the position was closed out by selling the 500 shares at $65.22.

This position demonstrates the trifecta that can sometimes be achieved using a Covered Calls dividend capture strategy with profits being obtained from all three sources: (1) Call options income; (2) Dividend income; and (3) Capital Appreciation of the underlying stock. 

As detailed below, this Citigroup Inc. position achieved a return-on-investment result of +4.3% absolute return in 20 days (equivalent to a +78.2% annualized return-on-investment).


Citigroup Inc. (C) -- Covered Calls Position Closed
The transactions were as follows:
10/30/2018 Bought 500 shares of Citigroup Inc. stock @ $64.48 per share 
10/30/2018 Sold 5 Citi Nov 16th, 2018 $65.00 Call options @ $1.52 per share
Note: this was a simultaneous Buy/Write transaction
11/02/2018 Ex-dividend of $225.00 = 500 shares x $.45 per share
11/16/2018 Call options expired with closing stock price of $64.95 below the $65.00 strike price
11/19/2018 Sold 500 shares Citi stock at $65.22

The overall performance result (including commissions) is as follows:
Covered Calls Cost Basis: $31,488.30
= ($64.48 - $1.52)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$760.00
= ($1.52 * 500 shares)
(b) Dividend Income: +$225.00
 = $.45 per share x 500 shares 
(c) Capital Appreciation: +$365.05
= ($65.22 -$64.48)* 500 shares - $4.95 commission

Total Profit: +$1,350.05
=$760.00 options income + $225.00 dividend income + $365.05 capital appreciation

Absolute Return-On-Investment: +4.3%
= +$1,350.05/$31,488.30
Equivalent Annualized Return: +78.2%
= (+$1,350.05/$31,488.30)*(365/20 days)

November 16th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had four positions [Alibaba Group Holding Ltd.(2 positions), Alphabet Inc., and Citigroup Inc.] with November 16th, 2018 options expirations.  Each of these Covered Calls positions closed with their stock prices below the strike prices, so their respective Call options expired and their underlying shares remain in the Covered Calls Advisor Portfolio.  Decisions will be made for each position to either: (1) Sell Call options against the long stock position to re-establish another Covered Calls position at the December 21, 2018 options expiration date; or (2) Sell the stock to close out the position.  As always, all transactions will be posted on this blog on the same day they occur. 

So far in 2018, thirty-eight of forty-four (86.4%) positions have been closed at a profit.  This far exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  None of the remaining six positions [Alibaba Group Holding Ltd. (two positions), Alphabet Inc., Citigroup Inc., Lam Research Inc., and U.S. Steel Corp.] have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.   

For the thirty-eight positions closed out so far in 2018, the average annualized return-on-investment is +28.8%.  In comparison, the annualized return-on-investment so far in 2018 for the S&P 500 benchmark is +4.5%.     

Established Covered Calls in Las Vegas Sands Corp.

Today, a Covered Calls position was established in Las Vegas Sands Corp. (ticker symbol LVS) with a December 21st, 2018 expiration and at the $50.00 strike price.  This position has an expected upcoming quarterly ex-dividend on December 17th of $.75 per share, so the potential return for this position includes the ex-dividend since it goes ex-dividend prior to the December 21st options expiration date.  Quarterly earnings were reported recently, so the next earnings report will not be until January 23rd, 2019.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a slightly in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +4.6% absolute return (equivalent to +46.5% annualized return for the next 36 days) if the stock is assigned on the December 21st options expiration date.  These potential returns are high because of the recent decline in LVS stock and also the stock market in general.  The Implied Volatility of the options has increased to the high level of 45.5 when this Covered Calls transactions was executed.

Las Vegas Sands Corp. (LVS) -- New Covered Calls Position
The transactions were:
11/16/2018 Bought 300 Las Vegas Sands shares @ $52.90
11/16/2018 Sold 3 LVS 12/21/2018 $50.00 Call options @ $4.40
Note: a simultaneous buy/write transaction was executed, and the Open Interest in these Call options was 328 contracts.
12/17/2018 Upcoming quarterly ex-dividend of $.75 per share

A possible overall performance result (including commissions) for this Las Vegas Sands Covered Calls position is as follows:
Covered Calls Cost Basis: $14,554.95
= ($52.90 - $4.40) *300 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,317.99
= ($4.40*300 shares) - $2.01 commissions
(b) Dividend Income (If Las Vegas Sands shares assigned at Dec 21st, 2018 expiration): +$225.00
= ($.75 dividend per share x 300 shares)

(c) Capital Appreciation (If LVS assigned at $50.00 strike price at options expiration): -$874.95
+($50.00-$52.90)*300 shares - $4.95 commissions

Total Net Profit (If Las Vegas Sands shares assigned at $50.00 at Dec 21, 2018 options expiration): +$668.04

= (+$1,317.99 +$225.00 -$874.95)

Absolute Return (If Las Vegas Sands shares assigned at $50.00 at Dec 21, 2018 options expiration): +4.6%

= +$668.04/$14,554.95

Annualized Return (If LVS stock assigned at $50.00 at Dec 21, 2018 expiration): +46.5%

= (+$668.04/$14,554.95)*(365/36 days)

These returns will be achieved as long as the stock is above the $50.00 strike price at the Dec. 21st options expiration date.  If the stock declines below the strike price, the breakeven price of $47.75 ($52.90 -$4.40 -$.75) provides 9.7% downside protection below today's purchase price.

Established Covered Calls in Blackstone Group L.P.

Today, a new Covered Calls positions was entered in Blackstone Group L.P. (ticker BX) for the December 21st, 2018 options expiration and at the $34.00 strike price when the stock was at $33.61.  

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

+3.5% absolute return in 39 days (equivalent to a +32.8% annualized return-on-investment) if the price of BX is unchanged upon the Dec 21st options expiration; OR

+4.7% absolute return in 39 days (equivalent to a +43.6% annualized return-on-investment) if the price of BX increases above the $34.00 strike price on the expiration date 

Blackstone Group L.P. (BX) -- New Covered Calls Position

The transactions were as follows:
11/13/2018 Bought 300 shares of Blackstone Group @ $33.61 
11/13/2018 Sold 3 BX Dec 21st, 2018 $34.00 Call options @ $1.14 per share
Note: this was a simultaneous Buy/Write transaction.  There is good liquidity with 2,565 Open Interest contracts and the Implied Volatility of these Call options was 31.0 when this transaction was executed. 

Two possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $9,747.96
= ($33.61 - $1.14)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$342.00
= ($1.14* 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BX is unchanged at $33.61 purchase price at Dec 21st expiration): +$0.00
= ($33.61 -$33.61)* 300 shares; OR
(c) Capital Appreciation (If BX is above $34.00 strike price at Dec 21st expiration): +$112.05
= ($34.00 -$33.61)* 300 shares - $4.95 commission

(a) Total Net Profit (If BX price unchanged at $33.61 at expiration): +$342.00
= (+$342.00 options income +$0.00 dividend income -$0.00 capital appreciation); OR
(b) Total Net Profit (If BX shares assigned at expiration): +$454.05
= (+$342.00 options income +$0.00 dividend income +$112.05 capital appreciation)

(a) Absolute Return (If BX price unchanged at expiration): +3.5%
= +$342.00/$9,747.96
Equivalent Annualized Return: +32.8%
= (+$342.00/$9,747.96)*(365/39 days); OR
(b) Absolute Return (If BX shares assigned at expiration): +4.7%
= +$454.05/$9,747.96
Equivalent Annualized Return: +43.6%
= (+$454.05/$9,747.96)*(365/39 days)

The downside 'breakeven price' at expiration is at $32.47 ($33.61 - $1.14), which is 3.4% below the current market price of $33.61.

The 'crossover price' at expiration is $34.75 ($33.61 + $1.14).  This is the price above which it would have been more profitable to buy-and-hold Blackstone Group stock until the December 21st, 2018 options expiration date.

Established New Covered Calls Position in Citigroup Inc.

Today, a new Covered Calls position was established in Citigroup Inc. (ticker symbol C) with a November 16th, 2018 options expiration date and at the $65.00 strike price. Five hundred shares were purchased at $64.48 and 4 Call options were sold at $1.52 for a net debit cost basis of $62.06 ($64.48 - $1.52).  This position has an expected upcoming quarterly ex-dividend this Friday of $.45 per share, so the potential return for this position includes this dividend.  Quarterly earnings were reported recently, so the next earnings report will not be until mid January.

Two potential return-on-investment results are: (1) +3.1% absolute return in 18 days (equivalent to a +63.4% annualized return-on-investment) if the stock closes at $64.48 (same as today's purchase price); and (2) +3.9% absolute return in 18 days (equivalent to a +79.9% annualized return-on-investment) if the stock closes above the $65.00 strike price on the Nov. 16th options expiration date.  These high potential returns are largely a result of the elevated implied volatility of the Call options (36.3) which is attributable largely to the recent steep decline the the overall stock market in general and also with Citi stock in particular.

Today's transactions and two potential results are detailed below:

1. Citigroup Inc. (C) -- New Covered Calls Position
The transactions were as follows:
10/30/2018 Bought 500 shares of Citigroup Inc. stock @ $64.48 per share 
10/30/2018 Sold 5 Citi Nov 16th, 2018 $65.00 Call options @ $1.52 per share
Note: this was a simultaneous Buy/Write transaction

There are a multitude of possible outcomes, but two possible overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $31,488.30
= ($64.48 - $1.52)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$760.00
= ($1.52 * 500 shares)
(b) Dividend Income: +$225.00
 = $.45 per share x 500 shares 
(c) Capital Appreciation (If Citigroup stock price remains unchanged at $64.48 purchase price at Nov 16th expiration): +$0.00
= ($64.48 -$64.48)* 500 shares; OR
(c) Capital Appreciation (If Citigroup stock is above $65.00 strike price at Nov 16th expiration): +$255.05
= ($65.00 -$64.48)* 500 shares - $4.95 commission

(a) Total Net Profit (If Citi stock price unchanged at $64.48 at Nov. 16th options expiration): +$985.00
= (+$760.00 options income +$225.00 dividend income +$0.00 capital appreciation); OR
(b) Total Net Profit (If stock price is above $65.00 strike price at Nov. 16th options expiration): +$1,240.05
= (+$760.00 options income +$225.00 dividend income +$255.05 capital appreciation)

(a) Absolute Return (If Citi stock price unchanged at $64.48 at Nov. 16th options expiration): +3.1%
= +$985.00/$31,488.30
Equivalent Annualized Return: +63.4%
= (+$985.00/$31,488.30)*(365/18 days); OR
(b) Absolute Return (If stock price is above $65.00 strike price at Nov. 16th options expiration): +3.9%
= +$1,240.05/$31,488.30
Equivalent Annualized Return: +79.9%
= (+$1,240.05/$31,488.30)*(365/18 days)

The downside 'breakeven price' at expiration is at $62.51 ($64.48 - $1.52 -$.45 ex-div), which is 3.1% below the current market price of $64.48.

Continuation of Two Alibaba Covered Calls Positions

Yesterday, both Covered Calls positions in Alibaba Group Holding Ltd. (ticker BABA) were continued by selling November 16th, 2018 $155.00 Call options against the current Alibaba shares owned.  The Covered Calls Advisor considers Alibaba as a core hold and is continuing the pattern of prior months by establishing monthly Covered Calls positions in Alibaba. 

The two Alibaba holdings are now as follows:

• Position #1 -- Long 200 shares BABA stock and short 2 Nov 16, 2018 $155.00 Call options
• Position #2 -- Long 200 shares BABA stock and short 2 Nov 16, 2018 $155.00 Call options

These two positions differ in their original cost basis as well as the options income that has been received to-date.  Alibaba shares in the first position were purchased at $160.00 and at $140.375 in the second position.  The return-on-investment results for each position will be calculated and posted on this blog when the positions are closed out.  

October 19th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had only one position (Alibaba Group Holding Ltd.) with an October 19th, 2018 options expiration. This Covered Calls position closed with the stock price of $142.93 below the $145.00 strike price, so the two Call options expired and the 200 shares remain in the Covered Calls Advisor Portfolio.  Soon, two Call options will be sold against the long stock position to re-establish another Covered Calls position at the November 16th, 2018 options expiration date.  As always, all transactions will be posted on this blog on the same day they occur. 

So far in 2018, thirty-eight of forty-three (88.4%) positions have been closed at a profit.  This far exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  None of the remaining five positions [Alibaba Group Holding Ltd. (two positions), Alphabet Inc., Lam Research Inc., and U.S. Steel Corp.] have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.  For the thirty-eight positions closed out so far in 2018, the average annualized return-on-investment is +28.8%.  

Established New Covered Calls Position in Alphabet Inc.

Today, a new Covered Calls position was established in Alphabet Inc. (although it's still more often still referred to as Google) with a November 16th, 2018 options expiration date. Despite the recent decline in the stock market, including Alphabet stock, the Covered Calls Advisor is now bullish on both Alphabet and Alibaba's long-term prospects and intends to continue establishing monthly Covered Calls positions in both companies. 

As detailed below, two potential return-on-investment results are: (1) +3.3% absolute return in 29 days (equivalent to a +41.9% annualized return-on-investment) if the stock closes at $1,104.78 (same as today's purchase price); and (2) +4.7% absolute return in 29 days (equivalent to a +59.7% annualized return-on-investment) if the stock closes above the $1,120.00 strike price on the Nov. 16th options expiration date.  These high potential returns are largely attributable to the elevated implied volatility of the Call option (32.9) since there is a quarterly earnings release upcoming prior to the options expiration date.

Today's transactions and two potential results are detailed below:

1. Alphabet Inc. (GOOGL) -- New Covered Calls Position

The transactions were as follows:
10/19/2018 Bought 100 shares of Alphabet Inc. stock @ $1,104.78 per share 
10/19/2018 Sold 1 Alphabet Nov 16th, 2018 $1,120.00 Call option @ $35.58 per share
Note: this was a simultaneous Buy/Write transaction

There are a multitude of possible outcomes, but two possible overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $106,925.62
= ($1,104.78 - $35.58)* 100 shares + $5.62 commission

Net Profit Components:
(a) Options Income: +$3,558.00
= ($35.58* 100 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If GOOGL stock price remains unchanged at $1,104.78 strike price at Nov 16th expiration): +$0.00
= ($1,104.78 -$1,104.78)* 100 shares; OR
(c) Capital Appreciation (If GOOGL stock is above $1,104.78 strike price at Nov 16th expiration): +$1,517.05
= ($1,120.00 -$1,104.78)* 100 shares - $4.95 commission

(a) Total Net Profit (If stock price unchanged at $1,104.78 at Nov. 16th options expiration): +$3,558.00
= (+$3,558.00 options income +$0.00 dividend income +$0.00 capital appreciation); OR
(b) Total Net Profit (If stock price is above $1,120.00 strike price at Nov. 16th options expiration): +$5,075.05
= (+$3,558.00 options income +$0.00 dividend income +$1,517.05 capital appreciation)

(a) Absolute Return (If stock price unchanged at $1,104.78 at Nov. 16th options expiration): +3.3%
= +$3,558.00/$106,925.62
Equivalent Annualized Return: +41.9%
= (+$3,558.00/$106,925.62)*(365/29 days); OR
(b) Absolute Return (If stock price is above $1,120.00 strike price at Nov. 16th options expiration): +4.7%
= +$5,075.05/$106,925.62
Equivalent Annualized Return: +59.7%
= (+$5,075.05/$106,925.62)*(365/29 days)

The downside 'breakeven price' at expiration is at $1,069.20 ($1,104.78 - $35.58), which is 3.2% below the current market price of $1,104.78.

Established New Covered Calls Position in Alibaba Group Holding Ltd.

Yesterday, a new Covered Calls position was established in Alibaba Group Holding Ltd. with an October 19th, 2018 options expiration date. Despite the large decline in the stock market for the past two days, the Covered Calls Advisor remains bullish on Alibaba's long-term prospects and intends to continue the pattern of prior months by establishing Covered Calls positions in Alibaba. 

As detailed below, two potential return-on-investment results are: (1) +1.3% absolute return in 9 days (equivalent to a +54.7% annualized return-on-investment) if the stock closes at $139.74 (same as the purchase price); and (2) +5.1% absolute return in 9 days (equivalent to a +208.6% annualized return-on-investment) if the stock closes above the $145.00 strike price on the Oct. 19th options expiration date.  

Today's transactions and two potential results are detailed below:

1. Alibaba Group Holding Ltd. (BABA) -- New Covered Calls Position

The transactions were as follows:
10/11/2018 Bought 200 shares of Alibaba stock @ $139.74 per share 
10/11/2018 Sold 2 Alibaba Oct 19th, 2018 $145.00 Call options @ $1.86 per share
Note: this was a simultaneous Buy/Write transaction

There are a multitude of possible outcomes, but two possible overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $27,582.29
= ($139.74 - $1.86)* 200 shares + $6.29 commission

Net Profit Components:
(a) Options Income: +$372.00
= ($1.86* 200 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock price remains unchanged at $139.74 strike price at Oct 19th expiration): +$0.00
= ($139.74 -$139.74)* 200 shares; OR
(c) Capital Appreciation (If BABA stock is above $145.00 strike price at Oct 19th expiration): +$1,047.05
= ($145.00 -$139.74)* 200 shares - $4.95 commission

(a) Total Net Profit (If stock price unchanged at $139.74 at Oct. 19th options expiration): +$372.00
= (+$372.00 options income +$0.00 dividend income +$0.00 capital appreciation); OR
(b) Total Net Profit: +$1,419.05
= (+$372.00 options income +$0.00 dividend income +$1,047.05 capital appreciation)

(a) Absolute Return: +1.3%
= +$372.00/$27,582.29
Equivalent Annualized Return: +54.7%
= (+$372.00/$27,582.29)*(365/9 days); OR
(b) Absolute Return: +5.1%
= +$1,419.05/$27,582.29
Equivalent Annualized Return: +208.6%
= (+$1,419.05/$27,582.29)*(365/9 days)

The downside 'breakeven price' at expiration is at $137.88 ($139.74 - $1.86), which is 1.3% below the current market price of $139.74.

September 21, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with September 21st, 2018 options expirations:

• One Covered Calls position (Metlife Inc.) closed at the  monthly options expiration in-the-money (stock price above the options strike price), so those shares were assigned (sold) at the strike price. 

• Two positions (Alibaba Group and Lam Research Inc.) closed with their stock prices below the strike price, so the options expired and the long stock positions now remain in the Covered Calls Advisor Portfolio.  Within the next few days, these stocks will either be sold or next month Call options will be sold against the stock to re-establish Covered Calls positions.  As always, all transactions will be posted on this blog on the same day they occur. 

The return-on-investment result for the completed Metlife position was +4.5% absolute return (+13.7% annualized return) over the 119 days investment period.

The cash now available in the Covered Calls Advisor Portfolio from the closing of this position will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

So far in 2018, thirty-eight of forty-one (92.7%) positions were closed at a profit.  This far exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  None of the remaining three positions (Alibaba Group, Lam Research Inc., and U.S. Steel Corp.) have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.  For the thirty-eight positions closed out so far in 2018, the average annualized return-on-investment is +28.8%.  

The details for the Metlife Inc. position are as follows:

Metlife Inc. (MET) -- Covered Calls Position Closed

The transactions details have been as follows:
05/25/2018 Bought 500 MET shares @ $47.63
05/25/2018 Sold 5 MET June 15, 2018 $47.50 Call options @ $.99
Note: a simultaneous buy/write transaction was executed.
06/15/2018 5 MET 6/15/2018 $47.50 Call options expired with stock price below the strike price
08/03/2018 Ex-dividend of $.42 per share
08/06/2018 Sold 5 MET 8/17/2018 $46.50 Call options @ $.33
08/17/2018 5 MET 8/17/2018 $46.50 Call options expired
Note: the price of MET stock was $45.94 upon options expiration
08/20/2018 Sold 5 MET 9/21/2018 $47.50 Call options @ $.52
Note: the price of MET stock was $46.37 when these Calls were sold
09/21/2018  MET stock closed above the $47.50 strike price, so 5 Call options expired and 500 shares were sold at $47.50

The overall performance result (including commissions) for this MET Covered Calls position is as follows:
Stock Purchase Cost Basis: $23,328.30
= ($47.63 -$.99) *500 shares +$8.30 commission

Net Profit:
(a) Options Income: +$903.40
= ($.99 +$.33 +$.52) *500 shares - $16.60 commissions
(b) Dividend Income: +$210.00
= $.42 per share x 500 shares

(c) Capital Appreciation: -$69.95
=+($47.50-$47.63)*500 - $4.95 commission

Total Net Profit: +$1,043.45

= (+$903.40 +$210.00 -$69.95)

Absolute Return: +4.5%

= +$1,043.45/$23,328.30

Annualized Return: +13.7%

= (+$1,043.45/$23,328.30)*(365/119 days)

Closed Postion in Skyworks Solutions Inc.

Last Friday, the August 17th, 2018 Covered Calls position in Skyworks Solutions Inc. (ticker symbol SWKS) expired with the stock price at $91.85, below the $92.50 strike price -- so the Call options expired and the 200 shares were retained in the Covered Calls Advisor's Portfolio.  The stock moved higher today and the position was closed out by selling the 200 shares at $92.46.  The Covered Calls Advisor had already established a next-month (Sept 21st expiration date) Covered Calls position in another semiconductor industry company, Lam Research (whose stock this advisor is more bullish on for the next year), so this position in Skyworks was liquidated today at a nice profit.

As detailed below, this Skyworks Solutions position achieved a return-on-investment result of +2.0% absolute return in 29 days (equivalent to a +25.0% annualized return-on-investment).


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

The transactions were:
07/23/2018 Bought 200 Skyworks Solutions shares @ $95.37
07/23/2018 Sold 2 SWKS 08/17/2018 $92.50 Call options @ $4.37
Note: a simultaneous buy/write transaction was executed.
08/06/2018 Quarterly ex-dividend date with a $.38 per share dividend forthcoming
08/17/2018 2 Call options expired and 200 shares of SWKS stock retained in Covered Calls Advisor Portfolio
08/21/2018 Sold 200 shares of SWKS at $92.46 per share

The overall performance result (including commissions) for this Skyworks Solutions position were as follows:
Covered Calls Cost Basis: $18,204.95
= ($95.37 - $4.37) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$872.66
= ($4.37*200 shares) - $1.34 commissions
(b) Dividend Income: +$76.00 = $.38 per share x 200 shares

(c) Capital Appreciation (SWKS purchased at $95.37 and sold today at $92.46): -$578.95
+($92.46-$95.37)*200 shares - $4.95 commission

Total Net Profit: +$361.71

= (+$872.66 options income +$76.00 dividend income -$586.95 capital appreciation)

Absolute Return: +2.0%

= +$361.71/$18,204.95

Annualized Return: +25.0%

= (+$361.71/$18,204.95)*(365/29 days)

Continuation of Covered Calls Position in Metlife Inc.

Last Friday, Metlife stock closed at $45.94 which was below the $46.50 strike price.  Today, the Covered Calls position was continued by selling 5 September 21, 2018 $47.50 Call options at $.52 when the price of MET was $46.37 per share.  

As detailed below, two potential outcomes for this investment are:

• +2.1% absolute return-on-investment (equivalent to +6.3% on an annualized basis) over the 121 days investment period if the stock closes unchanged at $46.37 on the Sept 21st options expiration date; OR
• +4.5% absolute return-on-investment (equivalent to +13.7% on an annualized basis) over the 121 days investment period if the stock closes above the $47.50 strike price on the Sept 21st 15th options expiration date.

Metlife Inc. (MET) -- New Covered Calls Position

The transactions details to-date have been as follows:
05/25/2018 Bought 500 MET shares @ $47.63
05/25/2018 Sold 5 MET June 15, 2018 $47.50 Call options @ $.99
Note: a simultaneous buy/write transaction was executed.
06/15/2018 5 MET 6/15/2018 $47.50 Call options expired with stock price below the strike price
08/03/2018 Ex-dividend of $.42 per share
08/06/2018 Sold 5 MET 8/17/2018 $46.50 Call options @ $.33
08/17/2018 5 MET 8/17/2018 $46.50 Call options expired
Note: the price of MET stock was $45.94 upon options expiration
08/20/2018 Sold 5 MET 9/21/2018 $47.50 Call options @ $.52
Note: the price of MET stock was $46.37 when these Calls were sold

A possible overall performance result (including commissions) for this MET Covered Calls position is as follows:
Stock Purchase Cost Basis: $23,328.30
= ($47.63 -$.99) *500 shares +$8.30 commission

Net Profit:
(a) Options Income: +$903.40
= ($.99 +$.33 +$.52) *500 shares - $16.60 commissions
(b) Dividend Income: +$210.00
= $.42 per share x 500 shares

(c) Capital Appreciation (If price of Metlife stock is unchanged at $46.37 at Sept 21st options expiration date): -$634.95
=+($46.37-$47.63)*500 - $4.95 commission; OR

(c) Capital Appreciation (If price of Metlife stock is above $47.50 strike price at Sept 21st options expiration date): -$69.95
=+($47.50-$47.63)*500 - $4.95 commission

1. Total Net Profit (If price of Metlife stock is unchanged at $46.37 at Sept 21st options expiration date): +$478.45

= (+$903.40 +$210.00 -$634.95); OR

2. Total Net Profit (If price of Metlife stock is above $47.50 strike price at Sept 21st options expiration date): +$1,043.45

= (+$903.40 +$210.00 -$69.95)

1. Absolute Return (price of Metlife stock is unchanged at $46.37 at Sept 21st options expiration date): +2.1%

= +$478.45/$23,328.30

Annualized Return: +6.3%

= (+$425.05/$23,328.30)*(365/119 days); OR

2. Absolute Return (If price of Metlife stock is above $47.50 strike price at Sept 21st options expiration date): +4.5%

= +$1,043.45/$23,328.30

Annualized Return: +13.7%

= (+$1,043.45/$23,328.30)*(365/119 days)

August 17th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had five positions with August 17th, 2018 options expirations:

• Two Covered Calls positions (Blackstone Group L.P. and Deere & Co.) closed at yesterday's  monthly options expiration in-the-money (stock price above the options strike price), so those shares were assigned (sold) at their respective strike prices. 

• Three positions (Metlife Inc., Skyworks Solutions Inc., and U.S. Steel Corp.) closed with the stock price below the strike price, so the options expired and the long stock positions now remain in the Covered Calls Advisor Portfolio.  Within the next few days, these stocks will either be sold or next month Call options will be sold against the stock to re-establish Covered Calls positions.  As always, all transactions will be posted on this blog on the same day they occur. 

For the two positions assigned on the August 17th expiration, the average annualized return-on-investment results were:

• Blackstone Group L.P.:  +3.0% absolute return (+45.8% annualized return) in 24 days
• Deere & Co: +5.8% absolute return (+49.0% annualized return) in 45 days

The cash now available in the Covered Calls Advisor Portfolio from the closing of these two positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  However, there are three important factors (near all-time high stock market valuations, tightening monetary policies, and rising trade tensions) that are, for the time being, causing the Covered Calls Advisor to increase cash (i.e. money-market) holdings to a majority position in the overall portfolio.   

So far in 2018, thirty-six of thirty-nine positions (92.3%) were assigned profitably.  This far exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  None of the remaining three positions (Metlife Inc., Skyworks Solutions Inc., and U.S. Steel Corp.) have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.  For the thirty-six positions closed out so far in 2018, the average annualized return-on-investment is +29.3%.  

To demonstrate how return-on-investment results for a closed Covered Calls position are calculated, the details for the Blackstone Group assigned position is detailed below:

Blackstone Group L.P. (BX) -- Covered Calls Position Closed

The transactions were as follows:
07/25/2018 Bought 500 shares of Blackstone Group stock @ $35.91 per share 
07/25/2018 Sold 5 BX August 17th, 2018 $36.00 Call options @ $.41 per share
07/27/2018 BX went ex-dividend at $.58 per share
08/17/2018 5 Call options were in-the-money at options expiration, so the 500 shares of Blackstone stock were sold at the $36.00 strike price

The overall performance result (including commissions) was:
Covered Calls Cost Basis: $17,758.30
= ($35.91 - $.41)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$205.00
= ($.41* 500 shares)
(b) Dividend Income: +$290.00
= $.58 ex-div per share  x 500 shares 
(c) Capital Appreciation (BX stock was assigned at $36.00 strike price at Aug 17th expiration): +$40.05
= ($36.00 -$35.91)* 500 shares - $4.95 commission

Total Net Profit: +$535.05
= (+$205.00 options income +$290.00 dividend income +$40.05 capital appreciation)

Absolute Return: +3.0%
= +$535.05/$17,758.30
Equivalent Annualized Return: +45.8%
= (+$535.95/$17,758.30)*(365/24 days)

This result is an example of the 'trifecta' that can sometimes be achieved via Covered Calls investing.  Profit contributions were obtained from all three possible sources: Call options income, dividend income, and stock capital appreciation.

Established Covered Calls in Lam Research Corp.

Today, a Covered Calls position was established in Lam Research Corp. (ticker symbol LRCX) with a September 21st, 2018 expiration and at the $165.00 strike price.  This position has an expected upcoming quarterly ex-dividend on September 6th of $1.10 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise because the ex-dividend is prior to the Sept 21st, 2018 options expiration date.  Quarterly earnings were reported recently, so the next earnings report will not be until mid October.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a slightly in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +2.85% absolute return (equivalent to +52.0% annualized return for the next 20 days) if the stock is assigned early (business day prior to Sept 6th ex-date); OR +3.5% absolute return (equivalent to +35.8% annualized return over the next 36 days) if the stock is assigned on the September 21st options expiration date.


Lam Research Corp. (LRCX) -- New Covered Calls Position
Although unlikely, if the current time value (i.e. extrinsic value) of $4.60 [$7.74 option premium - ($168.14 stock price - $165.00 strike price)] remaining in the two short Call options decays substantially (down to about $.15 or less) by Sept 5th (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 200 Lam Research shares away to capture the dividend payment.

The transactions were:
08/17/2018 Bought 200 Lam Research Corp. shares @ $168.14
08/17/2018 Sold 2 LRCX 09/21/2018 $165.00 Call options @ $7.74
Note: a simultaneous buy/write transaction was executed.
09/06/2018 Expected upcoming quarterly ex-dividend of $1.10 per share

Two possible overall performance results (including commissions) for this Lam Research Covered Calls position are as follows:
Covered Calls Cost Basis: $32,084.95
= ($168.14 - $7.74) *200 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,546.66
= ($7.74*200 shares) - $1.34 commissions
(b) Dividend Income (If option exercised early on Sept 5th, the business day prior to Sept 6th ex-div date): +$0.00; or
(b) Dividend Income (If Lam Research shares assigned at Sept 21st, 2018 expiration): +$220.00
= ($1.10 dividend per share x 200 shares)

(c) Capital Appreciation (If LRCX assigned early on Sept 5th): -$632.95
+($165.00-$168.14)*200 shares - $4.95 commissions; or
(c) Capital Appreciation (If LRCX assigned at $165.00 strike price at options expiration): -$632.95
+($165.00-$168.14)*200 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Sept 5th (business day prior to Sept 6th ex-dividend date)]: +$913.71

= (+$1,546.66 +$0.00 -$632.95); or

2. Total Net Profit (If Lam Research shares assigned at $165.00 at Sept 21, 2018 expiration): +$1,133.71

= (+$1,546.66 +$220.00 -$632.95)

1. Absolute Return [If LRCX option exercised on Sept 5th (business day prior to ex-dividend date)]: +2.85%

= +$913.71/$32,084.95

Annualized Return (If option exercised early): +52.0%

= (+$913.71/$32,084.95)*(365/20 days); or

2. Absolute Return (If Lam Research shares assigned at $165.00 at Sept 21, 2018 expiration): +3.5%

= +$1,133.71/$32,084.95

Annualized Return (If LRCX stock assigned at $92.50 at Aug 17, 2018 expiration): +35.8%

= (+$1,133.71/$32,084.95)*(365/36 days)

Either outcome would provide an excellent return-on-investment result.  These returns will be achieved as long as the stock is above the $165.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $159.30 ($168.14 -$7.74 -$1.10) provides 5.3% downside protection below today's purchase price.

The Covered Calls Advisor has established a set of eleven criteria to evaluate potential Covered Calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least nine of these eleven criteria must be achieved.  As shown in the table below, all of the eleven criteria are achieved for this Lam Research Corp. Covered Calls position.

Covered Calls Position Established in Alibaba Group Holding Ltd.

Today, a new Covered Calls positions was established in Alibaba Group Holding Ltd. with a September 21st, 2018 options expiration date.  A slightly in-the-money position was established given the Covered Calls Advisor's current Overall Market Meter sentiment of Slightly Bearish.

The Covered Calls Advisor intended to continue the pattern of prior months by establishing Covered Calls positions in Alibaba.  The stock price has declined by about ten percent in the last month, so I decided to take advantage of the spike in implied volatility to 37.0 in the Call options when this position was established today.  There is also an earnings report on August 23rd which contributes to the elevated implied volatility.

As detailed below, a potential return-on-investment result is +4.4% absolute return in 39 days (equivalent to a +40.9% annualized return-on-investment).

Today's transactions and a potential result are detailed below:

1. Alibaba Group Holding Ltd. (BABA) -- New Covered Calls Position

The transactions were as follows:
08/14/2018 Bought 200 shares of Alibaba stock @ $172.96 per share 
08/14/2018 Sold 2 Alibaba Sept 21st, 2018 $170.00 Call options @ $10.10 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $32,578.29
= ($172.96 - $10.10)* 200 shares + $6.29 commission

Net Profit Components:
(a) Options Income: +$2,020.00
= ($10.10* 200 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is above $170.00 strike price at Sept 21st expiration): -$596.95
= ($170.00 -$172.96)* 200 shares - $4.95 commission

Total Net Profit: +$1,423.05
= (+$2,020.00 options income +$0.00 dividend income -$596.95 capital appreciation)

Absolute Return: +4.4%
= +$1,423.05/$32,578.29
Equivalent Annualized Return: +40.9%
= (+$1,423.05/$32,578.29)*(365/39 days)

The downside 'breakeven price' at expiration is at $162.86 ($172.96 - $10.10), which is 5.8% below the current market price of $172.96.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the September 21st, 2018 options expiration) for this Alibaba Covered Calls position is 58.7%, so the expected value annualized ROI of this investment (if held until expiration) is +24.0% (+40.9% * 58.7%), a very nice result for this in-the-money Covered Calls position.

The 'crossover price' at expiration is $180.10 = $172.96 + [$10.10 - ($172.96 - $170.00)].
This is the price above which it would have been more profitable to simply buy-and-hold Alibaba stock until the Sept 21st, 2018 options expiration date rather than establishing this Covered Calls position.

Established Covered Calls in Blackstone Group L.P.

Today, a new Covered Calls position was established in Blackstone Group L.P. (ticker BX) for the August 17th, 2018 options expiration and at the $36.00 strike price when the stock was at $35.91.  Based on the Covered Calls Advisor's current Slightly Bearish sentiment, the closest at-the-money position was established.

As detailed below, a potential return-on-investment is +3.0% absolute return in 24 days (equivalent to a +45.9% annualized return-on-investment) if Blackstone stock closes above the $36.00 strike price on the Aug 17th options expiration date.

Blackstone Group L.P. (BX) -- New Covered Calls Position

The implied volatility of the Call options was 25.2 when this position was established.  There is an ex-dividend this Friday (7/27) of $.58 which is included in the return-on-investment calculations below.

The transactions were as follows:
07/25/2018 Bought 500 shares of Blackstone Group stock @ $35.91 per share 
07/25/2018 Sold 5 BX August 17th, 2018 $36.00 Call options @ $.41 per share
07/27/2018 BX has $.58 per share ex-dividend

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $17,758.30
= ($35.91 - $.41)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$205.00
= ($.41* 500 shares)
(b) Dividend Income: +$290.00
= $.58 ex-div per share  x 500 shares 
(c) Capital Appreciation (If BX stock is above $36.00 strike price at Aug 17th expiration): +$40.05
= ($36.00 -$35.91)* 500 shares - $4.95 commission

Total Net Profit: +$535.05
= (+$205.00 options income +$290.00 dividend income +$40.05 capital appreciation)

Absolute Return: +3.0%
= +$535.05/$17,758.30
Equivalent Annualized Return: +45.8%
= (+$535.95/$17,758.30)*(365/24 days)