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)
