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.