Covered Calls Established in Boeing Co. Using Dividend Capture Strategy

Today, a Covered Calls position was established in Boeing Co. (ticker symbol BA) with a February 15th, 2019 expiration and at the $345.00 strike price.  This position has an expected upcoming quarterly ex-dividend on February 7th of $2.055 per share, so the potential returns for this position, as detailed below, includes the possibility of early exercise because the ex-dividend is prior to the Feb 15th, 2019 options expiration date.  4th quarter earnings will be reported on January 30th, so the implied volatility in the Call options is elevated reflecting both today's large decline for both the overall market and also Boeing's stock as well as the uncertainty associated with this upcoming earnings release.  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 +2.0% absolute return (equivalent to +42.7% annualized return for the next 17 days) if the stock is assigned early (business day prior to February 7th ex-date); OR +2.7% absolute return (equivalent to +40.1% annualized return over the next 25 days) if the stock is assigned on the February 15th options expiration date.  
Either outcome would provide an excellent return-on-investment result.  These returns will be achieved as long as the stock is above the $345.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $335.965 ($356.41 -$18.39 -$2.055) provides 5.7% downside protection below today's purchase price.


Boeing Co. (BA) -- New Covered Calls Position

This position was established today when the Dow Jones Average was down about 350 points and Boeing was down 2.28% ($8.32 from yesterday's close).  If the current time value (i.e. extrinsic value) of $6.98 [$18.39 Call option price -($356.41 stock price - $345.00 strike price)] remaining in the short Call option decays substantially (down to about $.30 or less) by Feb 6th (the business day prior to the ex-dividend date), there is a possibility that the Boeing Call option owner would exercise early and therefore call the 100 Boeing shares away to capture the dividend payment.

The transactions were:
01/22/2019 Bought 100 Boeing shares @ $356.41
01/22/2019 Sold 1 Boeing 02/15/2019 $345.00 Call option @ $18.39
Note: A simultaneous buy/write transaction was executed.   The Open Interest in the Feb 15th $345.00 Calls was sufficiently liquid at 601 contracts and the Implied Volatility was very attractive at 34.4.
02/07/2019 Upcoming quarterly ex-dividend of $2.055 per share

Two possible overall performance results (including commissions) for this Boeing Co. Covered Call position are as follows:
Covered Calls Cost Basis: $33,806.95
= ($356.41 - $18.39) *100 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,868.33
= ($18.39*100 shares) - $0.67 commissions
(b) Dividend Income (If option exercised early on Feb 6th, the business day prior to Feb 7th ex-div date): +$0.00; or
(b) Dividend Income (If Boeing shares assigned at Feb 15th, 2019 expiration): +$205.50
= ($2.055 dividend per share x 100 shares)

(c) Capital Appreciation (If BA assigned early on Feb 6th): -$1,145.95
+($345.00-$356.41)*100 shares - $4.95 commissions; or
(c) Capital Appreciation (If BA assigned at $345.00 strike price at options expiration): -$1,145.95
+($345.00-$356.41)*100 shares - $4.95 commissions

1. Total Net Profit [If option exercised on Feb 6th (business day prior to Feb 7th ex-dividend date)]: +$717.38

= (+$1,868.33 +$0.00 -$1,145.95); or

2. Total Net Profit (If Boeing shares assigned at $345.00 at Feb 15th, 2019 expiration): +$922.88

= (+$1,868.33 +$205.50 -$1,145.95)

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

= +$717.38/$33,806.95

Annualized Return (If option exercised early): +45.5%

= (+$717.38/$33,806.95)*(365/17 days); or

2. Absolute Return (If Boeing shares assigned at $345.00 at Feb 15th, 2019 expiration): +2.7%

= +$922.88/$33,806.95

Annualized Return (If BA stock assigned at $67.50 at Feb 15th, 2019 expiration): +39.9%

= (+$922.88/$33,806.95)*(365/25 days)

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, ten of the eleven criteria are achieved for this Boeing Co. Covered Call position.