Today is Blackstone's $.58 per share quarterly ex-dividend date. Early exercise by the owners of these Call options was expected since there was only $.01 time value [$1.52 (mid-point of $1.40/$1.63 Call options price - ($34.51 stock price - $33.00 strike price)] remaining in the Feb 15th $33.00 Calls. So, the Call owners were willing to immediately forego the remaining time value per share (by exercising their option to buy the shares) in order to capture today's $.58 per share ex-dividend. As detailed below, the per share stock price had increased from $29.81 at the end of 2018 to $34.51 at yesterday's market close.
This Blackstone Covered Calls position was originally established in November of 2018 and the status of this position was included in the calendar year 2018 results (link) which were calculated as of Dec 31st, 2018. Likewise, overall return-on-investment (roi) results will be determined for calendar year 2019 (Jan 1st through Dec 31st, 2019), so the roi result for this Blackstone position was determined from its Jan 1st, 2019 market values through today's closing of the position.
As detailed below, the actual return-on-investment result achieved for this Blackstone position was a +12.5% absolute return (equivalent to +120.0% annualized return) for the 38 days this position was held. As always, the cash received in the Covered Calls Advisor Portfolio will be retained until a new Covered Calls position is established, the transactions details of which will be posted on this blog the same day they occur.
The Covered Calls Advisor Portfolio has had several positions since the beginning of this year that, like this Blackstone position, have experienced extraordinarily large returns. These positions benefited from the unusually swift bull move of the stock market in January. The Covered Calls Advisor cautions you that these types of returns are not customary for a Covered Calls investing strategy. From my decades of Covered Calls investing experience, my expectation is that "over a long-term investing horizon (say 10+ years), a disciplined Covered Calls investor that is cognizant of the six "edges" described above, and works to take advantage of them might expect (on average over the years), to outperform a buy-and-hold benchmark by about 3% to 5% per year." This conclusion was included as part of a post made on this blog more than 8 years ago (See Exploiting Our Covered Calls Investing "Edges"), and it continues to be an appropriate expectation today.
Blackstone Group L.P. (BX) -- Early Assignment of Covered Calls Position
The transactions were:
01/01/2019 Market value of 300 Blackstone Group L.P. shares was $29.81
01/07/2019 Sold 3 BX February 15, 2019 $33.00 Call options @ $.58
Note: Price of BX shares was $31.06 on Jan 7th when these Call options were sold
02/07/2019 Early assignment of 3 BX Feb 15th $33.00 Call options, so 300 shares of BX stock sold at $33.00 strike price
The overall performance result (including commissions) for this Blackstone Covered Calls position was as follows:
Covered Calls Cost Basis: $8,943.00
= $29.81 * 300 shares
Net Profit Components:
(a) Options Income: +$165.03
= $.58 * 300 shares - $8.97 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (BX assigned at $33.00 strike price): +$952.05
+($33.00-$29.81) * 300 shares - $4.95 commission
+($33.00-$29.81) * 300 shares - $4.95 commission
= (+$165.03 options income +$0.00 dividend income +$952.05 capital appreciation)
Absolute Return: +12.5%
Absolute Return: +12.5%
= +$1,117.08/$8,943.00
Annualized Return: +120.0%
= (+$1,117.08/$8,943.00)*(365/38 days)
