Today is Boeing's $2.055 per share quarterly ex-dividend date. This Boeing Covered Call was established on January 22nd, 2019 when the stock was purchased at $356.41 per share (link to blog post when Boeing position was originally established). The price has risen dramatically since its terrific quarterly earnings report and on February 1st, 2019, with the stock price at $391.26 per share, the position was rolled up to the $375.00 strike price and at the same February 15th, 2019 expiration date (link to blog post of roll up transaction). In the original blog post, the Covered Calls Advisor stated: "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 stock continued its strong upward move and closed at $411.11 at yesterday's market close, so (as expected) the Call owner decided to forego the remaining time value of approximately $.11 per share [$36.20 (mid-point of $35.70/$36.70 Call options price - ($411.11 stock price - $375.00 strike price)] in the Feb 15th $375.00 Calls in order to purchase the 100 shares and to obtain today's $2.055 dividend.
As detailed below, the actual return-on-investment result achieved for this Boeing Inc. position was a +2.5% absolute return (equivalent to +53.1% annualized return) for the 17 days this position was held. The Covered Calls Advisor was pleased to allow this outcome to happen since the annualized return-on-investment result achieved of +53.1% exceeds the +45.0% that would have occurred if the stock had instead been assigned at the Feb 15th options expiration date. 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.
Boeing Co. (BA) -- Early Assignment of Covered Call Position
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.
02/01/2019 Bought-to-Close 1 BA Feb 15, 2019 $345.00 Call option @ $46.78
02/01/2019 Sold-to-Open 1 BA Feb 15, 2019 $375.00 Call option @ $18.28
Note: this was a simultaneously executed roll-up transaction executed when BA was at $391.26 per share.
02/06/2019 Early assignment of 1 BA Feb 15th $375.00 Call option, so 100 shares of BA stock sold at $375.00 strike price
The overall performance result (including commissions) for this Boeing Covered Call position was as follows:
Covered Calls Cost Basis: $33,806.95
= ($356.41 - $18.39) *100 + $4.95 commission
Net Profit Components:
(a) Options Income: -$1,017.96
= ($18.39 -$46.78 +18.28) *100 shares) - $6.96 commissions
(b) Dividend Income (Boeing shares assigned on Feb 6th -- day prior to ex-dividend date): +$0.00
(c) Capital Appreciation (BA assigned at $375.00 strike price): +$1,854.05
+($375.00-$356.41)*100 shares - $4.95 commissions
+($375.00-$356.41)*100 shares - $4.95 commissions
= (-$1,017.96 options income +$0.00 dividend income +$1,854.05 capital appreciation)
Absolute Return (Boeing shares assigned at $375.00 on day prior to February 7th options expiration date): +2.5%
Absolute Return (Boeing shares assigned at $375.00 on day prior to February 7th options expiration date): +2.5%
= +$836.09/$33,806.95
Annualized Return: +53.1%
= (+$836.09/$33,806.95)*(365/17 days)
