Today is Citigroup's $.45 per share quarterly ex-dividend date. This Citi Covered Calls position was established on January 23rd, 2019 when the stock was purchased at $62.24 per share (link to blog post when Citigroup position established). The price has since risen to $64.46 at yesterdays's market close. In the original blog post, the Covered Calls Advisor stated: "if the current time value (i.e. extrinsic value) of $.61 [$2.85 Call options price - ($62.24 stock price - $60.00 strike price)] remaining in the three short Call options decays substantially (down to about $.15 or less) by January 31st (the business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 300 Citigroup shares away to capture the dividend payment. Prior to yesterday's market close, the Call owners did decide to forego the remaining approximately $.12 per share time value [$4.58 (mid-point of $4.45/$4.70 Call options price - ($64.46 stock price - $60.00 strike price)] in the Feb 15th $60.00 Calls in order to purchase the 300 shares and to obtain today's $.45 dividend.
As detailed below, the actual return-on-investment result achieved for this Citigroup Inc. position was a +1.0% absolute return (equivalent to +39.6% annualized return) for the 9 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 +39.6% exceeds the +26.4% 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.
This February 2019 monthly Covered Calls position is the third consecutive month where the Covered Calls Advisor has utilized the Dividend Capture Strategy on a money center bank stock. Using good timing as indicated using this advisor's Dividend Capture Strategy worksheet, selling
monthly Covered Calls 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 provide higher annualized return results than would be achieved with Covered Calls in these same stocks during their non-ex-dividend months. For the December 2018 monthly options expiration, a Bank of America Covered Calls position was established (BAC Position Link), and a JPMorgan Chase & Co. Covered Calls position was established (JPM Position Link) for the January 2019 monthly options expiration. For these two positions, the dividend was captured and the stocks were profitably assigned at expiration. From the date when these two Covered Calls positions were established, the Bank of America position achieved a +29.9% annualized return-on-investment result and the JPMorgan Chase position achieved +77.4%.
The transactions for this month's Citigroup Covered Calls position were:
01/23/2019 Bought 300 Citigroup shares @ $62.24
01/23/2019 Sold 3 Citigroup 02/15/2019 $60.00 Call options @ $2.85
Note: A simultaneous buy/write transaction was executed. The Open Interest in these Calls was very large at 14,920 contracts (so there is a nice, tight bid/ask spread) and the Implied Volatility was also at an attractive level of 27.5.
02/01/2019 Upcoming quarterly ex-dividend of $.45 per share
The overall performance result (including commissions) for this
Citi Covered Calls position was as follows:
Covered Calls Cost Basis: $17,821.95
= ($62.24 - $2.85) *300 + $4.95 commission
Net Profit Components:
(a) Options Income: +$850.99
= ($2.85*300 shares) - $4.01 commissions
(b) Dividend Income (3 Call options exercised early on Jan 31st, the business day prior to the ex-div date): +$0.00
(c) Capital Appreciation: -$676.95
+($60.00-$62.24)*300 shares - $4.95 commissions
+($60.00-$62.24)*300 shares - $4.95 commissions
Total Net Profit [3 Call options exercised on Jan 31st (business day prior to Feb 1st ex-dividend date)]: +$174.04
= (+$850.99 +$0.00 -$676.95)
Absolute Return on Investment: +1.0%
= +$174.04/$17,821.95
Annualized Return: +39.6%
= (+$174.04/$17,821.95)*(365/9 days)
