Today is Delta's $.35 per share quarterly ex-dividend date. This DAL Covered Calls position was established on January 23rd, 2019 when the stock was purchased at $47.01 per share (link to blog post when Delta position established). The price has since risen to $50.43 at yesterday's market close. In the original blog post, the Covered Calls Advisor stated: "If the current time value (i.e. extrinsic value) of $1.18 [$3.19 Call options price - ($47.01 stock price - $45.00 strike price)] remaining in the three short Call options decays substantially (down to about $.15 or less) by the business day prior to the estimated ex-dividend date, there is a possibility that the Call options owner would exercise early and therefore call the 300 Delta shares away to capture the dividend payment. Yesterday, the remaining time value was close to $0.00, so the Call owner did exercise early.
As detailed below, the actual return-on-investment result achieved for this Delta Air Lines position was a +2.6% absolute return (equivalent to +26.6% annualized return) for the 36 days this position was held. The Covered Calls Advisor was satisfied to allow this outcome to happen since the annualized return-on-investment result achieved of +26.6% exceeds the +24.0% that would have occurred if the stock had instead been assigned at the March 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.
Delta Air Lines Inc. (DAL) -- Early Assignment of Covered Calls PositionThe transactions were:
01/23/2019 Bought 300 Delta Air Lines shares @ $47.01
01/23/2019 Sold 3 DAL 03/15/2019 $45.00 Call options @ $3.19
Note: A simultaneous buy/write transaction was executed. The Open Interest in these Calls was 1,551 contracts and the Implied Volatility was 31.3.
02/27/2019 Early assignment of 3 DAL Mar 15th $45.00 Call options, so 300 shares of Delta stock sold at $45.00 strike price
The overall performance results (including commissions) for this
Delta Covered Calls position was as follows:
Covered Calls Cost Basis: $13,150.95
= ($47.01 - $3.19) *300 + $4.95 commission
Net Profit Components:
(a) Options Income: +$952.99
= ($3.19*300 shares) - $4.01 commissions
(b) Dividend Income (Option exercised early on Feb 27th, the business day prior to the ex-div date): +$0.00
(c) Capital Appreciation: -$607.95
+($45.00-$47.01)*300 shares - $4.95 commissions
+($45.00-$47.01)*300 shares - $4.95 commissions
Total Net Profit: +$345.04
= (+$952.99 +$0.00 -$607.95)
Absolute Return: +2.6%
= +$345.04/$13,150.95
Annualized Return: +26.6%
= (+$345.04/$13,150.95)*(365/36 days)
