Today is BlackRock's $3.30 per share quarterly ex-dividend date. This BLK Covered Call position was established on February 5th, 2019 when the stock was purchased at $415.90 per share (link to blog post when BlackRock position was established). The price has since risen to $437.33 at yesterday's market close. In the original blog post, the Covered Calls Advisor stated: "Although unlikely, if the current time value (i.e. extrinsic value) of $8.30 [$14.20 option premium - ($415.90 stock price - $410.00 strike price)] remaining in the short call options decays substantially by March 4th (the business day prior to the ex-dividend date), there is a possibility that the Call option owner would exercise early and therefore call the 100 BlackRock 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 BlackRock Inc. position was a +2.1% absolute return (equivalent to +26.7% annualized return) for the 28 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 +26.7% is very close to the +26.9% 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.
BlackRock Inc. (BLK) -- Covered Call Assigned Early
02/05/2019 Bought 100 BlackRock shares @ $415.90
02/05/2019 Sold 1 BlackRock 03/15/2019 $410.00 Call option @ $14.20
Note: a simultaneous buy/write transaction was executed and the implied volatility in the Call option was 22.4.
03/04/2019 Early assignment of 1 BLK Mar 15th $410.00 Call option, so 100 shares of BLK stock sold at $410.00 strike price
Note: price of BLK stock was $437.45 at market close on March 4th
The overall performance result (including commissions) for this BlackRock Covered Call position was as follows:
Covered Calls Cost Basis: $40,174.95
= ($415.90 - $14.20) *100 shares + $4.95 commission
Net Profit Components:
(a) Options Income: +$1,419.33
= ($14.20*100 shares) - $0.67 commissions
(b) Dividend Income (Call option exercised early on Mar 4th, the business day prior to Mar 5th ex-div date): +$0.00
(c) Capital Appreciation: -$594.95
+($410.00-$415.90)*100 shares - $4.95 commissions
+($410.00-$415.90)*100 shares - $4.95 commissions
Total Net Profit: +$824.38
= (+$1,419.33 options income +$0.00 dividend income -$594.95 capital appreciation)
Absolute Return: +2.1%
= +$824.38/$40,174.95
Annualized Return: +26.7%
= (+$824.38/$40,174.95)*(365/28 days)
