Established Covered Calls Position in Alibaba Group Holding Ltd.

A new Covered Calls positions was established in Alibaba Group Holding Ltd. with an August 16th, 2019 options expiration date and at the $165.00 strike price when Alibaba was priced at $173.34. 

The Covered Calls Advisor considers Alibaba to be a core portfolio holding, so the current intention is to continue the pattern of prior months by establishing ongoing monthly Covered Calls positions in Alibaba. 

As detailed below, a potential return-on-investment result is +1.1% absolute return in 18 days (equivalent to a +22.9% annualized return-on-investment).
The transactions and a potential result are detailed below:

1. Alibaba Group Holding Ltd. (BABA) -- New Covered Calls Position

The transactions were as follows:
07/30/2019 Bought 300 shares of Alibaba stock @ $173.34 per share 
07/30/2019 Sold 3 Alibaba August 16th, 2019 $165.00 Call options @ $10.20 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $48,948.96
= ($173.34 - $10.20) * 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$3,060.00
= ($10.20* 300 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is above $165.00 strike price at August 16th expiration): -$2,506.95
= ($165.00 -$173.34) * 300 shares - $4.95 commission

Total Net Profit: +$553.05
= (+$3,060.00 options income +$0.00 dividend income -$2,506.95 capital appreciation)

Absolute Return: +1.1%
= +$553.05/$48,948.96
Equivalent Annualized Return: +22.9%
= (+$553.05/$48,948.96)*(365/18 days)

The downside 'breakeven price' at expiration is at $163.14 ($173.34 - $10.20), which is 5.9% below the current market price of $173.34.

Using the Black-Scholes Options Pricing Model, the probability of making a profit (if held until the August 16, 2019 options expiration) for this Alibaba Covered Calls position is 76.9%, so the expected value annualized ROI of this investment (if held until expiration) is +17.6% (+22.9% * 76.9%), a satisfactory result for this moderately in-the-money Covered Calls position, especially given that there is no earnings report prior to the options expiration date.

The 'crossover price' at expiration is $175.20 = $173.34 + [$10.20 - ($173.34 - $165.00)].
This is the price at expiration above which it would have been more profitable to simply buy-and-hold Alibaba stock until the August 16th, 2019 options expiration date rather than establishing this Covered Calls position.