Established Covered Calls in Intel Corporation

Today, a Covered Calls position was established in Intel Corporation (ticker symbol INTC) with a May 15th, 2020 expiration and at the $55.00 strike price.  This position has an upcoming quarterly ex-dividend on May 6th of $.33 per share, so the potential return for this position, as detailed below, includes the possibility of early exercise because the ex-dividend is prior to the May 15th options expiration date.  Quarterly earnings were just reported last week, so the next earnings report will not be until late July.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Bearish, a moderately in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +46.0% annualized return for the next 9 days) if the stock is assigned early (business day prior to May 6th ex-dividend date); OR +1.7% absolute return (equivalent to +33.6% annualized return over the next 19 days) if the stock is assigned on the May 15th options expiration date.


Intel Corporation (INTC) -- New Covered Calls Position

An ex-dividend occurs on May 6th of $.33 per share.  Although unlikely, if the current time value (i.e. extrinsic value) of $.62 [$4.17 option premium - ($58.55 stock price - $55.00 strike price)] remaining in the short call options decays substantially (down to about $.10 or less) by May 5th (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 Intel shares away to capture the dividend payment.

The transactions were:
04/27/2020 Bought 300 Intel shares @ $58.55
04/27/2020 Sold 3 Intel 05/15/2020 $55.00 Call options @ $4.17
Note: a simultaneous buy/write transaction was executed.
05/06/2020 Upcoming quarterly ex-dividend of $.33 per share

Two possible overall performance results (including commissions) for this Intel Covered Calls position are as follows:
Covered Calls Cost Basis: $16,316.01
= ($58.55 - $4.17) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,251.00
= ($4.17 * 300 shares)
(b) Dividend Income (If option exercised early on May 5th, the business day prior to May 6th ex-div date): +$0.00; or
(b) Dividend Income (If INTC assigned at May 15th, 2020 expiration): +$99.00
= +($.33 dividend per share x 300 shares)

(c) Capital Appreciation (If INTC assigned early on May 5th): -$1,065.00
= +($55.00 - $58.55) * 300 shares; or
(c) Capital Appreciation (If INTC assigned at $55.00 strike price at options expiration): -$1,065.00
= +($55.00 - $58.55) * 300 shares

1. Total Net Profit [If option exercised on May 5th (business day prior to May 6th ex-dividend date)]: +$186.00

= (+$1,251.00 +$0.00 -$1,065.00); or

2. Total Net Profit (If Intel assigned at $55.00 at May 15, 2020 expiration): +$285.00

= (+$1,251.00 +$99.00 -$1,065.00)

1. Absolute Return [If option exercised on May 5th (business day prior to ex-dividend date)]: +1.1%

= +$185.00/$16,316.01

Annualized Return (If option exercised early): +46.0%

= (+$185.00/$16,316.01)*(365/9 days); or

2. Absolute Return (If Intel assigned at $55.00 at May 15th, 2020 expiration): +1.7%

= +$285.00/$16,316.01

Annualized Return (If Intel assigned at $55.00 at May 15, 2020 expiration): +33.6%

= (+$285.00/$16,316.01)*(365/19 days)

Either outcome provides a good return-on-investment result for this investment.  These returns will be achieved as long as the stock is above the $55.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $54.05 ($58.55 -$4.17 -$.33) provides 7.7% downside protection below today's stock purchase price.