Early Assignment of iShares MSCI Emerging Markets ETF Covered Calls

Early this morning the Covered Calls Advisor received notifications from my broker (Schwab) that all 5 iShares MSCI Emerging Markets ETF (ticker symbol EEM) Call options were exercised early, so the 500 shares of iShares MSCI Emerging Markets ETF in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $32.00 strike price. 

Details of the transactions and the results for this iShares MSCI Emerging Markets ETF position are provided below.  When this Covered Calls position was established, the time value (i.e. extrinsic value) was $.56 = [$3.45 options premium - ($34.89 EEM price - $32.00 strike price).  By yesterday's market close, the time value had declined to $0.01 and an owner of 5 EEM May 15th $32.00 Call options chose to exercise their option to buy four days prior to the May 15th options expiration date.  The per share price had increased from $34.89 when the position was originally established (on April 21st) to $36.60 at yesterday's market close.  As a result of this early assignment, the Covered Calls Advisor achieved the full $.56 options income profit per share, and this outcome was achieved 4 days prior to the options expiration date this Friday.  As detailed below, this early assignment provided an attractive return-on-investment (roi) result for the Covered Calls Advisor Portfolio of +1.8% absolute return (equivalent to +30.9% annualized return-on-investment for the 21 days this position was held. 

The Covered Calls Advisor will retain the cash received in the Covered Calls Advisor Portfolio until a new Covered Calls (or 100% Cash-Secured Puts) position is established.  As always, the transactions details for all new positions will be posted on this blog site the same day that they occur.

The detailed results for this EEM Covered Calls position are provided below.


iShares MSCI Emerging Markets ETF (EEM) -- New Covered Calls Position

The transactions were as follows:
04/21/2020 Bought 500 shares of iShares Emerging Markets ETF @ $34.89 per share 
04/21/2020 Sold 5 EEM May 15, 2020 $32.00 Call options @ $3.45 per share
Note: this was a simultaneous Buy/Write transaction.
05/11/2020 Early exercise of 5 EEM May 15th, 2020 $32.00 Call options, so 500 iShares MSCI Emerging Markets ETF shares were assigned (i.e. sold) at the $32.00 strike price.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $15,723.35
= ($34.89 - $3.45) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,725.00
= ($3.45 * 500 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (Early assignment of 500 EEM shares at $32.00 strike price): -$1,445.35
= ($32.00 - $34.89) * 500 shares - $.35 commission

Total Net Profit: +$279.65
= (+$1,725.00 options income +$0.00 dividend income -$1,445.35 capital appreciation)

Absolute Return: +1.8%
= +$279.65/$15,723.35
Equivalent Annualized Return: +30.9%
= (+$279.65/$15,723.35)*(365/21 days)