Covered Call Position Established in Deere & Co.

A new Covered Call position was established in Deere & Co. (ticker DE) with a July 17th, 2020 options expiration date.  One hundred shares of Deere & Co. were purchased at $151.36 and one Call option was sold at $9.50 per share at the $145.00 strike price. Given the Covered Calls Advisor's Bearish overall market outlook, an in-the-money strike price was selected with a Delta (a good approximation of the probability of assignment at expiration) of 67.8. There is an ex-dividend date on 6/29 (Monday) of $.76 per share, so capturing this dividend is included in the potential return-on-investment results detailed below.      

A potential return-on-investment result if this position closes in-the-money at the July 17th options expiration date is +2.7% absolute return in 22 days (equivalent to a +45.6% annualized return-on-investment).  


Deere & Co. (DE) -- New Covered Call Position

The transactions were as follows:
06/26/2020 Bought 100 shares of Deere & Co. @ $151.36 per share 
06/26/2020 Sold 1 John Deere July 17th, 2020 $145.00 Call option @ $9.50 per share
Note: the Implied Volatility of the Call option was 40.1 and the next quarterly earnings report on 7/23 is after the 7/17/2020 options expiration date
06/29/2020 Ex-dividend at $.76 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $14,186.67
= ($151.36 - $9.50) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$950.00
= ($9.50 * 100 shares)
(b) Dividend Income: +$76.00
= $.76 per share x 100 shares 
(c) Capital Appreciation (If John Deere stock is above $145.00 strike price at the July 17th options expiration): -$636.00
= ($145.00 -$151.36) * 100 shares

Total Net Profit: +$390.00
= (+$950.00 options income +$76.00 dividend income -$636.00 capital appreciation)

Absolute Return: +2.7%
= +$390.00/$14,186.67
Equivalent Annualized Return: +45.6%
= (+$390.00/$14,186.67)*(365/22 days)

These returns will be achieved if the stock is above the $145.00 strike price at the market closing on the July 17th, 2020 options expiration date.  If the stock declines below the strike price, the breakeven price of $141.10 ($151.36 -$9.50 -$.76) provides 6.8% downside breakeven protection below today's purchase price.