Early Assignment of Bristol-Myers Squibb Co. Covered Calls

Before market open this morning, I received email and text notifications from my broker (Schwab) that all five Bristol-Myers Squibb Co. (ticker symbol BMY) Call options were exercised early, so the 500 shares of Bristol-Myers stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $50.00 strike price. 

Details of the transactions and the results for this Bristol-Myers position are provided below.  When this Covered Calls position was established, the time value (i.e. extrinsic value) was $.61 = [$5.46 options premium - ($54.85 stock price - $50.00 strike price)].  By yesterday's market close (the last business day prior to the July 2nd, 2020 ex-dividend date), the time value had declined to $0.42.  So, the full $.61 options income profit per share potential was achieved upon the early assignment closing of this position.  The per share price has increased from $54.85 when the position was originally established (on June 19th) to $58.98 at yesterday's market close.  The owner of the Calls exercised their option to buy the shares at the $50.00 strike price in order to capture the $.45 dividend.  As detailed below, this early assignment provided a return-on-investment (roi) result for the Covered Calls Advisor Portfolio of +1.2% absolute return (equivalent to +34.7% annualized roi for the 13 days this position was held. The Covered Calls Advisor is pleased with this early assignment since the +34.7% annualized roi achieved exceeds the +27.0% that would have been achieved if the position was instead assigned on the July 17th options expiration date. 

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 details of any new transactions will be posted on this blog site the same day that they occur.  The detailed results for this Bristol-Myers position are provided below.


Bristol-Myers Squibb Co. (BMY) -- Covered Calls Position Assigned Early
The buy/write transaction was:

06/19/2020 Bought 500 Bristol-Myers Squibb Co. shares @ $54.85
06/19/2020 Sold 5 BMY 7/17/2020 $50.00 Call options @ $5.46
Note: The Call options' Implied Volatility was 40.4 when this position was transacted and the Open Interest was 385 contracts.
07/01/2020 5 Call options exercised so 500 shares of BMY stock assigned (i.e. sold) at the $50.00 strike price

The overall performance result (including commissions) for this Bristol-Myers Covered Calls position was as follows:
Covered Calls Cost Basis: $24,698.35
= ($54.85 - $5.46) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$2,730.00
= ($5.46 * 500 shares)
(b) Dividend Income (Call options exercised early on July 1st, the business day prior to the July 2nd ex-div date): +$0.00

(c) Capital Appreciation (BMY Call options assigned early on July 1st): -$2,425.00
+($50.00 - $54.85) * 500 shares

Total Net Profit: +$305.00

= (+$2,730.00 options income +$0.00 dividend income -$2,425.00 capital appreciation)

Absolute Return: +1.2%

= +$305.00/$24,698.35

Annualized Return (If option exercised early): +34.7%

= (+$305.00/$24,698.35)*(365/13 days)