Early Assignment of Morgan Stanley Covered Calls

Surprisingly, the four Morgan Stanley August 7th, 2020 $48.00 Call options were exercised early on the day prior to today's (July 30th) ex-dividend date. The reason this was a surprise to the Covered Calls Advisor was that the owner of these Call options decided to immediately forgo the remaining $.31 time value [$2.55 midpoint value of Call options $2.48/$2.61 Bid/Ask price - ($50.24 current stock price - $48.00 strike price)] in the Calls to buy the stock and therefore also capture today's $.35 ex-dividend. This is a good outcome for the Covered Calls Advisor since the resulting +35.0% annualized return-on-investment (aroi) achieved is better than the +32.1% maximum possible aroi that might have been achieved later at the options expiration date if the stock was above the $48.00 strike price on the expiration date.  As detailed below, a net profit of $128.00 was achieved in one week since the full $1,136 income (profit) received from selling the options exceeded the $1,008 loss in the stock price.

For any Covered Calls position where there is an ex-dividend date prior to the options expiration date, the Covered Calls Advisor usually prefers to have the stock called away (assigned) early, normally the day prior to the ex-div date.  The reason is that the Covered Calls Advisor's Dividend Capture Strategy spreadsheet was designed to identify positions where the aroi from early assignment is greater than what might be achieved if the stock is instead assigned at the options expiration date -- see item #8 below:

Morgan Stanley (MS) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was:
07/23/2020 Bought 400 Morgan Stanley shares @ $50.52
07/23/2020 Sold 4 Morgan Stanley 8/07/2020 $48.00 Call options @ $2.84
07/29/2020 Early exercise of 4 MS August 7th, 2020 $48.00 Call options, so 400 MS shares were assigned (i.e. sold) at the $48.00 strike price.

The overall performance result (including commissions) for this Morgan Stanley Covered Calls position was as follows:
Covered Calls Cost Basis: $19,074.68
= ($50.52 - $2.84) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,136.00
= ($2.84 * 400 shares)
(b) Dividend Income (Call options exercised early on July 29th, the business day prior to the July 30th ex-div date): +$0.00

(c) Capital Appreciation: -$1,008.00
+($48.00 - $50.52) * 400 shares

Total Net Profit: +$128.00

= (+$1,136.00 options income +$0.00 dividend income -$1,008.00 capital appreciation)

Absolute Return: +0.7%

= +$128.00/$19,074.68

Annualized Return: +35.0%

= (+$128.00/$19,074.68)*(365/7 days)