Established Covered Calls Position in Intel Corporation Using the Dividend Capture Strategy

Today a Covered Calls position was established in Intel Corporation (ticker symbol INTC) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $48.01 and 2 August 14th, 2020 Call options were sold at $2.41 at the $46.00 strike price.   Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Calls position was established -- the Delta was 71.4, which closely approximates the probability that the Call options will be in-the-money on the options expiration date. In addition, there is an upcoming ex-dividend of $.33 per share on August 6th which provides an annual dividend yield of 2.7% at the current stock price of $48.01.  Potential results for this Covered Calls position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the August 14th options expiration date.

As detailed below, two potential return-on-investment results are: 

•  +0.9% absolute return (equivalent to +40.0% annualized return-on-investment for the next 8 days) if the stock is assigned early (business day prior to the August 6th ex-dividend date); OR 

• +1.6% absolute return (equivalent to +34.4% annualized return over the next 17 days) if the stock is assigned on the August 14th options expiration date.

Intel Corp. (IBM) -- New Covered Calls Position

The buy/write transaction was:
07/29/2020 Bought 200 Intel shares @ $48.01
07/29/2020 Sold 2 Intel 8/14/2020 $46.00 Call options @ $2.41
Note: the Time Value (aka Extrinsic Value) in the Call options was $.40 per share = [$2.41 Call options premium - ($48.01 stock price - $46.00 strike price)]
08/06/2020 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: $9,121.34
= ($48.01 - $2.41) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$482.00
= ($2.41 * 200 shares)
(b) Dividend Income (If option exercised early on Aug 5th, the business day prior to the Aug 6th ex-div date): +$0.00; or
(b) Dividend Income (If Intel stock assigned at August 14th, 2020 expiration): +$66.00
= ($.33 dividend per share x 200 shares)

(c) Capital Appreciation (If Intel Call options assigned early on Aug 5th): -$402.00
+($46.00 - $48.01) * 200 shares; or
(c) Capital Appreciation (If INTC shares assigned at $120.00 strike price at options expiration): -$402.00
+($46.00 - $48.01) * 200 shares

1. Total Net Profit [If option exercised on Aug 5th (business day prior to Aug 6th ex-dividend date)]: +$80.00

= (+$482.00 options income +$0.00 dividend income -$402.00 capital appreciation); or

2. Total Net Profit (If Intel shares assigned at $46.00 strike price at August 14th, 2020 expiration): +$146.00

= (+$482.00 +$66.00 -$402.00)

1. Absolute Return (If two Intel Call options exercised early on Aug 5th): +0.9%

= +$80.00/$9,121.34

Annualized Return (If option exercised early): +40.0%

= (+$80.00/$9,121.34)*(365/8 days); or

2. Absolute Return (If Intel shares assigned at $46.00 at Aug 14th, 2020 options expiration): +1.6%

= +$146.00/$9,121.34

Annualized Return (If Intel shares assigned at $46.00 at Aug 14th, 2020 expiration): +34.4%

= (+$146.00/$9,121.34)*(365/17 days)

Either outcome provides an attractive return-on-investment result for this Intel investment.  These returns will be achieved as long as the stock is above the $46.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $45.27 ($48.01 -$2.41 -$.33) provides 5.7% downside protection below today's stock purchase price.

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Intel position, all nine criteria were met.