As detailed below, the return-on-investment result for this Phillips 66 Covered Calls position was +0.9% absolute return in 9 days (equivalent to a +36.2% annualized return-on-investment). This result is a good example of the advantage that can accrue from selling in-the-money Covered Calls using the Covered Calls Advisor's Dividend Capture strategy. Despite the stock declining by 4.1% (from $64.39 purchase price to $61.75 sale price), a profit was still achieved from this position.
Phillips 66 (PSX) -- Covered Calls Position Closed
08/12/2020 Bought 300 Phillips 66 shares @ $64.39
08/12/2020 Sold 3 Phillips 66 8/21/2020 $62.50 Call options @ $2.47
Note: the Time Value (aka Extrinsic Value) in the Call options was $.58 per share = [$2.47 Call options premium - ($64.39 stock price - $62.50 strike price)]
08/17/2020 Quarterly ex-dividend of $.90 per share
08/21/2020 Closed PSX Covered Calls position by simultaneously selling 300 PSX shares and buying-to-close 3 8/21/2020 $62.50 Call options at a net credit of $61.58.
The overall performance result (including commissions) for this Phillips 66 Covered Calls position was as follows:
Covered Calls Cost Basis: $18,578.01
= ($64.39 - $2.47) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income (Bought-to-Close 3 PSX Call options @ $.17 per share): +$687.99
= ($2.47 - $.17) * 300 shares - $2.01 commission
(b) Dividend Income: +$270.00
= ($.90 dividend per share x 300 shares)
(c) Capital Appreciation (300 PSX shares sold at $61.75): -$792.00
+($61.75 - $64.39) * 300 shares
+($61.75 - $64.39) * 300 shares
= (+$687.99 options income +$270.00 dividend income -$792.00 capital appreciation)
Absolute Return: +0.9%
Absolute Return: +0.9%
= +$165.99/$18,578.01
Annualized Return (If PSX shares assigned at $62.50 at Aug 21st, 2020 expiration): +36.2%
= (+$165.99/$18,578.01)*(365/9 days)
