As detailed below, the overall return-on-investment result for this Micron Technology Inc. position if the stock is in-the-money (i.e. above the $44.00 strike price) at expiration is -3.1% absolute return in 24 days (equivalent to a -47.1% annualized return-on-investment).
The recent swift decline in Micron's stock price resulted from the announcement by the CFO that next quarter's revenue is likely to be below the guidance previously provided because of a current slowdown in enterprise demand for its chips. The new two-week Covered Calls position will give the Covered Calls Advisor some additional time to determine if this position should be continued in the future or if it should be closed out at a loss.
The transactions to-date are as follows:08/12/2020 Bought 500 shares of Micron Technology Inc. stock @ $48.34 per share
08/12/2020 Sold 5 Micron Aug 21st, 2020 $47.00 Call options @ $1.96 per share
08/21/2020 5 MU 8/21/2020 Calls expired
08/24/2020 5 MU 9/4/2020 $44.00 Calls sold @ $.95 per share to continue Covered Calls position in Micron
A possible overall performance result (including commissions) if the stock price is above the $44.00 strike price at expiration would be as follows:
Covered Call Cost Basis: $23,193.35
= ($48.34 - $1.96) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,451.65
= ($1.96 + $.95) * 500 shares - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron stock is above $44.00 strike price at Sept 4th expiration): -$2,170.00
= ($44.00 - $48.34) * 500 shares
Total Net Profit: -$718.35
= (+$1,451.65 options income +$0.00 dividend income -$2,170.00 capital appreciation)
Absolute Return: -3.1%
= -$718.35/$23,193.35
Equivalent Annualized Return: -47.1%
= (-$718.35/$23,193.35)*(365/24 days)
