Covered Calls Established in D.R. Horton Inc.

Early this afternoon, the Covered Calls Advisor's limit order was executed and a Covered Calls position was established in D.R. Horton Inc. (ticker DHI) with an August 21st, 2020 options expiration date. Two D.R. Horton Call options were sold at $3.42 at the $65.00 strike price when the stock price was $67.68.  The Delta was approximately 75 when this transaction was executed -- a moderately in-the-money position which is consistent with the Covered Calls Advisor's current cautious market outlook.  Quarterly earnings were just announced on July 28th, so the next quarterly earnings report will be after the August 21st options expiration date.

D.R. Horton is the largest homebuilder in America by market cap. Importantly, it is considered the best-in-class operator in its industry and has the highest exposure to the critically important entry-level buyers (67% of closings), lowest debt leverage, and least on-balance sheet land risk. The earnings report was very positive and demand for new homes, boosted by record low mortgage rates, is improving nationwide.

As detailed below, a potential return-on-investment result is +1.4% absolute return in 15 days (equivalent to a +34.6% annualized return-on-investment).  


D.R. Horton Inc. (DHI) -- New Covered Calls Position

The Buy/Write transaction was as follows:
08/07/2020 Bought 200 shares of D.R. Horton Inc. stock @ $67.68 per share 
08/07/2020 Sold 2 D.R. Horton Aug 21st, 2020 $65.00 Call options @ $3.42 per share
08/11/2020 Ex-dividend of $.175 per share

A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $12,853.34
= ($67.68 - $3.42) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$684.00
= ($3.42 * 200 shares)
(b) Dividend Income: +$35.00
= $.175 per share x 200 shares
(c) Capital Appreciation (If D.R. Horton stock is above $65.00 strike price at August 21st expiration): -$536.00
= ($65.00 - $67.68) * 200 shares

Total Net Profit: +$183.00
= (+$684.00 options income +$35.00 dividend income -$536.00 capital appreciation)

Absolute Return: +1.4%
= +$183.00/$12,853.34
Equivalent Annualized Return: +34.6%
= (+$183.00/$12,853.34)*(365/15 days)

The downside 'breakeven price' at expiration is at $64.085 ($67.68 - $3.42 - $.175), which is 5.3% below the current market price of $67.68.