Early Assignment of Intel Corporation Covered Calls

Early this morning, the Covered Calls Advisor received email and text notifications from my broker (Schwab) that the two Intel Corporation (ticker symbol INTC) Call options were exercised early, so the 200 shares of INTC stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $46.00 strike price. 

Details of the transactions and the results for this Intel position are provided below.  When this Covered Calls position was established, the time value (i.e. extrinsic value) was $.40 per share = [$2.41 Call options premium - ($48.01 stock price - $46.00 strike price)].  By yesterday's market close (the last business day prior to the August 6th, 2020 ex-dividend date), the stock price has increased from $48.01 when the position was originally established (on July 29th) to $48.92 at yesterday's market close and the time value had declined to $.00; so, the full $.40 options income profit per share potential was achieved upon the early assignment closing of this position.  Intel's  $.33 per share ex-dividend date is today, so the owner of the Calls exercised their option yesterday to buy the 200 Intel shares at the $46.00 strike price, so they will receive the $.33 per share dividend payment.

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 (as it was in this case) the day prior to the ex-div date.  The reason early assignment is preferred 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.  As detailed below, the early assignment for this Intel position provided a return-on-investment (roi) result for the Covered Calls Advisor Portfolio of +0.9% absolute return (equivalent to +40.0% annualized roi for the 8 days this position was held). The Covered Calls Advisor is pleased with this early assignment since the +40.0% annualized roi achieved exceeds the +34.4% that might have been achieved if the position was instead assigned on the August 14th options expiration date. 

Intel Corp. (INTC) -- Covered Calls Position Closed by Early Assignment

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
08/5/2020 Early exercise of 2 INTC August 14th, 2020 $46.00 Call options, so 200 INTC shares were assigned (i.e. sold) at the $46.00 strike price.

The overall performance result (including commissions) for this Intel Covered Calls position were 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 (INTC options exercised early on Aug 5th, the business day prior to the Aug 6th ex-div date): +$0.00

(c) Capital Appreciation (Intel Call options assigned early on Aug 5th): -$402.00
+($46.00 - $48.01) * 200 shares

 Total Net Profit [Options 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)

 Absolute Return: +0.9%

= +$80.00/$9,121.34

Annualized Return: +40.0%

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