Established Covered Calls Position in Schlumberger N.V. Using the Dividend Capture Strategy

Today a Covered Calls position was established in Schlumberger (ticker symbol SLB) when the Covered Calls Advisor's buy/write limit order was executed -- 400 shares were purchased at $19.18 and 4 September 18th, 2020 Call options were sold at $1.92 at the $17.50 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 79.8, 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 $.125 per share on September 1st which provides an annual dividend yield of 2.6% at the current stock price of $19.18.  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: 

•  +1.4% absolute return (equivalent to +72.5% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the September 1st ex-dividend date); OR 

• +2.1% absolute return (equivalent to +30.9% annualized return over the next 25 days) if the stock is assigned on the September 18th options expiration date.

Schlumberger N.V. (SLB) -- New Covered Calls Position
The buy/write transaction was:
08/25/2020 Bought 400 Schlumberger shares @ $19.18
08/25/2020 Sold 4 Schlumberger 9/18/2020 $17.50 Call options @ $1.92
Note: the Time Value (aka Extrinsic Value) in the Call options was $.24 per share = [$1.92 Call options premium - ($19.18 stock price - $17.50 strike price)]
09/01/2020 Upcoming quarterly ex-dividend of $.125 per share

Two possible overall performance results (including commissions) for this Schlumberger Covered Calls position are as follows:
Covered Calls Cost Basis: $6,906.68
= ($19.18 - $1.92) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$768.00
= ($1.92 * 400 shares)
(b) Dividend Income (If option exercised early on Aug 31st, the business day prior to the Sept 1st ex-div date): +$0.00; or
(b) Dividend Income (If Schlumberger stock assigned at Sept 18th, 2020 expiration): +$50.00
= ($.125 dividend per share x 400 shares)

(c) Capital Appreciation (If Schlumberger Call options assigned early on Aug 31st): -$672.00
+($17.50 - $19.18) * 400 shares; or
(c) Capital Appreciation (If SLB shares assigned at $17.50 strike price at options expiration): -$672.00
+($17.50 - $19.18) * 400 shares

1. Total Net Profit [If option exercised on Aug 31st (business day prior to Sept 1st ex-dividend date)]: +$96.00

= (+$768.00 options income +$0.00 dividend income -$672.00 capital appreciation); or

2. Total Net Profit (If Schlumberger shares assigned at $17.50 strike price at September 18th, 2020 expiration): +$146.00

= (+$768.00 +$50.00 -$672.00)

1. Absolute Return (If two SLB Call options exercised early on Aug 31st): +1.4%

= +$96.00/$6,906.68

Annualized Return (If options assigned early): +72.5%

= (+$96.00/$6,906.68)*(365/7 days); or

2. Absolute Return (If Schlumberger shares assigned at $17.50 at Sept 18th, 2020 options expiration): +2.1%

= +$146.00/$6,906.68

Annualized Return (If Schlumberger shares assigned at $17.50 at Sept 18th, 2020 expiration): +30.9%

= (+$146.00/$6,906.68)*(365/25 days)

Either outcome provides an attractive return-on-investment result for this Schlumberger investment.  These returns will be achieved as long as the stock is above the $17.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $17.135 ($19.18 -$1.92 -$.125) provides 10.7% 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 Schlumberger position, all nine criteria were met.