New Covered Calls Positions Established in Anthem Inc. and Bank of America Corp.

Today, new Covered Calls positions were established in Anthem Inc.(ANTM) and Bank of America Corp.(BAC). Both positions have an intervening ex-dividend (but no earnings report) prior to their options expiration dates, which is included in the return-on-investment details provided below.

Two hundred Anthem Inc. shares were purchased at $268.93 and two $260.00 Sept 18th, 2020 Call options were sold at $12.93, a net debit of $256.00 per share.  Four hundred Bank of America shares were purchased at $25.66 and four $24.50 September 11th, 2020 Call options were sold at $1.35, a net debit of $24.31 per share.

As detailed below, some potential return-on-investment results are: 

• Anthem Inc.: (a) +1.6% absolute return in 14 days (equivalent to a +40.7% annualized return-on-investment) if assigned on the day prior to the 9/9/2020 ex-dividend date; OR (b) +1.9% absolute return in 24 days (equivalent to a +29.4% annualized return-on-investment) if assigned on the day prior to the 9/9/2020 ex-dividend date.
• Bank of America Corp.: (a) +0.8% absolute return in 8 days (equivalent to a +40.7% annualized return-on-investment) if assigned on the day prior to the 9/3/2020 ex-dividend date; OR (b) +1.5% absolute return in 17 days (equivalent to a +32.7% annualized return-on-investment) if assigned on the day prior to the 9/3/2020 ex-dividend date.

1.  Anthem Inc. (ANTM) -- New Covered Calls Position

The buy/write transaction was as follows:
08/26/2020 Bought 200 shares of Anthem stock @ $268.93 per share 
08/26/2020 Sold 2 ANTM Sept 18th, 2020 $260.00 Call options @ $12.93 per share 
Note: The Open Interest in these Calls was 177 contracts and their Implied Volatility was 28.6
09/09/2020 Ex-dividend of $.95 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $51,201.34
= ($268.93 - $12.93) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,586.00
= ($12.93 * 200 shares)
(b) Dividend Income (If ANTM shares assigned on 9/08/2020, the business day prior to the ex-dividend date): = +$0.00; or
(b) Dividend Income (If shares assigned at 9/18/2020 options expiration): +$190.00
= $.95 per share x 200 shares
(c) Capital Appreciation (If ANTM shares assigned on 9/8/2020): -$1,786.00
= ($260.00 -$268.93) * 200 shares; or
(c) Capital Appreciation (If shares above $260.00 strike price at Sept 18th options expiration): -$1,786.00
= ($260.00 -$268.93) * 200 shares

1. Potential Net Profit (If Anthem shares assigned early on 9/8/2020, the day prior to the Sept 9th ex-dividend date): +$800.00
= (+$2,586.00 options income +$0.00 dividend income -$1,786.00 capital appreciation)
2. Potential Net Profit (If Anthem price is above $260.00 strike price at Sept 18th options expiration): +$990.00
= (+$2,586.00 options income +$190.00 dividend income - $1,786.00 capital appreciation)

1. Absolute Return (If Anthem Calls exercised early on 9/8/2020, the day prior to the Sept 9th ex-dividend date): +1.6%
= +$800.00/$51,201.34
Equivalent Annualized Return (If assigned early on day prior to ex-div date): +40.7%
= (+$800.00/$51,201.34)*(365/14 days)
2. Absolute Return (If Anthem price is above $260.00 strike price at Sept 18th options expiration): +1.9%
= +$990.00/$51,201.34
Equivalent Annualized Return (If assigned on 9/18/2020 options expiration date): +29.4%
= (+$990.00/$51,201.34)*(365/24 days)


2. Bank of America Corp. (BAC) -- New Covered Calls Position

The buy/write transaction was as follows:
08/26/2020 Bought 400 shares of Bank of America Corp. stock @ $25.66 per share 
08/26/2020 Sold 4 BAC Sept 11th, 2020 $24.50 Call options @ $1.35 per share
Note: The Open Interest in these Calls was 241 contracts and the Implied Volatility was 27.7
09/03/2020 Ex-dividend of $.18 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $9,726.68
= ($25.66 - $1.35) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$540.00
= ($1.35 * 400 shares)
(b) Dividend Income (If BAC shares assigned on 9/02/2020, the business day prior to the ex-dividend date): = +$0.00; or
(b) Dividend Income (If shares assigned at 9/11/2020 options expiration): +$72.00
= $.18 per share x 400 shares
(c) Capital Appreciation (If BAC shares assigned on 9/2/2020): -$464.00
= ($24.50 -$25.66) * 400 shares; or
(c) Capital Appreciation (If shares above $24.50 strike price at Sept 11th options expiration): -$464.00
= ($24.50 -$25.66) * 400 shares

1. Potential Net Profit (If Bank of America shares assigned on 9/2/2020, the day prior to the Sept 3rd ex-dividend date): +$76.00
= (+$540.00 options income +$0.00 dividend income - $464.00 capital appreciation)
2. Potential Net Profit (If BAC price is above $24.50 strike price at Sept 11th options expiration): +$148.00
= (+$540.00 options income +$72.00 dividend income - $464.00 capital appreciation)

1. Absolute Return (If BAC shares assigned on 9/2/2020, the day prior to the Sept 9th ex-dividend date): +0.8%
= +$76.00/$9,726.68
Equivalent Annualized Return (If assigned early on day prior to ex-div date): +35.6%
= (+$76.00/$9,726.68)*(365/8 days)
2. Absolute Return (If BAC price is above $24.50 strike price at Sept 11th options expiration): +1.5%
= +$148.00/$9,726.68
Equivalent Annualized Return (If assigned on 9/11/2020 options expiration date): +32.7%
= (+$148.00/$9,726.68)*(365/17 days)