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.
But the stock rebounded today with Micron's announcement that it has developed the world's fastest graphics memory solution which will power NVIDIA's leading edge Graphics Processing Units (GPUs) for its gaming technology.
The current Covered Calls Advisor decided to roll up the Micron Covered Calls position from the $44.00 strike with an options expiration date this Friday (9/4/2020) to the $47.00 strike price at the Sept 18th, 2020 options expiration date. With the stock price at $47.82 today, there was only $.06 [$3.88 Call options price - ($47.82 share price - $44.00 strike price)] of time value remaining in the Sept 4th $44.00 Call options and the option premium received from selling the five Sept 18th $47.00 Calls was $2.33 per share. As shown below, these transactions could enable a losing position to recover to breakeven by the September 18th options expiration date if Micron's stock price is above the $47.00 strike price.
A potential return-on-investment result for this Micron Technology Covered Calls since its inception on August 12th, 2020 is -0.0% absolute return in 38 days (equivalent to a -0.0% annualized return-on-investment).
Micron Technology Inc. (MU) -- Continuation of Covered Calls Position
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
9/2/2020 Bought-to-Close 5 MU 9/4/2020 $44.00 Calls @ $3.88 per share
9/2/2020 Sold-to-Open 5 MU 9/18/2020 $47.00 Calls @ $2.33 per share
Note: this was a simultaneous rollout transaction
A possible overall performance result (including commissions) if the stock price is above the $47.00 strike price at the Sept 18th options expiration would be:
Covered Call Cost Basis: $23,193.35
= ($48.34 - $1.96) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$669.95
= ($1.96 + $.95 - $3.88 +$2.33) * 500 shares - $10.05 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron stock is above $47.00 strike price at Sept 18th expiration): -$670.00
= ($47.00 - $48.34) * 500 shares
Total Net Profit: -$0.05
= (+$669.95 options income +$0.00 dividend income -$670.00 capital appreciation)
Absolute Return: -0.0%
= -$0.05/$23,193.35
Equivalent Annualized Return: -0.0%
= (-$0.05/$23,193.35)*(365/38 days)
