Established Covered Calls Positions in Intel Corp. and Pfizer Inc.

Today, Covered Calls positions were established in Intel Corporation (ticker symbol INTC) and Pfizer Inc. (PFE) when the Covered Calls Advisor's buy/write limit orders were executed. For Intel, 200 shares were purchased at $44.64 and 2 November 20th, 2020 Call options were sold at $2.94 at the $42.50 strike price.   For Pfizer, 400 shares were purchased at $36.24 and 4 November 20th, 2020 Call options were sold at $2.79 at the $34.00 strike price.  Given the Covered Calls Advisor's current cautious outlook, moderately in-the-money Covered Calls positions were established for both companies.  Delta was 69.9 for the Intel Covered Calls position and 73.8 for the Pfizer position -- this approximates the probability that the Call options will be in-the-money on the options expiration date. In addition, there are upcoming ex-dividends of $.33 per share for Intel and $.38 for Pfizer, both on November 5th.   Potential results for this Covered Calls position, as detailed below, includes the possibility of early exercise since these ex-dividends are prior to the November 20th options expiration date.  Also, very important to the Covered Calls Advisor, neither company has a quarterly earnings report prior to the November 20th options expiration date.

As detailed below, two potential return-on-investment results for each of these Covered Calls positions are: 

• For Intel Corp.: +1.9% absolute return (equivalent to +87.5% annualized return-on-investment for the next 8 days) if the stock is assigned early (business day prior to the November 5th ex-dividend date); OR (2) +2.7% absolute return (equivalent to +41.2% annualized return over the next 24 days) if the stock is assigned on the November 20th options expiration date.

• For Pfizer Inc.: +1.6% absolute return (equivalent to +75.0% annualized return-on-investment for the next 8 days) if the stock is assigned early (business day prior to the November 5th ex-dividend date); OR (2) +2.8% absolute return (equivalent to +42.3% annualized return over the next 24 days) if the stock is assigned on the November 20th options expiration date.

1.  Intel Corp. (INTC) -- New Covered Calls Position

The buy/write transaction was:
10/28/2020 Bought 200 Intel shares @ $44.64
10/28/2020 Sold 2 Intel 11/20/2020 $42.50 Call options @ $2.94
Note: the Time Value (aka Extrinsic Value) in the Call options was $.80 per share = [$2.94 Call options premium - ($44.64 stock price - $42.50 strike price)]
11/05/2020 Upcoming quarterly ex-dividend of $.33 per share

Two possible overall performance results (including commissions) for this Intel Covered Calls position are as follows:
Covered Calls Cost Basis: $8,341.34
= ($44.64 - $2.94) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$588.00
= ($2.94 * 200 shares)
(b) Dividend Income (If option exercised early on Nov 4th, the business day prior to the Nov 5th ex-div date): +$0.00; or
(b) Dividend Income (If Intel stock assigned at November 20th, 2020 expiration): +$66.00
= ($.33 dividend per share x 200 shares)

(c) Capital Appreciation (If Intel Call options assigned early on Nov 4th): -$428.00
+($42.50 - $44.64) * 200 shares; or
(c) Capital Appreciation (If INTC shares assigned at $120.00 strike price at options expiration): -$428.00
+($42.50 - $44.64) * 200 shares

1. Total Net Profit [If option exercised on Nov 4th (business day prior to Nov 5th ex-dividend date)]: +$160.00

= (+$588.00 options income +$0.00 dividend income -$428.00 capital appreciation); or

2. Total Net Profit (If Intel shares assigned at $42.50 strike price at November 20th, 2020 expiration): +$226.00

= (+$588.00 +$66.00 -$428.00)

1. Absolute Return (If two Intel Call options exercised early on Nov 4th): +1.9%

= +$160.00/$8,341.34

Annualized Return (If option exercised early): +87.5%

= (+$160.00/$8,341.34)*(365/8 days); or

2. Absolute Return (If Intel shares assigned at $42.50 at Nov 20th, 2020 options expiration): +2.7%

= +$226.00/$8,341.34

Annualized Return (If Intel shares assigned at $42.50 at Nov 20th, 2020 expiration): +41.2%

= (+$226.00/$8,341.34)*(365/24 days)

Either outcome provides an attractive return-on-investment result for this Intel investment.  These returns will be achieved as long as the stock is above the $42.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $41.37 ($44.64 -$2.94 -$.33) provides 7.3% 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 Intel position, all nine criteria were met.

 

2.  Pfizer Inc. (PFE) -- New Covered Calls Position
The buy/write transaction was:
10/28/2020 Bought 400 Pfizer shares @ $36.24
10/28/2020 Sold 4 Pfizer 11/20/2020 $34.00 Call options @ $2.79
Note: the Time Value (aka Extrinsic Value) in the Call options was $.55 per share = [$2.79 Call options premium - ($36.24 stock price - $34.00 strike price)]
11/05/2020 Upcoming quarterly ex-dividend of $.38 per share

Two possible overall performance results (including commissions) for this Pfizer Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $13,382.68
= ($36.24 - $2.79) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,116.00
= ($2.79 * 400 shares)
(b) Dividend Income (If option exercised early on Nov 4th, the business day prior to the Nov 5th ex-div date): +$0.00; or
(b) Dividend Income (If Pfizer stock assigned at Nov 20th, 2020 expiration): +$152.00
= ($.38 dividend per share x 400 shares)

(c) Capital Appreciation (If Pfizer Call options assigned early on Nov 4th): -$896.00
+($34.00 - $36.24) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $34.00 strike price at options expiration): -$896.00
+($34.00 - $36.24) * 400 shares

1. Total Net Profit [If option exercised on Nov 4th (business day prior to Nov 5th ex-dividend date)]: +$220.00

= (+$1,116.00 options income +$0.00 dividend income -$896.00 capital appreciation); or

2. Total Net Profit (If Pfizer shares assigned at $34.00 strike price at November 20th, 2020 expiration): +$372.00

= (+$1,116.00 +$152.00 -$896.00)

1. Absolute Return (If option exercised early on Nov 4th): +1.6%

= +$220.00/$13,382.68

Annualized Return (If option exercised early): +75.0%

= (+$220.00/$13,382.68)*(365/8 days); or

2. Absolute Return (If Pfizer shares assigned at $34.00 at Nov 20th, 2020 options expiration): +2.8%

= +$372.00/$13,382.68

Annualized Return (If Pfizer shares assigned at $34.00 at Nov 20, 2020 expiration): +42.3%

= (+$372.00/$13,382.68)*(365/24 days)

Either outcome provides an attractive return-on-investment result for this Pfizer investment.  These returns will be achieved as long as the stock is above the $34.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $33.07 ($36.24 -$2.79 -$.38) provides 8.7% 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 Pfizer position, all nine criteria were met.