There is an ex-dividend date this Friday (12/04) of $.95 per share (1.2% annual dividend yield), so capturing this dividend is included in the potential return-on-investment results detailed below. The time value obtained when this position was established was $3.82 per share [$15.18 Call option premium - ($311.36 stock price - $300.00 strike price)].
As detailed below, a potential return-on-investment result if this position closes in-the-money at the December 18th options expiration date is +1.6% absolute return in 19 days (equivalent to a +30.9% annualized return-on-investment).
The buy/write transactions was as follows:
11/30/2020 Bought 100 shares of Anthem Inc. @ $311.36 per share
11/30/2020 Sold 1 Anthem Dec 18th, 2020 $300.00 Call option @ $15.18 per share
12/04/2020 Ex-dividend at $.95 per share
A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $29,618.67
= ($311.36 - $15.18) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$1,518.00
= ($15.18 * 100 shares)
(b) Dividend Income: +$95.00
= $.95 per share x 100 shares
(c) Capital Appreciation (If Anthem stock is above $300.00 strike price at the Dec 18th options expiration date): -$1,136.00
= ($300.00 -$311.36) * 100 shares
Total Net Profit: +$477.00
= (+$1,518.00 options income +$95.00 dividend income -$1,136.00 capital appreciation)
Absolute Return: +1.6%
= +$477.00/$29,618.67
Equivalent Annualized Return: +30.9%
= (+$477.00/$29,618.67)*(365/19 days)
These returns will be achieved if the Anthem stock is above the $300.00 strike price at the market closing on the December 18th, 2020 options expiration date. If the stock declines below the strike price, the breakeven price of $295.23 ($311.36 -$15.18 -$.95) provides 5.2% downside breakeven protection below today's stock purchase price.
Email me at partlow@cox.net if you have any questions related to this post or to anything else related to Covered Calls investing.
Jeff Partlow
