As detailed below, a +1.3% absolute
return in 8 days (equivalent to a +60.1% annualized
return-on-investment) was achieved for this position. There was a total net profit of $104.00 since the full $592.00 income (profit) received from selling the options
exceeded the $488.00 net loss in the stock price. This early assignment was a desirable outcome from the Covered Calls Advisor's perspective since the +60.1% annualized return-on-investment exceeds the potential +52.7% if the stock price remains above the $40.00 strike price at market close on the November 20th, 2020 options expiration date.
Truist Financial Corporation (TFC) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was:
11/04/2020 Bought 200 Truist Financial shares @ $42.44
11/04/2020 Sold 2 TFC 11/20/2020 $40.00 Call options @ $2.96
Note: the Time Value (aka Extrinsic Value) in the Call options was $.52 per share = [$2.96 Call options premium - ($42.44 stock price - $40.00 strike price)]
11/11/2020 Early Exercise of two TFC 11/20/2020 $40.00 Call options, so 200
shares of TFC stock were assigned (sold) at the $40.00 strike price
Note: TFC stock was $48.37 when this early assignment transaction occurred.
The overall performance result (including commissions) for this Truist Financial Covered Calls position was as follows:
Covered Calls Cost Basis: $7,897.34
= ($42.44 - $2.96) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$592.00
= ($2.96 * 200 shares)
(b) Dividend Income (Two Call options exercised early on Nov 11th, the business day prior to the Nov 12th ex-div date): +$0.00
(c) Capital Appreciation (TFC Call options assigned early on Nov 11th): -$488.00
= +($40.00 - $42.44) * 200 shares
Total Net Profit [Two Call options exercised on Nov 11th (business day prior to Nov 12th ex-dividend date)]: +$104.00
= (+$592.00 options income +$0.00 dividend income -$488.00 capital appreciation)
