Last Friday (December 11th), the Covered Calls position in D.R. Horton Inc. (ticker DHI) at the $70.00 strike price closed slightly out-of-the-money at $69.91. The stock market opened higher this morning largely because of optimism that Congress will soon pass a $908 billion Covid-19 relief package. So, soon after the market opened, the Covered Calls Advisor closed out the D.R. Horton position by selling the 400 DHI shares at $70.79.
As detailed below, the return-on-investment result is +2.6% absolute
return in 13 days (equivalent to a +74.3% annualized
return-on-investment).
D.R. Horton Inc. (DHI) -- Covered Calls Position Closed
The buy/write transaction was as follows:
12/01/2020 Bought 400 shares of D.R. Horton Inc. @ $72.26 per share
12/01/2020 Sold 4 D.R. Horton Dec 11th, 2020 $70.00 Call options @ $3.10 per share
Note: the Implied Volatility of the Call options was 32.9 when this Covered Calls position was executed.
12/03/2020 Ex-dividend at $.20 per share
12/11/2020 4 DHI 12/11/2020 $70.00 Call options expired. DHI stock closed at $69.91 so 400 shares remain in the Covered Calls Advisor Portfolio
12/14/2020 Sold 400 DHI shares at $70.79 per share
The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $27,666.68
= ($72.26 - $3.10) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,240.00
= ($3.10 * 400 shares)
(b) Dividend Income: +$80.00
= $.20 per share x 400 shares
(c) Capital Appreciation (DHI stock sold at $70.79 per share): -$588.00
= ($70.79 -$72.26) * 400 shares
Total Net Profit: +$732.00
= (+$1,240.00 options income +$80.00 dividend income -$588.00 capital appreciation)
Absolute Return: +2.6%
= +$732.00/$27,666.68
Equivalent Annualized Return: +74.3%
= (+$732.00/$27,666.68)*(365/13 days)
