Established Covered Calls Positions in Anthem Inc., Cardinal Health Inc., and Facebook Inc.

This morning, Covered Calls positions were established in Anthem Inc.(ticker symbol ANTM), Cardinal Health Inc.(CAH), and Facebook Inc. (FB) when the Covered Calls Advisor's buy/write limit orders were executed. For Anthem, 100 shares were purchased at $301.59 and 1 January 15th, 2021 Call option was sold at $18.11 at the $290.00 strike price.   For Cardinal Health, 200 shares were purchased at $53.62 and 2 January 15th, 2021 Call options were sold at $4.00 at the $50.00 strike price.  For Facebook, 100 shares were purchased at $268.37 and 1 December 31st, 2020 Call option was sold at $15.63 at the $255.00 strike price. Given the Covered Calls Advisor's current cautious outlook, moderately in-the-money Covered Calls positions were established for each position. The respective Deltas were 67.4 for the Anthem Inc. Covered Call, 80.2 for Cardinal Health, and 78.6 for Facebook, which approximates the probability that the Call options will be in-the-money on the options expiration date. In addition, there is an upcoming ex-dividend of $.4859 per share for the Cardinal Health position on December 30th and potential results for this Covered Calls position includes the possibility of early exercise since this ex-dividend is prior to the options expiration date.  Also, very important to the Covered Calls Advisor, none of these companies have a quarterly earnings report prior to their options expiration dates.

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

• For Anthem Inc.:  +2.3% absolute return (equivalent to +32.3% annualized return-on-investment for the next 26 days) if the stock is assigned on the January 15th, 2021 options expiration date.

• For Cardinal Health Inc.:  +0.8% absolute return (equivalent to +31.1% annualized return-on-investment for the next 9 days) if the stock is assigned early (business day prior to the December 30th ex-dividend date); OR (2) +1.7% absolute return (equivalent to +24.5% annualized return over the next 26 days) if the stock is assigned on the Jan. 15th options expiration date.

• For Facebook Inc.:  +0.9% absolute return (equivalent to +29.7% annualized return over the next 11 days) if the stock is assigned on the December 31st, 2020 options expiration date.

1.  Anthem Inc. (ANTM) -- New Covered Call Position

The Covered Calls Advisor's buy/write limit order at a net debit of $283.48 was transacted as follows:
12/21/2020 Bought 100 Anthem shares @ $301.59
12/21/2020 Sold 1 Anthem 01/15/2021 $290.00 Call option @ $18.11.  The Implied Volatility of the Call option was 30.2 when this transaction was executed.
Note: the Time Value (aka Extrinsic Value) in the Call option was $6.52 per share = [$18.11 Call option premium - ($301.59 stock price - $290.00 strike price)]

A possible overall performance result (including commissions) for this Anthem Inc. Covered Call position is as follows:
Covered Calls Cost Basis: $28,348.67
= ($301.59 - $18.11) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,811.00
= ($18.11 * 100 shares)
(b) Dividend Income (If Anthem stock assigned at Jan. 15th, 2021 expiration): +$0.00

(c) Capital Appreciation (If ANTM shares assigned at $290.00 strike price at options expiration): -$1,159.00
+($290.00 - $301.59) * 100 shares

 Total Net Profit (If Anthem shares assigned at $290.00 strike price at January 15th, 2021 expiration): +$652.00

= (+$1,811.00 option income +$0.00 dividend income -$1,159.00 capital appreciation)

Absolute Return  (If Anthem shares assigned at $290.00 at Jan. 15th, 2021 expiration): +2.3%

= (+$652.00/$28,348.67)

Annualized Return-on-Investment: +32.3%

= (+$652.00/$28,348.67)*(365/26 days)

2.  Cardinal Health Inc. (CAH) -- New Covered Calls Position
The Covered Calls Advisor's buy/write limit order at a net debit of $49.62 was transacted as follows:
12/21/2020 Bought 200 Cardinal Health shares @ $53.62
12/21/2020 Sold 2 CAH 01/15/2021 $50.00 Call options @ $4.00 per share.  The Implied Volatility of the Calls was 27.8.
Note: the Time Value (aka Extrinsic Value) in the Call options was $.38 per share = [$4.00 Call options premium - ($53.62 stock price - $50.00 strike price)]
12/30/2020 Upcoming quarterly ex-dividend of $.4859 per share

Two possible overall performance results (including commissions) for this Cardinal Health Covered Calls position are as follows:
Covered Calls Cost Basis: $9,925.34
= ($53.62 - $4.00) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$800.00
= ($4.00 * 200 shares)
(b) Dividend Income (If option exercised early on Dec. 29th, 2020, the business day prior to the Dec. 30th ex-div date): +$0.00; or
(b) Dividend Income (If Cardinal Health stock assigned at Jan. 15th, 2021 expiration): +$97.18
= ($.4859 dividend per share x 200 shares)

(c) Capital Appreciation (If Cardinal Health Call options assigned early on Dec 29th): -$724.00
+($50.00 - $53.62) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $50.00 strike price at January 15th, 2021 options expiration): -$724.00
+($50.00 - $53.62) * 200 shares

1. Total Net Profit [If option exercised on Dec 29th (business day prior to Dec. 30th ex-dividend date)]: +$76.00

= (+$800.00 options income +$0.00 dividend income - $724.00 capital appreciation); or

2. Total Net Profit (If Cardinal Health shares assigned at $50.00 strike price at Jan. 15th, 2021 expiration): +$173.18

= (+$800.00 options income +$97.18 dividend income -$724.00 capital appreciation)

1. Absolute Return (If option exercised early on Dec. 29th): +0.8%

= +$76.00/$9,925.34

Annualized Return (If option exercised early): +31.1%

= (+$76.00/$9,925.34)*(365/9 days); or

2. Absolute Return (If Cardinal Health shares assigned at $50.00 at Jan. 15th, 2021 options expiration): +1.7%

= +$173.18/$9,925.34

Annualized Return (If CAH shares assigned at $50.00 at Jan. 15, 2021 expiration): +24.5%

= (+$173.18/$9,925.34)*(365/26 days)

Either outcome provides a satisfactory return-on-investment result for this Cardinal Health investment.  These returns will be achieved as long as the stock is above the $50.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $49.1341 ($53.62 -$4.00 -$.4859) provides 8.4% 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 Cardinal Health position, all nine criteria were met.

3.  Facebook Inc. (FB) -- New Covered Call Position

The Covered Calls Advisor's buy/write limit order was transacted as follows:
12/21/2020 Bought 100 Facebook shares @ $268.37
12/21/2020 Sold 1 Facebook 12/31/2020 $255.00 Call option @ $15.63.  The Implied Volatility of the Call option was 37.8 when this transaction occurred.
Note: the Time Value (aka Extrinsic Value) in the Call option was $2.26 per share = [$15.63 Call option premium - ($268.37 stock price - $255.00 strike price)]

A possible overall performance result (including commissions) for this Facebook Inc. Covered Call position is as follows:
Covered Calls Cost Basis: $25,274.67
= ($268.37 - $15.63) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,563.00
= ($15.63 * 100 shares)
(b) Dividend Income (If Facebook stock assigned at Jan. 15th, 2021 expiration): +$0.00

(c) Capital Appreciation (If FB shares assigned at $255.00 strike price at options expiration): -$1,337.00
+($255.00 - $268.37) * 100 shares

 Total Net Profit (If Facebook shares assigned at $255.00 strike price at December 31st, 2020 expiration): +$226.00

= (+$1,563.00 option income +$0.00 dividend income -$1,337.00 capital appreciation)

Absolute Return  (If Facebook shares assigned at $255.00 at Dec. 31st, 2020 expiration): +0.9%

= (+$226.00/$25,274.67)

Annualized Return-on-Investment: +29.7%

= (+226.00/$25,274.67)*(365/11 days)