Yesterday, JPMorgan Chase & Co. (ticker JPM) went ex-dividend at $.90 per share. Today the Covered Calls Advisor decided to close the JPM Covered Calls (CC) position. The stock increased from the purchase price a week ago of $125.22 to $130.64 this morning when the January 15th, 2021 Covered Calls at the $120.00 strike price was closed out.
This JPM Covered Calls position was established with the knowledge that JPM's upcoming quarterly earnings report is before market open on January 15th, 2021 which is also the options expiration date. Since the Covered Calls Advisor prefers to avoid earnings reports and also since there was only $.34 time value [$10.98 Call options price - ($130.64 stock sales price - $120.00 strike price)] remaining in the Call options when this position was closed, the annualized return-on-investment result of +47.5% (detailed below) was better by closing the position today than the +26.2% annualized return-on-investment that would be achieved if the position was instead assigned on the January 15th options expiration date.
As detailed below, the return-on-investment result is +0.9% absolute
return in 7 days (equivalent to a +47.5% annualized
return-on-investment).
JPMorgan Chase & Co. (JPM) -- Covered Calls Position Closed
12/30/2020 Bought 200 JPM shares @ $125.22
12/30/2020 Sold 2 JPM 01/15/2021 $120.00 Call options @ $5.78
01/05/2021 Quarterly ex-dividend of $180.00 = ($.90 per share x 200 shares)
01/06/2021 Closed out (i.e. unwound) the JPM Covered Calls position by Selling-to-Close 200 JPM shares @ $130.64 and simultaneously Buying-to-Close the 2 JPM 1/15/2021 Call options @ $10.98 per share.
The overall performance results (including commissions) for this JPM Covered Calls position was as follows:
Stock Purchase Cost: $23,889.34
= ($125.22 - $5.78) *200 shares + $1.34 commission
Net Profit:
(a) Options Income: -$1,046.29
= ($5.78 - $10.98) *200 shares - $6.29 commissions
(b) Dividend Income (Jan. 5th ex-dividend): +$180.00
= ($.90 dividend per share x 200 shares)
+($130.64 -$125.22)*200 shares
