Established Covered Calls Position in Citizens Financial Group Inc. Using the Dividend Capture Strategy

Today a Covered Calls position was established in Citizens Financial Group Inc.(ticker symbol CFG) when the Covered Calls Advisor's buy/write limit order was executed -- 400 shares were purchased at $36.99 and 4 February 19th, 2021 Call options were sold at $2.45 per share at the $35.00 strike price.  There is an upcoming ex-dividend on February 2nd, 2021 of $.39 per share -- a generous 4.2% annual dividend yield at the current stock price. Also important to the Covered Calls Advisor, Citizens Financial reported their 4th quarter 2020 earnings per share last week so there will not be any earnings report surprises prior to the Feb. 19th options expiration date. These reported earnings beat analysts' estimates by 8.7% and I was also encouraged by their Board's buyback authorization representing 4.5% of their current outstanding shares.

Two potential return-on-investment results for this position are detailed below including the possibility of early exercise since the ex-dividend is prior to the February 19th, 2021 options expiration date.  Given the Covered Calls Advisor's current Overall Market Meter outlook, a conservative in-the-money Covered Calls position was established -- the Delta was 72.6, which approximates the probability that the Call options will be in-the-money on the options expiration date. 

As detailed below, two potential return-on-investment results are: 

•  +1.3% absolute return (equivalent to +60.8% annualized return for the next 8 days) if the stock is assigned early (business day prior to the February 2nd ex-dividend date); OR 

• +2.5% absolute return (equivalent to +34.5% annualized return over the next 26 days) if the stock is assigned on the February 19th options expiration date.

Citizens Financial Group Inc. (CFG) -- New Covered Calls Position
The buy/write transaction was:

01/25/2021 Bought 400 Citizens Financial shares @ $36.99
01/25/2021 Sold 4 Citizens Financial 02/19/2021 $35.00 Call options @ $2.45
Note: the Time Value (aka Extrinsic Value) in the Call options was $.46 per share = [$2.45 Call options premium - ($36.99 stock price - $35.00 strike price)]
02/02/2021 Upcoming quarterly ex-dividend of $.39 per share

Two possible overall performance results (including commissions) for this Citizens Financial Covered Calls position are as follows:
Covered Calls Cost Basis: $13,818.68
= ($36.99 - $2.45) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$980.00
= ($2.45 * 400 shares)
(b) Dividend Income (If option exercised early on February 1st, the business day prior to the Feb. 2nd ex-div date): +$0.00; or
(b) Dividend Income (If Citizens Financial stock assigned at Feb. 19th, 2021 expiration): +$156.00
= ($.39 dividend per share x 400 shares)

(c) Capital Appreciation (If Citizens Financial Call options assigned early on Feb. 1st): -$796.00
+($35.00 - $36.99) * 400 shares; or
(c) Capital Appreciation (If CFG shares assigned at $35.00 strike price at options expiration): -$796.00
+($35.00 - $36.99) * 400 shares

1. Total Net Profit [If option exercised on Feb. 1st (business day prior to Feb 2nd ex-dividend date)]: +$184.00

= (+$980.00 options income +$0.00 dividend income -$796.00 capital appreciation); or

2. Total Net Profit (If Citizens Financial shares assigned at $35.00 strike price at February 19th, 2021 options expiration): +$340.00

= (+$980.00 +$156.00 -$796.00)

1. Absolute Return (If option exercised early on Feb. 1st): +1.3%

= +$184.00/$13,818.68

Annualized Return (If option exercised early): +60.8%

= (+$184.00/$13,818.68)*(365/8 days); or

2. Absolute Return (If Citizens Financial shares assigned at $35.00 at Feb 19th, 2021 options expiration): +2.5%

= +$340.00/$13,818.68

Annualized Return (If Citizens Financial shares assigned at $35.00 at Feb 19th, 2021 expiration): +34.5%

= (+$340.00/$13,818.68)*(365/26 days)

Either outcome would provide a very attractive return-on-investment result for this Citizens Financial investment.  These returns will be achieved as long as the stock is above the $35.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $34.15 ($36.99 -$2.45 -$.39) provides a substantial 7.7% 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 for this Citizens Financial position, all nine criteria were met.