Rollout of GoHealth Inc., Draftkings Inc., and Alibaba Group Holdings Ltd. Covered Calls Positions

Today is the January 2021 monthly options expiration date.  Around 3:00pm today, the Covered Calls Advisor decided to rollout three existing in-the-money Covered Calls positions -- GoHealth Inc. (ticker GOCO), Draftkings Inc. (DKNG), and Alibaba Group Holdings (BABA).  The GoHealth position was rolled out at the same $15.00 strike price to the February 19th, 2021 options expiration date.  The Draftkings position was rolled-up-and-out from the $45.00 strike price to the $50.00 strike price and to the February 5th, 2021 expiration date.  The Alibaba position was rolled-up-and-out from the $240.00 strike price to the $245.00 strike price and to the February 5th, 2021 expiration date.  Importantly, the options expiration dates for all three positions are prior to their next quarterly earnings reports.  The potential return-on-investment results for these three positions are: 

• GoHealth Inc. (GOCO) -- +22.8% absolute return (equivalent to +46.3% annualized) for the 180 days of this investment  
• Draftkings Inc. (DKNG) -- +10.6% absolute return (equivalent to +67.0% annualized) for the 58 days of this investment
• Alibaba Group Holdings Ltd. (BABA) -- +4.2% absolute return (equivalent to +28.3% annualized) for the 54 days of this investment 
  

The transactions to-date and the potential return results are detailed below for each position.

1. GoHealth Inc. -- Rollout of Covered Calls Continuation
The Buy/Write transaction was as follows:
08/24/2020 Bought 400 shares of GoHealth Inc. stock @ $15.00 per share 
08/24/2020 Sold 4 GoHealth Sept 18th, 2020 $15.00 Call options @ $1.05 per share
Note: the Implied Volatility of these Calls was very high at 61.6 today when this transaction was made.
09/18/2020 GOCO Call options expired since stock closed below the strike price
09/23/2020 Sold 4 GOCO Oct 16th, 2020 $15.00 Call options at $.80 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $14.54 today when these Call options were sold.
10/16/2020 GOCO Call options expired since stock closed below the strike price
11/04/2020 Sold 4 GOCO Nov. 20th, 2020 $12.50 Call options at $.70 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $11.82 today when these Call options were sold.
11/20/2020 GOCO Call options expired since stock closed below the strike price
12/04/2020 Sold 4 GOCO Dec. 18th, 2020 $12.50 Call options at $.30 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $11.62 today when these Call options were sold.
12/18/2020 Bought-to-Close 4 GOCO Dec. 18th $12.50 Calls at $1.80
Note: the stock price was $14.24 when this transaction was executed, so the time value remaining in these Calls was $.06 =[$1.80 Call options price - ($14.24 stock price - $12.50 strike price)]
12/18/2020 Sold-to-Open 4 GOCO Jan. 15th, 2021 Call options at $.80 per share.
Note: the price of GOCO stock was $14.34 when these Calls were sold.
01/15/2021 Rollout transaction: Bought-to-Close 4 GOCO Jan. 15th, 2021 $15.00 Call options at $.07 per share and simultaneously Sold-to-Open 4 GOCO February 19th, 2021 $15.00 Calls at $1.44 per share. This rollout transaction occurred at a net credit of $1.37 ($1.44 - $.07) per share.  The GOCO stock price was $15.01 when this transaction was executed.

A possible overall performance result if the position is in-the-money at options expiration (including commissions) is as follows:
Covered Calls Cost Basis: $5,582.68
= ($15.00 - $1.05) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,274.60
= ($1.05 + $.80 + $.70 + $.30 - $1.80 + $.80 +$1.44 - $.07) * 400 shares - $13.40 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If GoHealth stock is assigned at $15.00 strike price at Feb. 19th expiration): +$0.00
= ($15.00 assignment price - $15.00 stock purchase price) * 400 shares

Total Net Profit (If GOCO stock closes above $15.00 at Feb. 19th, 2021 options expiration): +$1,274.60
= (+$1,274.60 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If stock closes above $15.00 strike price at options expiration): +22.8%
= +$1,274.60/$5,582.68
Equivalent Annualized Return: +46.3%
= (+$1,274.60/$5,582.68)*(365/180 days)

2. Draftkings Inc. -- Roll-Up-and-Out Covered Calls Continuation The simultaneous buy/write transaction was as follows:
12/10/2020 Bought 300 shares of Draftkings Inc. stock @ $48.80 per share 
12/10/2020 Sold 3 Draftkings January 15th, 20210 $45.00 Call options @ $6.56 per share
Note: the Delta of these Calls was 68.0, which approximates the probability that the Calls will expire in-the-money at the Jan 15th options expiration. 
01/15/2021 Roll-Out-and-Up transaction: Bought-to-Close 3 DKNG Jan. 15th, 2021 $45.00 Call options at $8.95 per share and simultaneously Sold-to-Open 3 DKNG February 5th, 2021 $50.00 Calls at $5.70 per share. This roll-up-and-out transaction occurred at a net debit of $3.25 ($8.95 - $5.70) per share and the price of DKNG stock was $53.85 when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $12,674.01
= ($48.80 - $6.56) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$988.98
= ($6.56 +$5.70 - $8.95) * 300 shares - $4.02 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If DKNG stock is above $50.00 strike price at the Feb.5th, 2021 expiration): +$360.00
= ($50.00 assignment price  - $48.80 stock purchase price) * 300 shares

Total Net Profit: +$1,348.98
= (+$988.98 options income +$0.00 dividend income +$360.00 capital appreciation)

Absolute Return: +10.6%
= +$1,348.98/$12,674.01
Equivalent Annualized Return: +67.0%
= (+$1,348.98/$12,674.01)*(365/58 days)


3. Alibaba Group Holdings Ltd. (BABA) -- Roll-Up-and-Out Covered Call Continuation

The transactions were as follows:
12/14/2020 Bought 100 shares of Alibaba stock @ $257.80 per share 
12/14/2020 Sold 1 Alibaba Dec 31st, 2020 $250.00 Call option @ $11.60 per share
Note: this was a simultaneous Buy/Write transaction.  The Implied Volatility of the Call options was 30.5 when this transaction was executed.
12/31/2020 BABA Call option expired since stock closed below the strike price
01/05/2021 Sold 1 BABA Jan. 15th, 2021 $240.00 Call option at $5.50 against the 100 shares of Alibaba stock to continue the Alibaba Covered Call position.
Note: the price of BABA was $237.02 today when this Call option was sold.
01/15/2021 Roll-Up-and-Out transaction: Bought-to-Close 1 BABA Jan. 15th, 2021 $240.00 Call option at $3.05 per share and simultaneously Sold-to-Open 1 BABA February 5th, 2021 $245.00 Call at $9.05 per share. This roll-up-and-out transaction occurred at a net credit of $6.00 ($9.05 - $3.05) per share and the price of BABA stock was $242.95 when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $24,620.67
= ($257.80 - $11.60) * 100 shares

Net Profit Components:
(a) Option Income: +$2,310.00
= ($11.60 + $5.50 +$9.05 - $3.05) * 100 shares - $7.00 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If BABA stock is above $245.00 strike price at Feb. 5th, 2021 expiration): -$1,280.00
= ($245.00 assignment price -$257.80 stock purchase price) * 100 shares

Total Net Profit: +$1,030.00
= (+$2,310.00 Call option income +$0.00 dividend income -$1,280.00 capital appreciation)

Absolute Return: +4.2%
= +$1,030.00/$24,620.67
Equivalent Annualized Return: +28.3%
= (+$1,030.00/$24,620.67)*(365/54 days)

As always, please email me at partlow@cox.net if you have any comments or questions related to this post or anything related to Covered Calls investing.

Best Regards, Jeff