At the February 19th options expiration last Friday, two of the thirteen total Covered Calls positions expired with the stock price below their strike prices. Today both positions (GoHealth Inc. and Pfizer Inc.) were closed out by selling the stocks. Fortunately, both positions were closed out profitably, so all thirteen positions in the Covered Calls Advisor Portfolio that were closed out during the past month were profitable.
As detailed below, the return-on-investment results are as follows: (1) GoHealth Inc. -- +17.8% absolute
return in 182 days (equivalent to a +35.7% annualized
return-on-investment); and (2) Pfizer Inc. -- +0.3% absolute
return in 38 days (equivalent to a +2.8% annualized
return-on-investment). These results provide a good example of the advantage that can accrue from selling in-the-money Covered Calls. Despite the stocks declining to below their strike prices, a net profit was still achieved from the time value decay in the Call options, and also from dividend income received (in the case of Pfizer).
1. GoHealth Inc. -- Closed Out Covered Calls Position
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.
02/19/2021 4 Feb. 19th Call options expired with the stock price below the $15.00 strike price.
02/22/2021 Sold 400 GOCO shares at $14.30 per share.
The overall performance result (including commissions) was 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 (400 shares GoHealth stock sold at $14.30 per share): -$280.00
= ($14.30 assignment price - $15.00 stock purchase price) * 400 shares
Total Net Profit: +$994.60
= (+$1,274.60 options income +$0.00 dividend income -$280.00 capital appreciation)
Absolute Return: +17.8%
= +$994.60/$5,582.68
Equivalent Annualized Return-on-Investment: +35.7%
= (+$994.60/$5,582.68)*(365/182 days)
2. Pfizer Inc. (PFE) -- Closed Out Covered Calls Position
The buy/write transaction was:
01/15/2021 Bought 300 Pfizer shares @ $36.46
01/15/2021 Sold 3 Pfizer 02/19/2021 $35.00 Call options @ $1.91
Note: the Time Value (aka Extrinsic Value) in the Call options was $.45 per share = [$1.91 Call options premium - ($36.46 stock price - $35.00 strike price)]
01/28/2021 Quarterly ex-dividend of $.39 per share
02/19/2021 3 Feb. 19th PFE Call options expired with the stock price below the $35.00 strike price.
02/22/2021 Sold 300 Pfizer shares at $34.26 per share.
The overall performance results (including commissions) for this Pfizer Inc. Covered Calls position was follows:
Covered Calls Cost Basis: $10,367.01
= ($36.46 - $1.91) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$573.00
= ($1.91 * 300 shares)
(b) Dividend Income: +$117.00
= ($.39 dividend per share x 300 shares)
(c) Capital Appreciation (300 PFE shares sold at $34.26 per share): -$660.00
+($34.26 - $36.46) * 300 shares
