A new Covered Call position was established today in Facebook Inc. (FB) by purchasing 100 shares at $260.25 per share and selling one Call option at the $250.00 strike price with a March 5th, 2021 options expiration date for $13.35 per share. The Call option premium received was very attractive since the Implied Volatility (IV) of the Call was 33.4 when this position was established. A moderately in-the-money Covered Call position was established with a Delta of 72.9 (which approximates the 72.9% probability of assignment at the options expiration date).
The Covered Calls Advisor Portfolio has an existing Covered Call position in Facebook (also at the $250.00 strike price) that will expire in-the-money at market close today. Facebook seems to have the most attractive valuation metrics profile of the megacap tech stocks (i.e. the FAAMG group) and I want to retain a position in FB going forward. But with three hours remaining until the market close today, there was still $.26 time value remaining in the Feb. 19th $250 Call options. So, instead of immediately closing out the current position by rolling out to the March 5th, 2021 expiration date, I decided not to forgo the remaining $.26 per share profit (at the bid/ask midpoint price) in the existing position. Instead, I had sufficient cash to simply establish the new Facebook Covered Call position now and allow assignment at options expiration today to occur in order to achieve the maximum potential return-on-investment result for the original position.
As detailed below, a potential return-on-investment result for this Facebook position is:
+1.3% absolute
return in 15 days (equivalent to a +30.6% annualized
return-on-investment) if the stock closes above the $250.00 strike price at the March 5th, 2021 options expiration date.
Facebook Inc. (FB) -- New Covered Call Position
02/19/2021 Bought 100 Facebook shares @ $260.25
02/19/2021 Sold 1 Facebook 3/05/2021 $250.00 Call option @ $13.35.
A possible overall performance result (including commissions) for this Facebook Inc. Covered Call position is as follows:
Covered Call Cost Basis: $24,690.67
= ($260.25 - $13.35) * 100 shares + $.67 commission
Net Profit Components:
(a) Option Income: +$1,335.00
= ($13.35 * 100 shares)
(b) Dividend Income: +$0.00
+($250.00 - $260.25) * 100 shares
