When the 200 shares of Micron Technology Inc. (ticker symbol MU) were trading at $85.24 today and the existing Covered Calls position was for the February 19th, 2021 expiration and at the $72.50 strike price, the Covered Calls Advisor's net debit limit order at $6.55 per share ($12.85 Buy-to-Close the Feb. 19th Calls at the $72.50 strike minus $6.30 Sell-to-Open the February 26th expiration at the $80.00 strike price) was executed (a few minutes after the order it was entered). The 200 Micron shares were deep-in-the-money, having spiked higher from the original purchase price on January 27th of $76.0865 to $85.24 this morning when the Covered Calls Advisor's debit spread limit order was executed.
Regarding the Covered Calls Advisor's "rolling" decision-making process:
I don't have a predetermined or automatic criteria (such as remaining time value in the existing Call options; or how deep-in-the-money the current stock price is) for deciding when to roll-up a Covered Calls position. But as a rule-of-thumb, if the stock price is more than 10% above the strike price, then I do regularly watch Call options pricing (including their Implied Volatility, their Delta, and their Bid/Ask spreads) for various future strike prices and expiration dates to determine if there is a desirable roll-up or roll-up-and-out opportunity.
This remains a conservative in-the-money Covered Calls position since the Delta for these new Calls when this rollout transaction was executed was 78.2 which closely approximates the probability of assignment at options expiration (i.e. 78.2% probability). Also as preferred by the Covered Calls Advisor, there is no quarterly earnings report for Micron prior to the new February 26th, 2021 options expiration date.
As detailed below, a potential return-on-investment result for this Micron Technology Inc. position is +4.2% absolute
return in 31 days (equivalent to a +49.8% annualized
return-on-investment) if the stock closes above the $80.00 strike price at the Feb. 26th options expiration.
Micron Technology Inc. (MU) -- Roll-Up-and-Out Covered Calls Position
The Buy/Write transaction was as follows:01/27/2021 Bought 200 shares of Micron Technology Inc. stock @ $76.0865 per share
01/27/2021 Sold 2 Micron Feb. 19th, 2021 $72.50 Call options @ $5.63 per share
02/11/2021 Roll-Up-and-Out transaction: Bought-to-Close 2 MU Feb. 19th, 2021 $72.50 Call options at $12.85 per share and simultaneously Sold-to-Open 2 MU Feb. 26th, 2021 $80.00 Calls at $6.30 per share. This roll-up-and-out transaction occurred at a net debit of $6.55 ($12.85 - $6.30) per share. The price of Micron's stock was $85.24 when this net debit limit order was executed.
A possible overall performance result (including commissions) if the stock price is above the $80.00 strike price at expiration would be as follows:
Covered Call Cost Basis: $14,092.64
= ($76.0865 - $5.63) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: -$186.68
= ($5.63 - $12.85 + $6.30) * 200 shares - $2.68 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron stock is above $80.00 strike price at the February 26th, 2021 options expiration): +$782.70
= ($80.00 - $76.0865) * 200 shares
Total Net Profit: +$596.02
= (-$186.68 options income +$0.00 dividend income + $782.70 capital appreciation)
Absolute Return: +4.2%
= +$596.02/$14,092.64
Equivalent Annualized Return: +49.8%
= (+$596.02/$14,092.64)*(365/31 days)
