Surprisingly, the four Bristol-Myers Squibb Co. April 16th, 2021 $60.00 Call options were exercised early on the day prior to today's (March 31st) ex-dividend date. The reason this was a surprise to the Covered Calls Advisor was that the owner of these Call options decided to immediately forgo the remaining $.61 time value in the Calls to buy the stock and therefore also capture today's $.49 ex-dividend.
This is a good outcome for the Covered Calls Advisor since the resulting +36.4% annualized return-on-investment (aroi) achieved is better than the +25.5% maximum possible aroi that might have been achieved later at the options expiration date if the stock was above the $60.00 strike price on the expiration date. As detailed below, a net profit of $284.00 was achieved in 12 days
since the full $876.00 income (profit) received from selling the options
exceeded the $592.00 loss in the stock price value. For any Covered Calls position where there is an ex-dividend date prior to the options expiration date, the Covered Calls Advisor usually prefers to have the stock called away (assigned) early, normally the day prior to the ex-div date. The reason is that the Covered Calls Advisor's Dividend Capture Strategy spreadsheet was designed to identify positions where the annualized-return-on-investment from early assignment is most often greater than what might be achieved if the stock is instead assigned at the options expiration date. The transactions and detailed results for this position are as follows:
Bristol-Myers Squibb Co. (BMY) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was:
3/19/2021 Bought 400 Bristol-Myers Squibb Co. shares @ $61.48
3/19/2021 Sold 4 BMY 4/16/2021 $60.00 Call options @ $2.19
3/31/2021 4 BMY Call options exercised, so Call options expired and 400 BMY shares were sold at the $60.00 strike price
The overall performance results (including commissions) for this Bristol-Myers Squibb Co. Covered Calls position was as follows:
Covered Calls Cost Basis: $23,718.68
= ($61.48 - $2.19) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$876.00
= ($2.19 * 400 shares)
(b) Dividend Income (Call options assigned early on March 30th, 2021, the business day prior to the March 31st ex-div date): +$0.00
(c) Capital Appreciation (BMY Call options assigned early on March 30th, 2021): -$592.00
= +($60.00 - $61.48) * 400 shares
