The Covered Calls Advisor Portfolio had four positions with March 5th, 2021 options expirations. Three positions (Applied Materials Inc., Facebook Inc., and Lennar Corporation) closed in-the-money, so the maximum potential return-on-investment results were achieved for these positions. The results for the three positions that were closed out today were:
- Applied Materials Inc. (AMAT) -- +1.7% absolute return (equivalent to +57.7% annualized roi) for the 11 days of this investment
- Facebook Inc. (FB) -- +1.3% absolute return (equivalent to +30.6% annualized roi) for the 15 days of this investment
- Lennar Corporation (LEN) -- +4.8% absolute return (equivalent to +33.5% annualized roi) for the 52 days of this investment
The Covered Call position in Alibaba Group Holdings Ltd. at the $235.00 strike price closed out-of-the money at $233.89, so the Call option expired and 100 shares of Alibaba stock now remain in the Covered Calls Advisor Portfolio.
The cash now available from the assignment (i.e. closing) of these three in-the-money positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established. These positions demonstrate that very good return-on-investment results can be achieved with conservative (i.e. moderately in-the-money) Covered Call positions. Given the Covered Calls Advisor's currently cautious Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at moderately in-the-money strike prices with good downside protection (that usually being with Deltas greater than 70).
The detailed transactions and results for these three closed positions are as follows:
1. Applied Materials Inc. (AMAT) -- Covered Calls Position Closed
02/23/2021 Bought 200 shares of Applied Materials Inc. @ $112.26 per share
02/23/2021 Sold 2 Applied Materials March 5th, 2021 $108.00 Call options @ $5.89 per share
Note: the Implied Volatility of the Call option was 34.5 when this buy/write limit order was executed.
02/24/2021 Ex-dividend of $.22 per share
03/05/2021 Today's $108.00 Call option expired in-the-money (stock closed at $113.45 per share), so the 200 AMAT shares were assigned (i.e. sold) at the $108.00 strike price.
The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $21,275.34
= ($112.26 - $5.89) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,178.00
= ($5.89 * 200 shares)
(b) Dividend Income: +$44.00
= $.22 per share x 200 shares
(c) Capital Appreciation (Applied Materials stock closed above $108.00 strike price at the March 5th options expiration): -$852.00
= ($108.00 -$112.26) * 300 shares
Total Net Profit: +$370.00
= (+$1,178.00 options income +$44.00 dividend income -$852.00 capital appreciation)
Absolute Return-on-Investment: +1.7%
= +$370.00/$21,275.34
Equivalent Annualized Return-on-Investment: +57.7%
= (+$370.00/$21,275.34)*(365/11 days)
2. Facebook Inc. (FB) -- Covered Call Position Closed
02/19/2021 Bought 100 Facebook shares @ $260.25
02/19/2021 Sold 1 Facebook 3/05/2021 $250.00 Call option @ $13.35.
03/05/2021 Today's $250.00 Call option expired in-the-money (stock closed at $264.28 per share), so the 100 FB shares were assigned (i.e. sold) at the $250.00 strike price.
The overall performance result (including commissions) for this Facebook Inc. Covered Call position was 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
The buy/write transaction was:
01/13/2021 Bought 200 Lennar Corp. shares @ $76.39
01/13/2021 Sold 2 LEN 01/29/2021 $72.50 Call options @ $4.96
Note: the Implied Volatility of the Call options was 37.5 when this position was transacted and the Delta (approximately the probability of assignment at expiration) was 73.3.
01/20/2021 Roll-Up-and-Out transaction: Bought-to-Close 2 LEN Jan. 29th, 2021 $72.50 Call options at $11.18 per share and simultaneously Sold-to-Open 2 LEN February 19th, 2021 $77.50 Calls at $7.50 per share. This roll-up-and-out transaction occurred at a net debit of $3.68 ($11.18 - $7.50) per share and the price of Lennar's stock was $83.58 when this transaction was executed.
01/28/2021 Quarterly ex-dividend of $.25 per share
02/08/2021 Roll-Up-and-Out transaction: Bought-to-Close 2 LEN Feb. 19th, 2021 $77.50 Call options at $17.45 per share and simultaneously Sold-to-Open 2 LEN March 5th, 2021 $85.00 Calls at $10.75 per share. This roll-up-and-out transaction occurred at a net debit of $6.70 ($10.75 - $17.45) per share and the price of Lennar's stock was $94.85 when this transaction was executed.
03/05/2021 Today's two LEN $85.00 Call options expired in-the-money (stock closed at $85.98 per share), so the 200 LEN shares were assigned (i.e. sold) at the $85.00 strike price.
The overall performance result (including commissions) for this Lennar Corp. Covered Calls position is as follows:
Covered Calls Cost Basis: $14,287.34
= ($76.39 - $4.96) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: -$1,089.36
= ($4.96 -$11.18 + $7.50 -$17.45 +$10.75) * 200 shares - $5.36 commissions
(b) Dividend Income (Lennar stock assigned at the March 5th, 2021 options expiration): +$50.00
= ($.25 dividend per share x 200 shares)
+($85.00 - $76.39) * 200 shares
Absolute Return: +4.8%
Please email me at partlow@cox.net with any questions or comments related specifically to this post or whenever you have comments or questions related to Covered Calls investing.
Best Wishes and Godspeed,
Jeff Partlow
