At last Friday's options expiration, only one of the fourteen positions in the Covered Calls Advisor Portfolio expired with the stock price below its strike price. This morning, that position (Oscar Health Inc.) was closed out by selling the 300 shares of Oscar Health stock. The Covered Calls Advisor prefers to avoid quarterly earnings reports, and since we are now entering the bulk of earnings reporting season during the next six weeks and since Oscar's earnings will be reported before its next potential options expiration date on May 21st, the Oscar position was exited. Fortunately, this position was closed out profitably as detailed below:
The return-on-investment results for this Oscar Health Inc. Covered Calls position were as follows: +3.6% absolute
return in 20 days (equivalent to a +65.7% annualized
return-on-investment). These results provide a good example of the advantage that can accrue from selling in-the-money Covered Calls. Despite Oscar Health's stock decline from its purchase price of $25.49 to below its $25.00 strike price ($24.18 when sold today), an attractive return-on-investment result was still achieved from the time value decay in the Call options that were sold.
Oscar Health Inc. (OSCR) -- Covered Calls Position Closed
The simultaneous Buy/Write transaction was as follows:
03/30/2021 Bought 300 Oscar Health shares @ $25.49 per share
03/30/2021 Sold 3 OSCR April 16th, 2021 $25.00 Call options @ $2.15 per share
Note: the Implied Volatility of the Call options was very high at 81.0 when this transaction occurred.
04/16/2021 3 OSCR 4/16/2021 $25.00 expired with the stock price below the strike price, so 300 shares remain in the Covered Calls Advisor Portfolio
04/19/2021 Sold 300 OSCR shares at $24.18 per share to close this Oscar Health Covered Calls position.
The overall performance results (including commissions) was as follows:
Covered Call Cost Basis: $7,004.01
= ($25.49 - $2.15) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$645.00
= ($2.15 * 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (OSCR stock sold at $24.36 early this morning): -$393.00
= ($24.18 - $25.49) * 300 shares
Total Net Profit: +$252.00
= (+$645.00 options income +$0.00 dividend income -$393.00 capital appreciation)
Absolute Return: +3.6%
= +$252.00/$7,004.01
Equivalent Annualized Return: +65.7%
= (+$252.00/$7,004.01)*(365/20 days)
