Established Covered Calls in LyondellBasell Industries N.V. Using Dividend Capture Strategy

Today, a Covered Calls position was established in LyondellBasell Industries N.V.(ticker LYB) with the purchase of 200 shares at $112.54 per share and two June 18th, 2021 Call options were sold for $3.82 per share at the $110.00 strike price.  This transaction occurred at simultaneous buy/write transaction at a net debit of $108.72 per share.  The corresponding time value (aka extrinsic value) in the Call options was $1.28 per share = [$3.82 Call options premium received - ($112.54 stock purchase price - $110.00 options strike price)].  A moderately in-the-money Covered Calls positions was established with the Delta of the Calls at approximately 66.2 when this buy/write transaction was executed, which approximates the probability of assignment on the June 18th, 2021 options expiration date. 

LyondellBasell Industries made their quarterly dividend announcement this morning; it will go ex-dividend at $1.13 per share (4.0% annualized dividend yield at the current stock price which is an increase of +7.6% above the prior quarterly dividend amount) on June 4th which is prior to the June 18th options expiration date, so this dividend is included in the potential return-on-investment results shown below.  Also shown below, all nine criteria in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet were met for this position and, as preferred by the Covered Calls Advisor, the next quarterly earnings report on July 30th, 2021 is after the June 18th options expiration date. 

LyondellBasell's revenue is exploding this fiscal year and will almost double last year's pandemic-depressed level. Earnings are also expected to explode higher to perhaps above $14.00 per share this year (a historically very attractive P/E ratio of only 7.7) with expected Q2 earnings of $4.59 versus $.71 last year. The stock is close to its prior 3-year high, but the Covered Calls Advisor believes it remains a good value at its current price.

As shown below, two potential return-on-investment result are: (1) +1.2% absolute return in 7 days (equivalent to a +61.1% annualized return-on-investment if LYB stock is assigned at $110.00 on the day prior to the June 4th ex-dividend date; OR (2) +2.2% absolute return in 22 days (equivalent to a +36.7% annualized return-on-investment if assigned at the June 18th expiration.

LyondellBasell Industries N.V. (LYB) -- New Covered Calls Position
The buy/write transaction was as follows:
05/28/2021 Bought 200 shares of LyondellBasell stock @ $112.54 per share 
05/28/2021 Sold 2 LyondellBasell June 18th, 2021 $110.00 Call options @ $3.82 per share
Note: the Implied Volatility of the Call options was 22.0.
06/04/2021 Upcoming ex-dividend of $1.13 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $21,745.34
= ($112.54 - $3.82) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$762.66
= ($3.82 * 200 shares) - $1.34 commission
(b) Dividend Income (If LyondellBasell stock assigned on day prior to June 4th ex-dividend date): +$0.00; OR
(b) Dividend Income (If LyondellBasell stock assigned on June 18th options expiration date): $226.00
= $1.13 dividend per share x 200 shares
(c) Capital Appreciation (If LYB stock is assigned at $110.00 on the day prior to the June 4th ex-dividend date): -$508.00
= ($110.00 - $112.54) * 200 shares; OR
(c) Capital Appreciation (If LyondellBasell stock is above $110.00 strike price at the June 18th expiration): -$508.00
= ($110.00 - $112.54) * 200 shares

1.  Total Net Profit (If LyondellBasell stock assigned on day prior to June 4th ex-dividend date): +$254.66
= (+$762.66 options income +$0.00 dividend income -$508.00 capital appreciation): OR
2.  Total Net Profit (If LYB stock assigned on June 18th options expiration date): +$480.66
= (+$762.66 options income +$226.00 dividend income -$508.00 capital appreciation)

1.  Absolute Return (If LYB stock assigned on day prior to June 4th ex-dividend date): +1.2%
= +$254.66/$21,745.34
Equivalent Annualized Return: +61.1%
= (+$254.66/$21,745.34) * (365/7 days); OR
2.  Absolute Return (If LyondellBasell stock assigned on June 18th options expiration date): +2.2%
= +$480.66/$21,745.34
Equivalent Annualized Return: +36.7%
= (+$480.66/$21,745.34)*(365/22 days)


Either outcome would provide a very good return-on-investment result.  These returns will be achieved as long as the stock is above the $110.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $107.59 ($112.54 -$3.82 -$1.13) provides 4.4% downside protection below today's purchase price.

The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy.  The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved which is the case for this LyondellBasell Industries N.V. position, and all nine criteria were met in this case (as shown in the chart below).