Roll Down-and-Out Covered Calls Position in Hologic Inc.

Today, the Covered Calls position in Hologic Inc. (HOLX) was rolled down-and-out from the May 21st, 2021 $70.00 strike price to the June 18th, 2021 $65.00 strike price at a net credit of $2.48 per share. The stock price has declined from the original purchase price of $72.92 per share to $64.58 today when this rollout transaction was executed. The Covered Calls Advisor made the mistake of establishing the original position just prior to Hologic's quarterly earnings report. The current quarter's results exceeded expectations but the guidance for the next quarter was well below expectations, so the stock price suffered in response. But the Covered Calls Advisor continues to view Hologic as a good investment and today's rollout transaction begins an effort to repair this Hologic Covered Calls position.

As detailed below, two potential return-on-investment results are: 

•  -2.0% absolute return (equivalent to -16.9% annualized return for the next 44 days) if the stock price is unchanged from today's price of $64.58 on the June 18th, 2021 options expiration date; OR 

• -1.4% absolute return (equivalent to -11.8% annualized return over the next 44 days) if the stock is assigned at the $65.00 strike price on the June 18th, 2021 options expiration date.
  

 

Hologic Inc. (HOLX) -- Continuation of Covered Calls Positon

The buy/write transaction was as follows:
04/27/2021 Bought 200 shares of Hologic stock @ $72.92 per share 
04/27/2021 Sold 2 Hologic May 21st, 2021 $70.00 Call options @ $4.48 per share
Note: The Implied Volatility of the Call options was 36.1 when this transaction was executed.
05/11/2021 Bought-to-Close 2 HOLX May 21st, 2021 $70.00 Call Options @ $.17 per share and simultaneously Sold-to-Open 2 HOLX $65.00 Calls @ $2.65 per share.
Note: the stock price was $64.58 when this credit spread transaction was executed.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $13,689.34
= ($72.92 - $4.48) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,389.32
= ($4.48 - $.17 + $2.65) * 200 shares - $2.68 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If Hologic stock price is unchanged at $64.58 at the June 18th, 2021 options expiration date): -$1,668.00
= ($64.58 -$72.92) * 200 shares; OR
(c) Capital Appreciation (If Hologic stock price closes above the $65.00 strike price and is assigned at the June 18th, 2021 options expiration date): -$1,584.00
= ($65.00 -$72.92) * 200 shares

(a) Total Net Profit (If Hologic stock price is unchanged at $64.58 at the June 18th, 2021 options expiration date): -$278.68
= (+$1,389.32 Call options income +$0.00 dividend income -$1,668.00 capital appreciation); OR
(b) Total Net Profit (If Hologic stock price closes above the $65.00 strike price and is assigned at the June 18th, 2021 options expiration date): -$194.68
= (+$1,3892.32 Call options income +$0.00 dividend income -$1,584.00 capital appreciation)

1. Absolute Return-on-Investment (If Hologic stock price is unchanged at $64.58 at the June 18th, 2021 options expiration date): -2.0%
= -$278.68/$13,689.34
Equivalent Annualized Return-on-Investment: -16.9%
= (-$278.68/$13,689.34)*(365/44 days); OR
2. Absolute Return-on-Investment (If Hologic stock price closes above the $65.00 strike price and is assigned at the June 18th, 2021 options expiration date): -1.4%
= -$194.68/$13,689.34
Equivalent Annualized Return-on-Investment: -11.8%
= (-$194.68/$13,689.34)*(365/44 days)