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)