Covered Calls Position Established in Prudential Financial Inc.

Today a Covered Calls position was established in Prudential Financial Inc. (ticker symbol PRU) when the Covered Calls Advisor's buy/write limit order was executed.  Two hundred shares were purchased at $102.49 and two July 16th, 2021 Call options were sold at $3.63 at the $100.00 strike price.  The time value when this Covered Call was established was $1.14 per share = [$3.63 Call option price - ($102.49 stock price - $100.00 strike price)].  Given the Covered Calls Advisor's current cautious outlook, a moderately in-the-money Covered Call position was established with the Delta at 67.0, which approximates a probability of 67.0% that the Call options will be in-the-money on the options expiration date.  Fortunately, the next quarterly earnings report on 8/3/2021 is after the upcoming 7/16/2021 options expiration date.  Prudential is attractive since it appeared in the top 2% of all Financial sector stocks in the Covered Calls Advisor's Financial sector screener.

As detailed below, a potential return-on-investment result for this Prudential Covered Calls position is +1.1% absolute return (equivalent to +22.0% annualized return over the next 19 days) if the stock is in-the-money and therefore assigned on the July 16th, 2021 options expiration date.

 

Prudential Financial Inc. (PRU) -- New Covered Calls Position

The buy/write transaction was as follows:
06/28/2021 Bought 200 shares of Prudential Financial stock @ $102.49 per share 
06/28/2021 Sold 2 Prudential July 16th, 2021 $100.00 Call options @ $3.63 per share
Note: The Implied Volatility of the Call options was 24.2 when this transaction was executed.  

A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $19,773.34
= ($102.49 - $3.63) * 200 shares + $1.34 commission

Net Profit Components:
(a) Option Income: +$724.66
= ($3.63 * 200 shares) - $1.34 commission
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If PRU stock is above $100.00 strike price at July 16th, 2021 expiration): -$498.00
= ($100.00 -$102.49) * 200 shares

Total Net Profit: +$226.66
= (+$724.66 Call option income +$0.00 dividend income -$498.00 capital appreciation)

Absolute Return-on-Investment: +1.1%
= +$226.66/$19,773.34
Equivalent Annualized Return-on-Investment: +22.0%
= (+$226.66/$19,773.34)*(365/19 days)