Early Assignment of HP Inc. Covered Calls

Three HP Inc. (formerly Hewlett-Packard Corp.) June 18th, 2021 $28.00 Call options were exercised early on the day prior to today's (June 8th) ex-dividend date. This early exercise by the Call owners was somewhat surprising to the Covered Calls Advisor since they decided to immediately forgo the remaining $.19 time value in the Calls [$2.55 midpoint value of the Call options' $2.51/$2.58 Bid/Ask price - ($30.36 current stock price - $28.00 strike price)], and only 11 days remaining until the options expiration date, to buy the stock and therefore also capture today's $.1938 ex-dividend. 

This is a good outcome for the Covered Calls Advisor since the resulting +31.1% annualized return-on-investment (aroi) achieved is slightly better than the +27.1% maximum possible aroi that might have been achieved later at the options expiration date if the stock was above the $28.00 strike price on the expiration date.  The transactions and detailed results for this position are as follows:

HP Inc. (HPQ) -- Covered Calls Position Closed by Early Assignment

The original buy/write transaction was:
05/28/2021 Bought 300 HP Inc. HP Inc. shares @ $29.26
05/28/2021 Sold 3 HP Inc. 6/18/2021 $28.00 Call options @ $1.52
Note 1: the Implied Volatility of the Calls was 26.4 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.26 per share = [$1.52 Call options premium - ($29.26 stock price - $28.00 strike price)]
06/07/2021 Three Call options exercised early, so Call options expired and 300 shares of HPQ stock were sold at the $28.00 strike price.

The overall performance result (including commissions) for this HP Inc. Covered Calls position was as follows:
Covered Calls Cost Basis: $8,324.01
= ($29.26 - $1.52) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$456.00
= ($1.52 * 300 shares)
(b) Dividend Income (Three Call options exercised early on June 7th, the business day prior to the June 8th ex-div date): +$0.00

(c) Capital Appreciation: (HP Inc. Call options assigned early): -$378.00
+($28.00 - $29.26) * 300 shares

 Total Net Profit: +$78.00

= (+$456.00 options income +$0.00 dividend income -$378.00 capital appreciation)

 

 Absolute Return: +0.9%

= +$78.00/$8,324.01

Equivalent Annualized Return: +31.1%

= (+$78.00/$8,324.01)*(365/11 days)