A Covered Calls position was established in Micron Technology Inc. (ticker MU) with a July 16th, 2021 options expiration date. A buy/write transaction entered at a net debit of $73.72 was executed when 300 shares of Micron were purchased at $77.00 and three July 16th, 2021 Call options at the $77.50 strike price were sold at $3.28 per share. The Implied Volatility of these Calls was high at 40.3 today when this transaction was executed, a reflection of the increased uncertainty with the upcoming Q3 2021 earnings report of June 30th being prior to the July 16th, 2021 options expiration date. However, the Covered Calls Advisor is confident these results will exceed projections -- and annual earnings are expected to more than double this fiscal year and continue to grow dramatically next year to well above $10 per share.
Micron's finances are strong and they are also very highly rated by analysts. Reuters Research indicates that currently 31 analysts have a Buy or Outperform rating on the stock, 4 have a Hold, and none have an Underperform or Strong Sell; and their current average target price is $118.62 (+53.1% above the $77.50 strike price). Because of Micron's bullish outlook, a slightly out-of-the-money strike price was established (stock purchased at $77.00 and with a strike price at $77.50).
As detailed below, two potential return-on-investment results are:
- +3.8% absolute return (equivalent to +47.3% annualized return for the next 29 days) if the stock price is unchanged at options expiration at the $77.00 purchase price; OR
- +4.4% absolute return (equivalent to +55.9% annualized return over the next 29 days) if the stock price is in-the-money (i.e. above the $77.50 strike price) and therefore assigned on the July 16th options expiration date.
Micron Technology Inc. (MU) -- New Covered Calls Position
The Buy/Write transaction was as follows:06/18/2021 Bought 300 shares of Micron Technology Inc. stock @ $77.00 per share
06/18/2021 Sold 3 Micron July 16th, 2021 $77.50 Call options @ $3.28 per share
Two possible overall performance results (including commissions) for this Micron Technology Inc. Covered Calls position are as follows:
Stock Purchase Cost: $22,118.01
= ($77.00 - $3.28) *300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$981.99
= ($3.28 *300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
=+($77.00 -$77.50) * 300 shares; or
(c) Capital Appreciation (If 300 Micron shares assigned at $77.50 strike price at expiration): +$0.00
+($77.50 -$77.50) * 300 shares
