This morning, a Covered Calls position was established in Cigna Corp. (ticker symbol CI) when two hundred Cigna shares were purchased at $209.83 and two September 17th, 2021 Call options were sold for $6.23 per share at the $205.00 strike price. The buy/write net debit limit order at $203.60 was executed, so the time value was $1.40 per share [$6.23 Call options premium - ($209.83 stock purchase price - $205.00 strike price)]. There is an upcoming quarterly ex-dividend of $1.00 (annual dividend yield of 1.9%) on September 7th, so potential return-on-investment results for this position, as detailed below, include the possibility of early assignment because the ex-dividend is prior to the September 17th, 2021 options expiration date.
As preferred by the Covered Calls Advisor, Cigna's next quarterly earnings report will be after the September 17th, 2021 options expiration date. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Calls position was established with a Delta of 70.9 when the buy/write limit order was executed.
Cigna stock has an attractive valuation since its Next Fiscal Year P/E Ratio is only 9.3 compared with its prior 5-year historical average of 13. In addition, the average analysts' target price is $275.44 (+31.3% above today's stock purchase price).
As detailed below, a potential return-on-investment result is +0.7% absolute return (equivalent to +31.2% annualized
return for the next 8 days) if the stock is assigned early (business day
prior to the September 7th ex-date); OR +1.2%
absolute return (equivalent to +22.6% annualized return over the next 19
days) if the stock is assigned on the September 17th, 2021 options expiration date.
Cigna Corp. (CI) -- New Covered Calls PositionThe transaction today was as follows:
08/30/2021 Bought 200 Cigna Corp. shares @ $209.83
08/30/2021 Sold 2 Cigna 9/17/2021 $205.00 Call options @ $6.23
09/07/2021 Upcoming quarterly ex-dividend of $1.00 per share
Two possible overall performance results (including commissions) for this Cigna Covered Calls position are as follows:
Covered Calls Cost Basis: $40,721.34
= ($209.83 - $6.23) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$1,244.66
= ($6.23 * 200 shares) - $1.34 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Sept 7th ex-div date): +$0.00; or
(b) Dividend Income (If Cigna shares assigned at Sept 17th, 2021 options expiration): +$200.00
= ($1.00 dividend per share x 200 shares)
(c) Capital Appreciation (If CI shares assigned early on Sept.7th): -$966.00
+($205.00 - $209.83) * 200 shares ;or
(c) Capital Appreciation (If Cigna shares assigned at $205.00 strike price at options expiration): -$966.00
+($205.00 - $209.83) * 200 shares
These returns will be achieved as long as the stock is above the $205.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $202.60 ($209.83 -$6.23 -$1.00) provides 3.4% downside protection below today's purchase price.
The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy. The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved. As shown in the table below, eight of the nine criteria are met for this Cigna Corp. Covered Calls position.
