Early Assignment of United Parcel Service Inc. Covered Call

Early this morning, the Covered Calls Advisor was notified by Schwab that the UPS August 27th, 2021 $187.50 Call option was exercised early yesterday (on August 19th, 2021), the last business day prior to today's (August 20th) ex-dividend date.   The UPS stock price has increased from its purchase price of $191.25 to $194.06 at the market close yesterday.  The initial $1.22 time value per share declined to no time value per share remaining at market close yesterday, so the owner of the Calls exercised their right to buy the 100 shares of UPS at the $187.50 strike price and capture today's $1.02 ex-dividend.  

As detailed below, a +0.7% absolute return in 9 days (equivalent to a +26.4% annualized return-on-investment) was achieved for this position. 


United Parcel Service Inc. (UPS) -- Covered Call Position Closed by Early Assignment

The transactions were:
08/11/2021 Bought 100 UPS shares @ $191.25
08/11/2021 Sold 1 UPS 8/27/2021 $187.50 Call option @ $4.97 per share 08/20/2021 One UPS Call option exercised early, so the Call option expired and 100 shares of UPS stock were sold at the $187.50 strike price.

The overall performance results (including commissions) for this UPS Covered Call position are as follows:
Covered Call Cost Basis: $18,628.67
= ($191.25 - $4.97) * 100 shares + $.67 commissions

Net Profit Components:
(a) Option Income: +$496.33
= ($4.97 * 100 shares) - $.67 commissions
(b) Dividend Income (Call option exercised early on the business day prior to the Aug 20th ex-div date): +$0.00

(c) Capital Appreciation (UPS assigned early on August 20th): -$375.00
+($187.50 -$191.25) * 100 shares

Total Net Profit [Call option exercised on Aug 19th (business day prior to the August 20th ex-dividend date)]: +$121.33

= (+$496.33 +$0.00 - $375.00)

 

 Absolute Return-on-Investment: +0.7%

= +$121.33/$18,628.67

Annualized Return-on-Investment: +26.4%

= (+$121.33/$18,628.67)*(365/9 days)