Established Covered Calls in Delta Air Lines Inc.

A Covered Calls position was established in Delta Air Lines Inc. (ticker DAL) with an August 20th, 2021 options expiration date.   A buy/write transaction entered early in today's trading executed early this afternoon at 12:34 p.m. at the net debit limit order price of $35.46 when 300 shares of Delta were purchased at $38.22 and three August 20th, 2021 Call options at the $36.00 strike price were sold at $2.76 per share.  As preferred by the Covered Calls Advisor, 2nd quarter earnings were announced 3 weeks ago so the next quarterly earnings report will be after the August 20th options expiration date.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a moderately in-the-money Covered Calls position was established with a Delta of 75.6 which approximates a probability of 75.6% that the stock will be in-the-money at the options expiration date. 

As detailed below, a potential return-on-investment result is +1.5% absolute return (equivalent to +32.3% annualized return over the next 17 days) if the stock price is in-the-money (i.e. above the $36.00 strike price) and therefore assigned on the August 20th, 2021 options expiration date.

Delta Air Lines Inc. (DAL) -- New Covered Calls Position

The Buy/Write transaction was as follows:
08/04/2021 Bought 300 shares of Delta Air Lines @ $38.22 per share 
08/04/2021 Sold 3 DAL August 20th, 2021 $36.00 Call options @ $2.76 per share.  The Implied Volatility of these Call options was very high at 42.2 (given that VIX was 18.0) when this transaction was executed.

A possible overall performance result (including commissions) for this Delta Air Lines Covered Calls position is as follows:
Stock Purchase Cost: $10,640.01
= ($38.22 - $2.76) *300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$825.99
= ($2.76 *300 shares) - $2.01 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If 300 Delta Air Lines shares assigned at $36.00 strike price at expiration): -$666.00
= +($36.00 -$38.22) * 300 shares

Total Net Profit (If 300 Delta Air Lines shares assigned at $36.00 strike price at Aug 20th, 2021 options expiration): +$159.99

= (+$825.99 options income +$0.00 dividend income -$666.00) capital appreciation

 

Absolute Return-on-Investment (If 300 DAL shares assigned at $36.00 strike price at expiration): +1.5%

= +$159.99/$10,640.01

Annualized Return-on-Investment: +32.3%

= (+$159.99/$10,640.01)*(365 days per year /17 days)