Update: Several subscribers have inquired about receiving email notifications sooner than the batch overnight emails. I have updated my service with my RSS Feed provider (Feedblitz) so now you should be receiving an email notification within 45 minutes after I make any post. FYI, I entered this Best Buy post today at 2:31 pm Eastern Daylight Savings Time.
Today, a new Covered Calls position was entered in Best Buy Inc. (ticker BBY) for the September 24th, 2021 options expiration and at the $112.00 strike price when the stock was at $115.05. Based on the Covered Calls Advisor's current cautious sentiment, a moderately in-the-money position was established at a Delta of 68.8 (which approximates a 68.8% probability that the Calls will expire in-the-money on the options expiration date). There is an upcoming ex-dividend on Sept. 13th of $.70 per share, so the possibility of early assignment on the last business day prior to the ex-div date is included in the detailed return-on-investment results below.
Analysts covering Best Buy have an average target price of $130.77 (+13.7% above today's purchase price). The Covered Calls Advisor also likes the valuation based on its P/E Ratio -- based on estimates for this year's earnings per share, the P/E would be 11.7 which compares favorably with the prior 5-year average of 14.7.
As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +39.3% annualized
return for the next 10 days) if the stock is assigned early (last business day
prior to the September 13th ex-date); OR +1.7%
absolute return (equivalent to +28.3% annualized return over the next 22
days) if the stock is assigned on the September 24th, 2021 options expiration date.
Best Buy Inc. (BBY) -- New Covered Calls Position
The transactions were as follows:9/03/2021 Bought 200 shares of Best Buy shares @ $115.05 per share
9/03/2021 Sold 2 Best Buy September 24th, 2021 $112.00 Call options @ $4.25 per share
Note: this was a net debit limit simultaneous Buy/Write transaction
09/13/2021 Upcoming quarterly ex-dividend of $.70 per share
Two possible overall performance results (including commissions) for this Best Buy Covered Calls position are as follows:
Covered Calls Cost Basis: $22,161.34
= ($115.05 - $4.25) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$848.66
= ($4.25 * 200 shares) - $1.34 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Sept 13th ex-div date): +$0.00; or
(b) Dividend Income (If BBY shares assigned at Sept 24th, 2021 options expiration): +$140.00
= ($.70 dividend per share x 200 shares)
(c) Capital Appreciation (If Best Buy shares assigned early on Friday, Sept.10th the last business day prior to the Monday, Sept. 13th options expiration date): -$610.00
+($112.00 - $115.05) * 200 shares ;or
(c) Capital Appreciation (If Best Buy shares assigned at $112.00 strike price at options expiration): -$610.00
+($112.00 - $115.05) * 200 shares
These returns will be achieved as long as the stock is above the $112.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $110.10 ($115.05 -$4.25 -$.70) provides 4.3% 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, all nine criteria are met for this Best Buy Inc. Covered Calls position.
