Pioneer Natural Resources Company is a leading pure-play oil and gas exploration and production (E&P) company that explores for, develops, and produces oil, natural gas, natural gas liquids (NGLs) and gas within the U.S., with operations primarily in the Permian Basin in West Texas. Pioneer is known for its low breakeven costs and its strong balance sheet. The recent acquisition of Parsley Energy provides additional assets and further diversifies its operations into the Delaware Basin (in West Texas and Southeastern New Mexico), one of the most prolific basins in the U.S.
There are currently 34 analysts covering Pioneer and their average price target is $221.85 (+22.7% above today's purchase price of $180.80).
Two potential return-on-investment results are as follows: (a) +1.7% absolute return-on-investment (equivalent to +33.3% annualized roi) for 19 days if this Covered Call position is assigned early on November 26th (the last business day prior to the Nov. 29th ex-dividend date); OR (b) +3.5% absolute return-on-investment (equivalent to +34.0% annualized roi) for 38 days if this Covered Call position is in-the-money on the December 17th, 2021 options expiration date.
Pioneer Natural Resources Company (PXD) -- New Covered Call Position Established
The buy/write transaction was as follows:
11/10/2021 Bought 100 shares of Pioneer Natural Resources @ $180.80 per share
11/10/2021 Sold 1 PXD Dec. 17th, 2021 $170.00 Call option @ $13.70 per share
11/29/2021 Ex-dividend of $3.02 per share (a Special/Variable Dividend)
Two possible overall performance results (including commissions) would be as follows:
Covered Call Cost Basis: $16,710.67
= ($180.80 - $13.70) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$1,370.00
= ($13.70 * 100 shares)
(b) Dividend Income (If option exercised early on the last business day prior to the ex-div date): +$0.00; or
(b) Dividend Income (If PXD shares assigned at Dec. 17th, 2021 expiration): +$302.00
= ($3.02 dividend per share x 100 shares)
(c) Capital Appreciation (If Pioneer shares assigned early): -$1,080.00
+($170.00 strike price - $180.80 stock purchase cost) * 100 shares; or
(c) Capital Appreciation (If PXD shares assigned at $170.00 strike price at options expiration): -$1,080.00
+($180.80- $170.00) * 100 shares
Either outcome would provide a very good return-on-investment result. These returns will be achieved as long as the stock is above the $170.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $164.08 ($180.80 -$13.70 -$3.02) provides 9.2% 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 achieved for this Pioneer Natural Resources Co. Covered Calls position.
