December 30th, 2022 Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with December 30, 2022 weekly options expirations with the following results:

1. Bank of America Corporation (BAC) -- -5.4% absolute return (equivalent to -63.8% annualized return-on-investment) for the 31 days of this investment.  The Covered Calls position was assigned at the $32.50 strike price on its 12/30/2022 options expiration date since the Bank of America stock closed in-the-money at $33.12 per share.  The prior post detailing the history of this Bank of America position is here. 

2. Medtronic PLC (MDT) -- This Covered Calls position closed slightly out-of-the-money since the strike price was $78.00 and the stock closed at $77.72.  The blog post when this Medtronic Covered Calls position was originally established is here.  So, the two 12/30/2022 MDT Calls expired and 200 Medtronic shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either close out the position by selling the shares or continuing this Covered Calls position by selling two MDT Calls against the 200 Medtronic shares.

I welcome your feedback on any topics related to the Covered Calls investing strategy.  My email address is shown below.

Best Wishes for a Happy and Healthy New Year to All!

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in iShares China Large-Cap ETF

A Covered Calls position was established in iShares China Large-Cap ETF (ticker FXI) with a January 20th, 2023 options expiration date.   Five hundred shares of iShares China Large-Cap ETF were purchased at $28.28 and five 1/20/2023 Call options were sold at the $27.00 strike price at $1.86 per share--a net debit transaction of $26.42 per share which provides a $.58 per share time value. The Implied Volatility of these Calls was 40.7 and the Delta was 69.0 when this transaction was executed.

As detailed below, a potential return-on-investment result is +2.2% absolute return (equivalent to +36.0% annualized return for the next 22 days) if the share price is in-the-money (i.e. above the $27.00 strike price) and therefore assigned on the January 20th, 2023 options expiration date.

 
iShares China Large-Cap ETF (FXI) -- New Covered Calls Position 
The Buy/Write transaction was as follows:
12/30/2023 Bought 500 shares of iShares China Large-Cap ETF @ $28.28 per share 
12/30/2023 Sold 5 FXI Jan. 20th, 2023 $27.00 Call options @ $1.86 per share

A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
FXI Shares Purchase Cost: $13,213.35
= ($28.28 - $1.86) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$926.65
= ($1.86 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 iShares China Large-Cap ETF shares assigned at $27.00 strike price at expiration): -$640.00
+($27.00 - $28.28) * 500 shares

Total Net Profit (If 500 iShares China Large-Cap ETF shares assigned at $27.00 strike price at expiration): +$286.65
= (+$926.65 options income +$0.00 dividend income -$640.00 capital appreciation)

Absolute Return-on-Investment: +2.2%
= +$286.65/$13,213.35
Annualized Return-on-Investment: +36.0%
= (+$286.65/$13,213.35) * (365/22 days)

Established Three New Covered Calls Positions in Alcoa Corporation, Cisco Systems Inc., and Freeport-McMoRan Inc.

This morning, three Covered Call positions were established in Alcoa Corporation (ticker AA), Cisco Systems Inc. (CSCO), and Freeport-McMoRan Inc.(FCX) when the Covered Calls Advisor's buy/write limit orders for each position were executed.   For Alcoa, 400 shares were purchased at $45.94 and 4 January 13th, 2023 Call options were sold at $3.86 per share at the $43.00 strike price.   For Cisco Systems, 300 shares were purchased at $47.09 and 3 January 13th, 2023 Call options were sold at $1.40 at the $46.00 strike price.  For Freeport-McMoRan, 400 shares were purchased at $37.72 and 4 January 20th, 2023 Call options were sold at $2.96 per share at the $35.50 strike price.  Given the Covered Calls Advisor's current cautious outlook, moderately in-the-money Covered Calls positions were established for all three positions.  Two of the positions (Cisco Systems and Freeport-McMoRan) have intervening ex-dividend dates prior to their options expiration dates and both positions passed all nine criteria of my Dividend Capture Strategy.

As detailed below, some potential return-on-investment results for these Covered Calls positions are: 

• For Alcoa Corporation: +1.7% absolute return (equivalent to +42.4% annualized return-on-investment for the next 15 days) if the stock is in-the-money and therefore assigned on the January 13th, 2023 options expiration date.

• For Cisco Systems Inc.: +1.5% absolute return (equivalent to +36.4% annualized return over the next 15 days) if the stock is assigned on its January 13th options expiration date.

• For Freeport-McMoRan Inc.: +2.1% absolute return (equivalent to +59.2% annualized return-on-investment for the next 13 days) if the stock is assigned early (last trading day prior to the January 12th, 2023 ex-dividend date); OR (2) +2.5% absolute return (equivalent to +42.2% annualized return over the next 22 days) if the stock is assigned on its January 20th, 2023 options expiration date.

 

1.  Alcoa Corporation (AA) -- New Covered Calls Position              The simultaneous buy/write transaction was:
12/30/2022 Bought 400 Alcoa Corporation shares @ $45.94
12/30/2022 Sold 4 AA 1/13/2022 $43.00 Call options @ $3.86 per share. Note: the Implied Volatility of these Calls was 55.8 when this transaction was executed.

A potential overall performance result (including commissions) for this Alcoa Covered Calls position is as follows:
Covered Calls Net Investment: $16,834.68
= ($45.94 - $3.86) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$1,469.32
= ($3.68 * 400 shares) - $2.68 commission
(b) Dividend Income (If Alcoa shares assigned at January 13th, 2023 expiration): +$0.00
= ($0.00 dividend per share x 400 shares)
(c) Capital Appreciation (If Alcoa shares assigned at $43.00 strike price at expiration): -$1,176.00
+($43.00 - $45.94) * 400 shares

Total Net Profit (If Alcoa shares assigned at $43.00 strike price at the January 13th, 2023 expiration): +$293.32

= (+$1,469.32 options income +$0.00 dividend income -$1,176.00 capital appreciation)
 

Absolute Return-on-Investment (If shares assigned at $43.00 at the Jan. 13th, 2023 options expiration date): +1.7%

= +$293.32/$16,834.68

Annualized Return-on-Investment (If 400 Alcoa shares assigned at $43.00 at the Jan. 13th, 2023 options expiration): +42.4%

= (+$293.32/$16,834.68) * (365/15 days)

2.  Cisco Systems Inc. (CSCO) -- New Covered Calls Position
The simultaneous buy/write transaction was:

12/30/2022 Bought 300 Cisco Systems Inc. shares @ $47.09
12/30/2022 Sold 3 Cisco 1/13/2023 $46.00 Call options @ $1.40.  Note: the Implied Volatility of these Calls was 19.1 when this transaction was executed.
1/4/2023 Upcoming quarterly ex-dividend of $.38 per share

A possible overall performance result (including commissions) for this Cisco Systems Covered Calls position is as follows:
Covered Calls Net Investment: $13,709.01
= ($47.09 - $1.40) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$417.99
= ($1.40 * 300 shares) - $2.01 commission
(b) Dividend Income (If Cisco stock assigned at Jan. 13th, 2023 options expiration): +$114.00
= ($.38 dividend per share x 300 shares)

(c) Capital Appreciation (If 300 CSCO shares assigned at $46.00 strike price at options expiration): -$327.00
+($46.00 - $47.09) * 300 shares

Total Net Profit (If Cisco shares assigned at $46.00 at the Jan. 13th, 2023 expiration): +$204.99

= (+$417.99 options income +$114.00 dividend income -$327.00 capital appreciation)
 

Absolute Return-on-Investment (If Cisco Systems shares assigned at $46.00 at the Jan. 13th, 2023 options expiration): +1.5%

= +$204.99/$13,709.01

Annualized Return-on-Investment (If Cisco shares assigned at $46.00 at 1/13/2023 options expiration): +36.4%

= (+$204.99/$13,709.01) * (365/15 days) 

 

3.  Freeport-McMoRan Inc. (FCX) -- New Covered Calls Position The buy/write transaction was:
12/30/2022 Bought 400 Freeport-McMoRan shares @ $37.72 each
12/30/2022 Sold 4 FCX 1/20/2023 $35.50 Call options @ $2.96 per share
1/12/2023 Upcoming quarterly ex-dividend of $.15 per share

Two possible overall performance results (including commissions) for this Freeport Covered Calls position are as follows:
Covered Calls Net Investment: $13,906.68
= ($37.72 - $2.96) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$1,181.32
= ($2.96 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on January 11th, 2023 the last business day prior to the January 12th ex-div date): +$0.00; or
(b) Dividend Income (If Freeport shares assigned at January 20th, 2023 expiration): +$60.00
= ($.15 dividend per share x 400 shares)
(c) Capital Appreciation (If Freeport shares assigned early): -$888.00
+($35.50 - $37.72) * 400 shares; or
(c) Capital Appreciation (If Freeport-McMoRan shares assigned at $35.50 strike price at expiration): -$888.00
+($35.50 - $37.72) * 400 shares

1. Total Net Profit [If option exercised on Jan.11th (business day prior to the Jan. 12th, 2023 ex-dividend date)]: +$293.32

= (+$1,181.32 options income +$0.00 dividend income -$888.00 capital appreciation); or

2. Total Net Profit (If Freeport shares assigned at $35.50 strike price at the Jan. 20th, 2023 expiration): +$353.32

= (+$1,181.32 options income +$60.00 dividend income -$888.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on business day prior to ex-dividend date): +2.1%

= +$293.32/$13,906.68

Annualized Return-on-Investment (If option exercised early): +59.2%

= (+$293.32/$13,906.68) * (365/13 days); or

2. Absolute Return-on-Investment (If Freeport shares assigned at $35.50 at the January 20th, 2023 expiration): +2.5%

= +$353.32/$13,906.68

Annualized Return-on-Investment (If 400 FCX shares assigned at $35.50 at the Jan. 20th, 2023 options expiration): +42.2%

= (+$353.32/$13,906.68) * (365/22 days)

Either outcome provides a very good return-on-investment result for this investment.  These returns will be achieved as long as the stock is above the $35.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price at options expiration of $34.61 ($37.72 -$2.96 -$.15) provides 8.2% downside protection below today's $37.72 stock purchase price.

Foundation Stocks for the New Year

My personal preference is to establish positions in relatively short-term (one month or less) Covered Calls.  The primary reason for this is simply that the shorter the duration, the larger the potential annualized return-on-investment.  This is true since the rate of time value decay of options increases the closer they get to the options expiration date.  Short-duration positions also provide another benefit --they give us a more frequent opportunity to evaluate our original purchase decision and to determine if, given ongoing news about the company and the change in its price since our purchase, we would like to modify our position by either: (1) selling out of the position entirely if there has been negative news about the company or if we have found another company that we are more bullish on and need cash to invest in the new company; or (2) continuing the existing Covered Calls position near or on its original options expiration date and rolling out the same company to a future options expiration date.

I truly enjoy reading, researching, analyzing, and thinking about my investments.  Since I've been retired (for several years now) and can devote more time to investing, I've noticed that I now tend to close out my positions in a company on (or even before) their original expiration date and then move on to a new position in a different company.  This approach has improved my overall results, but I also recognize that most subscribers to this blog cannot devote anywhere near the same number of hours that I do to their investments.  

Several subscribers to my blog have emailed me that they have a different approach to Covered Calls investing.  Their preference is to buy-and-hold stocks for a longer period and to regularly sell Call options against these stocks to increase income compared with not utilizing Covered Calls but to instead simply hold only long positions in their selected stocks -- in other words the basic buy-and-hold strategy.  I understand the need for such an approach and agree that this approach to Covered Calls is still preferable to the basic buy-and-hold stocks strategy.  But I'm confident you will agree that holding stocks for a prolonged period makes stock selection decisions of paramount importance.  In short, the companies selected should be ones with good quality characteristics but also with good future growth prospects and which are also trading at the time of purchase at an attractive valuation relative to the overall market and to their own historic valuation.  

If you have a buy-and-hold Covered Calls investing approach, a few companies you might consider including in your analyses going into 2023 (in a variety of sectors) might include:
Communication Services -- Alphabet, Disney
Consumer Discretionary -- MGM Resorts International
Energy -- Canadian Natural Resources, EQT Corporation
Financial -- Bank of America
Healthcare -- CVS Health
Industrial -- Lockheed Martin
Information Technology -- Microsoft, Qualcomm
Materials -- Mosaic Co.
International -- iShares Large-Cap China ETF 

As always, I welcome your emails at any time.

Best Wishes for a Happy and Prosperous New Year,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in JPMorgan Chase & Co.

Today a Covered Calls position was established in JPMorgan Chase & Co. (ticker symbol JPM) to replace the Covered Calls position in U.S. Bancorp that was assigned earlier today.  Both positions are in the Financials sector.  Like the U.S. Bancorp position, this JPMorgan position also uses my Dividend Capture Strategy since it has an ex-dividend upcoming of $1.00 per share on January 5th, 2023.  Two hundred JPM shares were purchased at $132.59 and two January 13th, 2023 $127.00 Call options were sold at $6.59 per share in a simultaneous buy/write transaction.  The time value in the Call options when this position was established was $1.00 per share = [$6.59 Call options premium received - ($132.59 stock purchase price - $127.00 strike price)].  

I am continuing to establish conservative Covered Calls positions with moderately in-the-money Call options strike prices (Deltas in approximately the 70 to 80 range) in this current bear market.  Since JPMorgan's next quarterly earnings report is before market open on January 13th (which is also the options expiration date for this position) and I prefer not maintaining positions through earnings reports, it is very likely that I will close out this position before January 13th to avoid this potential stock price volatility.

As detailed below, two potential return-on-investment results are: 

•  +0.8% absolute return (equivalent to +41.1% annualized return for the next 7 days) if the stock is assigned early (business day prior to the January 5th, 2023 ex-dividend date); OR 

• +1.6% absolute return (equivalent to +36.1% annualized return over the next 16 days) if the stock is assigned on the January 13th, 2023 options expiration date.

JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

The simultaneous buy/write transaction was:
12/29/2022 Bought 200 JPM shares @ $132.59 12/29/2022 Sold 2 JPM January 13th, 2023 $127.00 Call options @ $6.59 per share
1/05/2023 Upcoming quarterly ex-dividend at $1.00 per share

Two possible overall performance results (including commissions) for this JPM Covered Calls position are as follows:
Stock Purchase Net Investment: $25,201.34
= ($132.59 - $6.59) *200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,316.66
= ($6.59 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on January 4th, the business day prior to the January 5th ex-div date): +$0.00; or
(b) Dividend Income (If JPM assigned at the January 13th, 2023 options expiration date): +$200.00
= ($1.00 dividend per share x 200 shares)

(c) Capital Appreciation (If JPM assigned early): -$1,118.00
+($127.00 -$132.59) * 200 shares; or
(c) Capital Appreciation (If JPM assigned at $127.00 strike price at expiration): -$1,118.00
+($127.00-$132.59) * 200 shares

1. Total Net Profit [If option exercised on the last business day prior to the Jan. 5th ex-dividend date)]: +$198.66

= (+$1,316.66 options income +$0.00 dividend income -$1,118.00 capital appreciation); or

2. Total Net Profit (If JPM assigned at $127.00 at the January 13th, 2023 expiration): +$398.66

= (+$1,316.66 options income +$200.00 dividend income -$1,118.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on business day prior to ex-dividend date): +0.8%

= +$198.66/$25,201.34

Annualized Return-on-Investment (If option exercised early): +41.1%

= (+$198.66/$25,201.34) * (365/7 days); or

2. Absolute Return-on-Investment (If JPM assigned at $127.00 at the Jan. 13th, 2023 expiration date): +1.6%

= +$398.66/$25,201.34

Annualized Return-on-Investment (If JPM assigned at $127.00 at the Jan. 13th, 2023 options expiration): +36.1%

= (+$398.66/$25,201.34) * (365/16 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  Eight of the nine criteria are achieved in this JPMorgan position.

Early Assignment of Covered Calls Position in U.S. Bancorp

Early this morning, the Covered Calls Advisor was notified by my broker (Schwab) that the four U.S. Bancorp (ticker USB) January 6th, 2023 $41.00 Call options were exercised yesterday--Note: it is commonplace with early assignments that they normally occur on the last business day prior to the ex-dividend date.  U.S. Bancorp stock has increased from its purchase price of $42.30 one week ago to $43.35 at the market close yesterday.  The original $.24 time value had declined on yesterday's market close to only $0.025 (at the midpoint of the Bid/Ask spread), so as I expected and with 9 days remaining until the options expiration date, the owner of the Calls exercised their option to buy the 400 shares at the $41.00 strike price in order to receive today's $.48 per share ex-dividend.  

The post showing the details of this position when it was originally established is here .  As detailed below, the return-on-investment results for this U.S. Bancorp was: +0.6% absolute return in 7 days (equivalent to a +30.8% annualized return-on-investment).    
 

U.S. Bancorp (USB) -- Covered Calls Position Closed by Early Assignment

The original simultaneous buy/write transaction was:
12/22/2022 Bought 400 U.S. Bancorp shares @ $42.30
12/22/2022 Sold 4 USB January 6th, 2023 $41.00 Call options @ $1.54 per share.  The Implied Volatility of these Call options was 21.4 when this position was established.
12/29/2022 U.S. Bancorp Call options owner exercised their options, so the Covered Calls position was closed out early. The 4 USB Call options expired worthless and the 400 BK shares were sold at the $41.00 strike price.
 

The overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Stock Purchase Net Investment: $16,306.68
= ($42.30 - $1.54) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$616.32
= ($1.54 * 400 shares) - $2.68 commission
(b) Dividend Income (Four Call options exercised early on December 28th, the last business day prior to the December 29th ex-div date): +$0.00
(c) Capital Appreciation (USB's shares assigned early at $41.00 strike price): -$520.00
+($41.00-$42.30) * 400 shares

Total Net Profit (U.S. Bancorp's shares assigned early at $41.00 on December 28th): +$96.32

= (+$616.32 options income +$0.00 dividend income -$520.00 capital appreciation)

Absolute Return-on-Investment: +0.6%

= +$96.32/$16,306.68

Annualized Return-on-Investment: +30.8%

= (+$96.32/$16,306.68) * (365/7 days)

Rolled Out the Tyson Foods Inc. Covered Calls Position

The Covered Calls Advisor Portfolio has a Covered Calls position in Tyson Foods Inc. (ticker TSN)  that expired out-of-the-money at its December 16th, 2022 options expiration date.  Tyson Foods closed at $61.84 then and the strike price was $65.00.  I decided to continue this Covered Calls position today by rolling-down-and-out to the $62.50 strike price at the January 20th, 2023 expiration date by selling two Call options at $1.30 per share against the 200 Tyson shares owned when the stock price today was $61.67.   

As detailed below, two potential return-on-investment results are: (1) -1.2% absolute return (equivalent to -8.4% annualized return for the 53 days holding period) if the Tyson Foods price is unchanged at today's $61.67 price on the January 20th, 2023 expiration date; and (2) -0.1% absolute return (equivalent to -1.0% annualized return for the 53 days holding period) if Tyson Foods is in-the-money (i.e. above the $62.50 strike price) on the Jan. 20th expiration date. In doing this rollout transaction, I am attempting to maintain exposure in the Consumer Staples sector by repairing this currently losing position back closer to profitability. 

Tyson Foods Inc. (TSN) -- Covered Calls Position Continued by Rolling Out
The original simultaneous buy/write transaction was:

11/23/2022 Bought 200 Tyson Foods shares @ $66.99
11/23/2022 Sold 2 Tyson Foods 12/16/2022 $65.00 Call options @ $2.59
11/30/2022 Upcoming quarterly ex-dividend of $.48 per share
12/16/2022 Two TSN Call options expired out-of-the-money and 200 shares remain in the Covered Calls Advisor Portfolio
12/27/2022 Continued Tyson Foods Covered Calls position by selling two Jan. 20th, 2023 $62.50 Call options @ $1.30 per share.  The stock price was $61.67 when this transaction was made.

Two possible overall performance results (including commissions) for this Tyson Foods Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $15,477.34
= ($79.84 - $2.46) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$779.34
= ($2.59 + $1.30) * 200 shares - $2.68 commissions
(b) Dividend Income: +$96.00
= ($.48 dividend per share x 200 shares)
(c) Capital Appreciation (If the Tyson Foods price is unchanged at today's $61.67 price on the January 20th, 2023 expiration date): -$1,064.00
+($61.67 current stock price - $66.99 stock purchase price) * 200 shares; OR
(c) Capital Appreciation (If Tyson Foods shares are assigned at the $62.50 strike price at the 1/20/2023 options expiration date): -$898.00
+($62.50 options strike price - $66.99 stock purchase price) * 200 shares

1. Total Net Profit (If the Tyson Foods price is unchanged at today's $61.67 price on the January 20th, 2023 expiration date): -$188.66

= (+$779.34 options income +$96.00 dividend income -$1,064.00 capital appreciation); OR

2. Total Net Profit (If Tyson Foods shares are assigned at the $62.50 strike price at the 1/20/2023 options expiration date): -$22.66

= (+$779.34 options income +$96.00 dividend income -$898.00 capital appreciation)

 

1. Absolute Return-on-Investment (If the Tyson Foods price is unchanged at today's $61.67 price on the January 20th, 2023 expiration date): -1.2%

= -$188.66/$15,477.34

Annualized Return-on-Investment (If stock price unchanged at $61.67 at expiration): -8.4%

= (-$188.66/$15,477.34) * (365/53 days); OR

2. Absolute Return-on-Investment (If Tyson Foods shares are assigned at the $62.50 strike price at the 1/20/2023 options expiration date): -0.1%

= -$22.66/$15,477.34

Annualized Return-on-Investment (If Tyson Foods shares are assigned at the $62.50 strike price at the 1/20/2023 options expiration date): -1.0%
= (-$22.66/$15,477.34) * (365/53 days)

Closed Covered Calls Position in Devon Energy Corporation

At last Friday's options expiration, two December 16th, 2022 Covered Calls in Devon Energy Corporation (ticker DVN) expired out-of-the-money with the stock price below the $63.00 strike price, so the Calls expired and the 300 Devon shares remained in the Covered Calls Advisor Portfolio.  

I decided to close this position this morning given the current Bearish outlook of my Overall Market Meter as well as the impact the current worldwide economic slowdown might continue to have on the U.S. stock market early in 2023.  The price of crude oil was higher by about 3% in early trading today attributed to a combination of Russia's indication of possible declines in production as well as the potential impact of energy demand throughout North America from the plummeting temperatures caused by the current Polar vortex.  So early in this morning's trading, when Devon was trading 1.88% above yesterday's close, I closed out the position by selling the 300 shares at a market price of $61.24 per share.    

The return-on-investment results for this Devon Energy position was: +1.5% absolute return in 30 days (equivalent to a +18.2% annualized return-on-investment).   

This Covered Calls position demonstrates the benefit of selling moderately in-the-money Covered Calls in bearish markets using the Dividend Capture Strategy.  This Devon Energy stock price declined by 9.0% since its original purchase price one month ago, however a satisfactory annualized return-on-investment profit of +18.2% was still achieved (as detailed below).

Devon Energy Corp (DVN) -- Covered Calls Position Closed
The original buy/write transaction was:
11/23/2022 Bought 300 Devon Energy shares @ $67.27 each
11/23/2022 Sold 3 DVN 12/16/2022 $63.00 Call options @ $5.61 per share
12/9/2022 Quarterly ex-dividend of $1.35 per share
12/16/2022 Three DVN $63.00 Call options expired out-of-the-money and 300 shares remain in the Covered Calls Advisor Portfolio
12/23/2022 Sold 300 Devon Energy shares @ $61.24 per share to close out this Covered Calls position

The overall performance results (including commissions) for this Devon Covered Calls position were as follows:
Covered Calls Net Investment: $18,500.01
= ($67.27 - $5.61) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,680.99
= ($5.61 * 300 shares) - $2.01 commission
(b) Dividend Income: +$405.00
= ($1.35 dividend per share x 300 shares)
(c) Capital Appreciation (Devon shares sold at $61.24 to close out the Covered Calls position): -$1,809.00
+($61.24 stock selling price - $67.27 stock purchase price) * 300 shares

Total Net Profit: +$276.99

= (+$1,680.99 options income +$405.00 dividend income -$1,809.00 capital appreciation)
 

Absolute Return-on-Investment: +1.5%

= +$276.99/$18,500.01

Annualized Return-on-Investment: +18.2%

= (+$276.99/$18,500.01) * (365/30 days)

Covered Calls Established in U.S. Bancorp

A January 6th, 2023 Covered Calls buy/write limit order was executed today in U.S. Bancorp (ticker USB) at a net debit price of $40.76 per share.  Four hundred shares were purchased at $42.30 and four January 6th, 2023 $41.00 strike price Call options were sold at $1.54 per share.  The corresponding extrinsic value (i.e. time value) was $.24 per share [$1.54 Call options premium - ($42.30 stock purchase price - $41.00 strike price)].   There is an intervening ex-dividend prior to the options expiration date one week from today (on December 29th) at $.48 per share which is included in the potential return-on-investment results shown below.  The Implied Volatility of the Call options was 21.4 and the Delta was 74.3 when this position was established.  And as preferred, there is no quarterly earnings report prior to the options expiration date.

Some key numbers for this U.S. Bancorp Covered Calls position are:
Covered Calls Net Investment: $16,301.32
Time Value Profit if Assigned on Expiration Date: $93.32
Dividend Income if Assigned on the Options Expiration Date: $192.00
Total Potential Profit if Assigned ($93.32 time value profit + $192.00 dividend income): $285.32
Days Until the January 6th, 2023 Options Expiration: 16

Absolute Return-on-Investment if Assigned Early (on day prior to ex-dividend date): +0.6%
Annualized Return-on-Investment if Assigned Early: +30.8%

Absolute Return-on-Investment if Assigned at Expiration: +1.8%
Annualized Return-on-Investment if Assigned at Expiration: +39.9%

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Closed the Cash-Secured Puts Position in Global Payments Inc.

At last Friday's options expiration, three December  16th, 2022 100% Cash-Secured Put Options in Global Payments Inc. (ticker GPN) expired with the stock price slightly below the $95.00 strike price, so 300 shares of Global Payments were purchased at the $95.00 strike price.  Since last Friday, GPN's price increased and I decided to close this position by selling the 300 shares today at a market price of $95.62 per share.    

The return-on-investment results for this Global Payments Inc. position was: +2.1% absolute return in 15 days (equivalent to a +51.0% annualized return-on-investment).   

Global Payments Inc. (GPN) -- 100% Cash-Secured Puts Position Closed Out

The original transaction was as follows:
12/6/2022  Sold 3 Global Payments December 16th, 2022 $95.00 100% Cash-Secured Put options @ $1.35 per share.
The Covered Calls Advisor does not use margin, so the detailed information on this position and the potential result detailed below reflect that this position was established using 100% cash securitization for the three Global Payments Put options sold. 
12/16/2022 Three GPN Puts closed below the $95.00 strike price, so the 3 Put options expired and 300 shares of GPN were purchased at $95.00 in the Covered Calls Advisor Portfolio.
12/21/2022 Closed out this Global Payments position by selling the 300 shares @ $95.62.

The overall performance results (including commissions) were as follows:
100% Cash-Secured Puts Net Investment: $28,097.01
= ($95.00 - $1.35) * 200 shares + $2.01 commission

Net Profit:
(a) Options Income: +$402.99
= ($1.35 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Global Payments stock sold at $95.62 per share on 12/21/2022):  +$186.00
= ($95.62 stock selling price - $95.00 stock purchase price) * 300 shares

Total Net Profit: +$588.99
= (+$402.99 options income +$0.00 dividend income +$186.00 capital appreciation)

Absolute Return-on-Investment: +2.1%
= +$588.99/$28,097.01
Annualized Return-on-Investment: +51.0%
= (+$588.99/$28,097.01) * (365/15 days)

Rolled Out the Bank of America Corporation Covered Calls

The Covered Calls Advisor Portfolio has a Covered Calls position in Bank of America Corporation (ticker BAC)  that expired out-of-the-money at last Friday's options expiration date.  BAC closed at $31.70 Friday and the strike price was $35.50.  I decided to continue this Bank of America Covered Calls position today by rolling-out at the same $32.50 strike price to the December 30th, 2022 expiration by selling 5 Calls at $.52 per share when the price of BofA was $32.41.   

As detailed below, a potential return-on-investment result is -5.4% absolute return (equivalent to -63.8% annualized return for the 31 days holding period) if the Bank of America price is in-the-money (i.e. above the $32.50 strike price) and therefore assigned on the December 30th, 2022 options expiration date.  My plan is to attempt to gradually repair this losing position back toward profitability.  Fortunately, the Open Interest in weekly Bank of America options is very high (which provides for the desired tight Bid/Ask options spreads), so continuing this Covered Calls position by rolling out two weeks at a time (as is being done with today's rollout) is a feasible approach. 

Bank of America Corporation (BAC) -- Covered Calls Position Rolled Out
The original net debit limit order buy/write transaction was as follows:
11/29/2022 Bought 500 Bank of America Corp. shares at $36.80
11/29/2022 Sold 5 BAC December 30th, 2022 $35.50 Call options @ $1.67 per share.
12/01/2022 Ex-dividend of $.22 per share
12/16/2022 5 BAC Call options expired out-of-the-money and 500 shares remain in the Covered Calls Advisor Portfolio
12/20/2022 Continued BAC Covered Calls position by selling 5 Dec. 30th, 2022 $32.50 Call options @ $.52 per share when the stock price was $32.41. 

A possible overall performance result (including commissions) if this Bank of America Corp. Covered Calls position is assigned at the 12/30/2022 options expiration date is as follows:
Original Net Investment: $17,568.35
= ($36.80 - $1.67) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$1,088.30
= ($1.67 + $.52) * 500 shares - $6.70 commissions
(b) Dividend Income: +$110.00 = $.22/share x 500 shares
(c) Capital Appreciation (If 500 BAC shares assigned at $32.50 strike price at expiration): -$2,150.00
+($32.50 strike price - $36.80 original stock purchase price) * 500 shares

Total Net Profit (If 500 Bank of America shares assigned at $32.50 strike price at expiration): -$951.70
= (+$1,088.30 options income +$110.00 dividend income -$2,150.00 capital appreciation)

Absolute Return-on-Investment: -5.4%
= -$951.70/$17,568.35
Annualized Return-on-Investment: -63.8%
= (-$951.70/$17,568.35) * (365/31 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Closed Positions in Kohl's Corporation and Suncor Energy Inc.

Yesterday, I closed out two losing Covered Calls positions in Kohl's Corporation (ticker KSS) and Suncor Energy Inc. (SU).  Both positions closed well out-of-the-money at their options expirations last Friday and both positions were closed out by selling the 400 Kohl's shares at $25.96 and the 400 Suncor shares at $30.135.  

Based primarily on declines for four consecutive months in the leading economic indicators and the recent inverted 10 year/3 month yield curve, it is increasingly likely the U.S. will go into recession in early 2023.  Although the stock market decline in 2022 has been substantial, it is also likely that an upcoming recession is not fully priced into the market at its current S&P 500 level of about 3800 and my current belief is that stocks in the Consumer Discretionary sector (such as Kohl's) will continue to underperform in the months ahead.  Regarding my sale of Suncor, I will continue to establish positions in the Energy sector using my Dividend Capture Strategy as I believe the present demand/supply imbalance in energy markets will persist.  As detailed below, since I've already captured the Suncor quarterly dividend, I am now completing the process of simply exchanging my Suncor position for a new Dividend Capture position in the Energy sector that I recently established in the Energy Select Sector SPDR Fund ETF (ticker XLE)--see details of that position here.      

Details of the completed Kohl's and Suncor Covered Calls positions are as follows:

1. Kohl's Corporation (KSS) -- Covered Calls Position Closed Out
The simultaneous buy/write transactions was as follows:
11/25/2022 Bought 400 shares of Kohl's Corporation stock @ $31.98 per share 
11/25/2022 Sold 4 Kohl's Dec. 16th, 2022 $30.00 Call options @ $2.58 per share
12/6/2022 Ex-dividend at $.50 per share
12/16/2022 4 KSS $30.00 Call options expired out-of-the-money and 400 shares remain in the Covered Calls Advisor Portfolio
12/19/2022 Sold 400 Kohl's shares @ $25.96 per share to close out this Covered Calls position

The overall performance results (including commissions) were as follows:
Covered Calls Net Investment: $11,761.34
= ($31.98 - $2.58) * 400 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,030.66
= ($2.58 * 400 shares) - $1.34 commission
(b) Dividend Income: +$200.00
= $.50 dividend per share x 400 shares
(c) Capital Appreciation: -$2,408.00
= ($25.96 - $31.98) * 400 shares

Net Profit: -$1,177.34
= (+$1,030.66 options income +$200.00 dividend income - $2,408.00 capital appreciation)

Absolute Return-on-Investment: -10.0%
= -$1,177.34/$11,761.34
Equivalent Annualized Return-on-Investment: -152.2%
= (-$1,177.34/$11,761.34) * (365/24 days)

2.  Suncor Energy Inc. (SU) -- Covered Calls Position Closed Out
The buy/write transaction was:
11/16/2022 Bought 400 Suncor Energy shares @ $36.38 each
11/16/2022 Sold 4 SU 12/16/2022 $34.00 Call options @ $3.12 per share
12/1/2022 Upcoming quarterly ex-dividend of $.39 per share
12/16/2022 4 SU $34.00 Call options expired out-of-the-money and 400 shares remain in the Covered Calls Advisor Portfolio
12/19/2022 Sold 400 Suncor shares @ $30.135 per share to close out this Covered Calls position

The overall performance results (including commissions) for this Suncor Covered Calls position were as follows:
Covered Calls Net Investment: $13,306.68
= ($36.38 - $3.12) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$1,245.32
= ($3.12 * 400 shares) - $2.68 commission
(b) Dividend Income: +$156.00
= ($.39 dividend per share x 400 shares)
(c) Capital Appreciation: -$2,498.00
+($30.135 - $36.38) * 400 shares

Total Net Profit: -$1,096.68

= (+$1,245.32 options income +$156.00 dividend income -$2,498.00 capital appreciation)
 

Absolute Return-on-Investment: -8.2%

= -$1,096.68/$13,306.68

Annualized Return-on-Investment: -91.2%

= (-$1,096.68/$13,306.68) * (365/33 days)

Monthly Options Expiration Results through December 16th, 2022

Each month on the day after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So this post covers the period from the day after last month's November 18th, 2022 options expiration through Friday's December 16th, 2022 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio held a total of twelve positions.  Six positions were closed out at a profit and six positions had their options expire out-of-the-money and these stocks currently remain in the Covered Calls Advisor Portfolio at an unrealized loss.   

The specific results for each position are summarized as follows: 

• Three Covered Calls positions expired in-the-money (stock price above the strike price) on their December 16th, 2022 monthly options expiration date and were therefore assigned with the following results:

1. Mosaic Company -- +3.2% absolute return-on-investment in 29 days (equivalent to a +40.4% annualized return-on-investment).
2. Tapestry Inc. -- +2.3% absolute return-on-investment in 17 days (equivalent to a +48.6% annualized return-on-investment).
3. United Rentals Inc. -- +2.3% absolute return-on-investment in 29 days (equivalent to a +28.7% annualized return-on-investment).

• Two Covered Calls positions expired in-the-money on their respective Weekly options expiration dates during the past month as follows:

1. Exxon Mobil Corp. -- +1.9% absolute return-on-investment in 22 days (equivalent to a +32.0% annualized return-on-investment).
2. Discover Financial Services -- +2.2% absolute return-on-investment in 18 days (equivalent to a +45.2% annualized return-on-investment).

• One Covered Call position in Qualcomm Inc. was closed out early based on my decision at the time with a +1.0% absolute return-on-investment in 19 days (equivalent to a +18.8% annualized return-on-investment).

• Six positions (five Covered Calls positions and one Cash-Secured Puts positions) had December 16th options expirations close below their strike prices, so the options expired and the stocks now remain in the Covered Calls Advisor Portfolio.  These positions are: (1) 500 shares in Bank of America Corp.; (2) 300 shares in Devon Energy Corporation; (3) 300 shares in Global Payments Inc.; (4) 400 shares in Kohl's Corporation; (5) 400 shares in Suncor Energy Inc.; and (6) 200 shares in Tyson Foods Inc.  Early next week, decisions will be made for each of these six positions to either sell the shares or to continue the Covered Calls positions by selling future Call options against the shares currently held.  As always, the details of all transactions will be posted on this blog site on the same day the transactions occur.
  

During the past year (last 12 months) 109 of 118 positions (92.4%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit and 9 positions were closed out at a loss.  The Covered Calls Advisor Portfolio weighted average annualized-return-on-investment (aroi) was +19.2% during the past year and the average holding period for these 118 closed positions was 22.7 days.  In comparison, the benchmark S&P 500 returned -15.8% during the same prior one-year period.   

As demonstrated by these past year's results, the Covered Calls strategy can be extraordinarily beneficial during Bearish markets such as we have experienced during the past year, and especially by selling moderately in-the-money strike prices to provide added downside protection in bearish markets.  However, be advised that these return-on-investment results by the Covered Calls Advisor Portfolio above that of the benchmark S&P 500 (i.e. +19.2% versus -15.8%) substantially exceeds that which would normally be expected over a period of several years using the Covered Calls investing strategy.  

This Covered Calls Advisor blog (see here) is available to all who are interested in learning the benefits of the Covered Calls investing strategy.  As always, I encourage you to email me at partlow@cox.net any time you would like my feedback on your comments or questions related to Covered Calls. 

Best Wishes and Happy Holidays,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Covered Calls Established in Energy Select Sector SPDR Fund ETF

A Covered Calls position was established in the Energy Select Sector SPDR Fund ETF (ticker XLE), with a January 6th, 2023 weekly options expiration date. Three hundred shares of the Energy Select Sector SPDR Fund were purchased at $84.85 and three 1/6/2023 Call options were sold at $4.57 per share at the $81.00 strike price.  The Implied Volatility of these Calls was 26.8 when this position was transacted which, as preferred by the Covered Calls Advisor, is above that of the S&P 500 Volatility Index (i.e. VIX) which is currently at 22.1.

The time value was $.72 per share [$81.00 strike price - ($84.85 share price - $4.57 options premium)] when this net debit buy/write limit order transaction was executed.  XLE also goes ex-distribution in 4 days on December 19th, 2022.  The exact amount of the XLE distribution is not pre-announced, but based on prior quarterly distributions, I estimate it will be approximately $.85 per share.  Note: the actual ex-distribution amount turned out to be $.8596. 

Given my current Bearish Overall Market Meter rating, the current strategy is to established Covered Calls between 4.0% and 7.0% in-the-money.  The Delta was 75.3 when this position was established, which is a good approximation of the probability that XLE will close in-the-money (and therefore be assigned at the strike price) on the January 6th options expiration date.  This corresponds to a 4.8% [($84.85 stock purchase price - $81.00 strike price)/$81.00 strike price] in-the-money position which is within the desired 4% to 7% in-the-money range given my current bearish viewpoint.

As detailed below, a potential return-on-investment result is +0.9% absolute return (equivalent to +81.1% annualized return for the next 4 days) in the unlikely event that the stock is assigned early tomorrow on December 16th (the last business day prior to the December 19th ex-distribution date); OR +2.0% absolute return (equivalent to +31.1% annualized return over the next 23 days) if the stock is assigned on the January 6th, 2023 options expiration date.

Energy Select Sector SPDR Fund ETF (XLE) -- New Covered Calls Position
The buy/write transaction today was as follows:
12/15/2022 Bought 300 Energy Select Sector SPDR Fund ETF shares @ $84.85 per share
12/15/2022 Sold 3 XLE 12/6/2022 $81.00 Call options @ $4.57 per share
12/19/2022 Upcoming quarterly ex-distribution estimated at $.8596 per share

Two possible overall performance results (including commissions) for this Energy Select Sector SPDR Fund ETF Covered Calls position are as follows:
Covered Calls Net Investment: $24,086.01
= ($84.85 - $4.57) * 300 shares + $2.01 commissions

Net Profit Components:
(a) Options Income: +$1,368.99
= ($4.57 * 300 shares) - $2.01 commissions
(b) Distribution Income (If option exercised tomorrow on the last business day prior to the Dec. 19th ex-distribution date): +$0.00; or
(b) Distribution Income (If XLE shares assigned at the January 6th, 2023 options expiration): +$257.88
= ($.8596 distribution per share x 300 shares)
(c) Capital Appreciation (If XLE shares assigned early): -$1,155.00
+($81.00 - $84.85) * 300 shares ;or
(c) Capital Appreciation (If shares are in-the-money and therefore assigned at the $81.00 strike price at options expiration): -$1,086.00
+($81.00 - $84.85) * 300 shares

1. Total Net Profit [If options exercised on Dec. 16th (last business day prior to the Dec. 19th ex-distribution date)]: +$213.99

= (+$1,368.99 options income +$0.00 distribution income - $1,155.00 capital appreciation); or

2. Total Net Profit (If XLE shares assigned at $81.00 strike price at the January 6th, 2023 expiration): +$471.87

= (+$1,368.99 options income + $257.88 distribution income - $1,155.00 capital appreciation)

1. Absolute Return-on-Investment [If XLE Call options exercised on final business day prior to ex-distribution date]: +0.9%

= +$213.99/$24,086.01

Annualized Return-on-Investment (If options exercised early): +81.1%

= (+$213.99/$24,086.01) * (365/4 days); or

2. Absolute Return-on-Investment (If XLE shares assigned at $81.00 strike price on the Jan. 6th, 2023

options expiration date): +2.0%

= +$471.87/$24,086.01

Annualized Return-on-Investment (If XLE shares assigned at $81.00 at Jan. 6th, 2023 expiration): +31.1%

= (+$468.99/$24,086.01) * (365/23 days)

These returns will be achieved as long as the XLE price is above the $81.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $79.43 ($84.85 -$4.57 -$.85) provides 6.4% 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, all nine criteria are met for this Energy Select Sector SPDR Fund ETF Covered Calls position.

Established Covered Calls Position in Medtronic PLC Using the Dividend Capture Strategy

This afternoon, a Covered Calls position was established in Medtronic PLC (ticker symbol MDT) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $79.84 and 2 December 30th, 2022 Call options were sold at $2.46 at the $78.00 strike price.   Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Calls position was established -- the Delta was 68.1 which closely approximates the probability that the Call options will be in-the-money on the options expiration date. In addition, there is an upcoming ex-dividend of $.68 per share one week from today on December 20th which provides an annual dividend yield of 3.4% at the current stock price.  Potential results for this Covered Calls position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the Dec. 20th options expiration date.

As detailed below, two potential return-on-investment results are: 

•  +0.8% absolute return (equivalent to +41.8% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the December 20th ex-dividend date); OR 

• +1.7% absolute return (equivalent to +34.1% annualized return over the next 18 days) if the stock is assigned on the December 30th, 2022 options expiration date. 
  

Medtronic PLC (MDT) -- New Covered Calls Position
The buy/write transaction was:
12/13/2022 Bought 200 Medtronic PLC shares @ $79.84
12/13/2022 Sold 2 MDT 12/30/2022 $78.00 Call options @ $2.46
Note 1: the Implied Volatility of the Calls was 20.6 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.62 per share = [$2.46 Call options premium - ($79.84 stock price - $78.00 strike price)]
12/20/2022 Upcoming quarterly ex-dividend of $.68 per share

Two possible overall performance results (including commissions) for this Medtronic Covered Calls position are as follows:
Covered Calls Net Investment: $15,477.34
= ($79.84 - $2.46) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$492.00
= ($2.46 * 200 shares)
(b) Dividend Income (If option exercised early on Dec. 19th, the business day prior to the Dec. 20th ex-div date): +$0.00; or
(b) Dividend Income (If Medtronic stock assigned at December 30th, 2022 expiration): +$136.00
= ($.68 dividend per share x 200 shares)

(c) Capital Appreciation (If Medtronic Call options assigned early on Dec. 19th): -$368.00
+($78.00 - $79.84) * 200 shares; or
(c) Capital Appreciation (If MDT shares assigned at $78.00 strike price at options expiration): -$368.00
+($78.00 - $79.84) * 200 shares

1. Total Net Profit (If option exercised early): +$124.00

= (+$492.00 options income +$0.00 dividend income -$368.00 capital appreciation); or

2. Total Net Profit (If Medtronic shares assigned at $78.00 strike price at the Dec. 20th, 2022 options expiration date): +$260.00

= (+$492.00 +$136.00 dividend income -$368.00)

1. Absolute Return-on-Investment (If two MDT Call options exercised early on December 19th): +0.8%

= +$124.00/$15,477.34

Annualized Return-on-Investment (If options assigned early): +41.8%

= (+$124.00/$15,477.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Medtronic shares assigned at $78.00 at Dec. 30th options expiration): +1.7%

= +$260.00/$15,477.34

Annualized Return-on-Investment (If MDT shares assigned at $78.00 at the Dec. 30th, 2022 options expiration): +34.1%
= (+$260.00/$15,477.34) * (365/18 days)

Either outcome provides an attractive return-on-investment result for this Medtronic investment.  These returns will be achieved as long as the stock is above the $78.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $76.70 ($79.84 -$2.46 -$.68) provides 3.9% downside protection below today's stock purchase price.

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Medtronic position, eight criteria were met.

Closed Covered Calls Position in Qualcomm Inc.

At last Friday's options expiration, two December  9th, 2022 Covered Calls in Qualcomm Inc. (ticker QCOM) expired out-of-the-money with the stock price below the $120.00 strike price, so the Calls expired and the 200 shares of Qualcomm remained in the Covered Calls Advisor Portfolio.  I decided to close this position given the current bearishness in general in the Information Technology sector and more specifically in the semiconductor industry (including Qualcomm).  So this morning, I closed this Qualcomm Inc. position by selling the 200 shares at a market price of $119.10 per share.    

The return-on-investment results for this Qualcomm Inc. position was: +1.0% absolute return in 19 days (equivalent to a +18.8% annualized return-on-investment).   

This Covered Calls position demonstrates the benefit of selling moderately in-the-money Covered Calls in bearish markets.  This Qualcomm stock price declined by 4.4% since its original purchase price just 19 days ago, however a satisfactory return-on-investment profit was still achieved (as detailed below).

Qualcomm Inc.(QCOM) -- Covered Calls Position Closed
The original simultaneous buy/write transactions was as follows:
11/25/2022 Bought 200 shares of Qualcomm stock @ $124.52 per share 
11/25/2022 Sold 2 Qualcomm Dec. 9th, 2022 $120.00 Call options @ $5.84 per share
11/30/2022 Ex-dividend of $150.00 ($.75 per share x 200 shares)
12/9/2022 Two QCOM Calls closed below the $120.00 strike price @ $119.05 per share, so the 2 QCOM Call options expired and 200 Qualcomm shares remained in the Covered Calls Advisor Portfolio.
12/12/2022 Closed out this Qualcomm Covered Calls position by selling the 200 remaining QCOM shares @ $119.10.

The overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $23,737.34
= ($124.52 - $5.84) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,166.66
= ($5.84 * 200 shares) - $1.34 commission
(b) Dividend Income: +$150.00
= $.75 dividend per share x 200 shares
(c) Capital Appreciation: -$1,084.00
= ($119.10 - $124.52) * 200 shares

Net Profit: +$232.66
= (+$1,166.66 options income +$150.00 dividend income - $1,084.00 capital appreciation)

Absolute Return-on-Investment: +1.0%
= +$232.66/$23,737.34
Equivalent Annualized Return-on-Investment: +18.8%
= (+$232.66/$23,737.34) * (365/19 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Established New Position in Global Payments Inc.

This morning, a short-term (11 days) 100% Cash-Secured Put options position was established in Global Payments Inc. (ticker GPN) at the December 16th, 2022 options expiration date and at the $95.00 strike price.  Three Puts were sold at $1.35 per share when the stock price was at $98.90 (4.1% above the strike price).  The Implied Volatility of these Puts was 41.3 when this position was established.  Establishing positions where the Implied Volatility is greater than that of the S&P 500 Volatility Index (i.e. VIX), which is currently at 21.6, is strongly preferred by the Covered Calls Advisor.  This preference is the fifth of the twelve investing "edges" (see here) utilized that contributes to our achieving outperformance in comparison with that of the benchmark S&P 500 Index. There is no earnings report or quarterly dividend prior to the December 16th options expiration date.

Global Payments is a company in the Information Technology sector that provides payment technology and software solutions for card, electronic, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific. It operates through three segments: Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions.  Their valuation is attractive since their FY2022 P/E is estimated at only 10.6 which is 5 turns below its prior 5-year average, and their EPS are expected to continue growing another 11.8% in FY2023.  They have beat analysts' quarterly estimates in each of the last 4 quarters and analysts' target price of $149.82 is +51.5% above today's purchase price.  

The probability that Global Payments stock is above the strike price on the December 16th options expiration date (in which case the Puts expire worthless and the maximum potential profit is achieved) was 71.9% when this position was established.  Just prior to establishing this position, a comparison was made to determine whether establishing a Covered Calls position or a Cash-Secured Puts position would be preferable.  For this Global Payments position, selling the Puts was preferable since it provided the potential for a slightly higher annualized-return-on-investment. 

Global Payments Inc. (GPN) -- New 100% Cash-Secured Puts Position

As detailed below for this Global Payments 100% Cash-Secured Puts position, there is potential for a +1.4% absolute return in 11 days (equivalent to a +47.6% annualized return-on-investment).

The transaction today was as follows:
12/6/2022  Sold 3 Global Payments December 16th, 2022 $95.00 100% Cash-Secured Put options @ $1.35 per share.

The Covered Calls Advisor does not use margin, so the detailed information on this position and the potential result detailed below reflect that this position was established using 100% cash securitization for the three Global Payments Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Puts Net Investment: $28,097.01
= ($95.00 - $1.35) * 200 shares + $2.01 commission

Net Profit:
(a) Options Income: +$402.99
= ($1.35 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Global Payments stock is above the $95.00 strike price at the Dec. 16th options expiration): +$0.00
= ($95.00 - $95.00) * 300 shares

Total Net Profit [If Global Payments stock price is out-of-the-money (i.e. above $95.00 strike price) at options expiration]: +$402.99
= (+$402.99 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return-on-Investment: (If stock is above $90.00 strike price at the Nov. 18th, 2022 options expiration) : +1.4%
= +$402.99/$28,097.01
Annualized Return-on-Investment: +47.6%
= (+$402.99/$28,097.01) * (365/11 days)

Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

December 2nd, 2022 Options Expiration Results

There was one Covered Calls position in the Covered Calls Advisor Portfolio with a December 2nd, 2022 weekly options expiration date.  This position in Discover Financial Services (ticker DFS) was closed out yesterday since its stock price of $105.40 at the market close yesterday was in-the-money, so the two $101.00 Call options expired and the 200 shares owned were assigned (i.e. sold) at their $101.00 strike price.  

As detailed below, the result achieved was a +2.2% absolute return-on-investment (equivalent to +45.2% annualized return-on-investment) for the 18 days holding period).  This position was established using my Dividend Capture Strategy, so the return-on-investment result achieved includes receiving Discover's $.60 per share quarterly dividend since the ex-dividend date occurred on November 22nd which was during the 18 day period between November 15th when this Covered Calls position was established and the December 2nd, 2022 options expiration date.

Discover Financial Services (DFS) -- Covered Calls Position Assigned on the December 2nd Options Expiration Date 
The buy/write transaction was as follows:
11/15/2022 Bought 200 shares of Discover Financial Services @ $104.18 per share 
11/15/2022 Sold 2 DFS Dec. 2nd, 2022 $101.00 Call options @ $4.80 per share.  The Implied Volatility of these Calls was 30.3 when this position was established.
11/22/2022 Ex-dividend of $.60 per share
12/2/2022 Two DFS $101.00 Calls expired in-the-money (DFS stock was $105.40 at the market close yesterday (12/2/2022) and the 200 stock shares were sold at the $101.00 strike price to close out this Covered Calls position.

The overall performance results (including commissions) was as follows:
Covered Calls Net Investment: $19,877.34
= ($104.18 - $4.80) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$958.66
= ($4.80 * 200 shares) - $1.34 commission
(b) Dividend Income: +$120.00
= ($.60 dividend per share x 200 shares)
(c) Capital Appreciation (DFS shares assigned at $101.00 strike price at options expiration): -$636.00
+($101.00 strike price - $104.18 original stock purchase price) * 200 shares

Total Net Profit: +$442.66

= (+$958.66 options income +$120.00 dividend income -$636.00 capital appreciation)
 

Absolute Return-on-Investment: +2.2%

= +$442.66/$19,877.34

Annualized Return-on-Investment: +45.2%

= (+$442.66/$19,877.34) * (365/18 days)

Established Covered Calls Position in Tapestry Inc.

A December 16th, 2022 Covered Calls buy/write limit order was placed in Tapestry Inc. (ticker TPR) at a net debit limit price of $34.51 per share.  Tapestry Inc. owns and is the designer and marketer of luxury accessories and lifestyle brands Coach, Kate Spade, and Stuart Weitzman.  The order was executed and 500 shares were purchased at $36.96 and five December 16th Call options were sold at the $35.00 strike price for $2.45 per share.  The Implied Volatility of these Call options was 39.9 when this transaction was executed and the Delta was 72.5.  In addition, there is an upcoming quarterly ex-dividend of $.30 per share (3.2% annual dividend yield) on December 8th which is prior to the options expiration date; so it is included in the potential return-on-investment calculations detailed below. 

Tapestry meets the five primary criteria currently preferred for new positions established by the Covered Calls Advisor:

 

As detailed below, two potential return-on-investment results are: 

•  +1.4% absolute return (equivalent to +63.9% annualized return for the next 8 days) if the stock is assigned early (business day prior to the December 8th, 2022 ex-dividend date); OR 

• +2.3% absolute return (equivalent to +48.6% annualized return over the next 17 days) if the stock is assigned on the December 16th, 2022 options expiration date.

These returns will be achieved as long as Tapestry's stock price is above the $35.00 strike price at options expiration.  If the stock declines below the strike price, the breakeven price of $34.21 per share ($36.96 stock purchase price - $2.45 Call options selling price - $.30 ex-dividend amount) provides a substantial 7.4% downside breakeven protection below today's stock purchase price.

Tapestry Inc. (TPR) -- New Covered Calls Position

The transactions were:
11/30/2022 Bought 500 Tapestry Inc. shares @ $36.96
11/30/2022 Sold 5 TPR 12/16/2022 $35.00 Call options @ $2.45 per share
12/08/2022 Upcoming quarterly ex-dividend of $.30 per share

Two possible overall performance results (including commissions) for this Tapestry Covered Calls position are as follows:
Covered Calls Net Investment: $17,258.35
= ($36.96 - $2.45) * 500 shares + $3.35 commissions

Net Profit Components:
(a) Options Income: +$1,221.65
= ($2.45 * 500 shares) - $3.35 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Dec. 8th ex-div date): +$0.00; or
(b) Dividend Income (If Tapestry shares assigned at the Dec 16th, 2022 options expiration): +$150.00
= ($.30 dividend per share x 500 shares)
(c) Capital Appreciation (If TPR assigned early on Dec 8th): -$980.00
+($35.00 - $36.96) * 500 shares ;or
(c) Capital Appreciation (If TPR shares assigned at $35.00 strike price at options expiration): -$980.00
+($35.00 - $36.96) * 500 shares

1. Total Net Profit [If options exercised on Dec. 7th (business day prior to the Dec. 8th ex-dividend date)]: +$241.65

= (+$1,221.65 +$0.00 - $980.00); or

2. Total Net Profit (If Tapestry shares assigned at $35.00 strike price at Dec. 16th, 2022 expiration): +$391.65

= (+$1,221.65 + $150.00 - $980.00)

1. Absolute Return [If TPR Call options exercised on business day prior to ex-dividend date]: +1.4%

= +$241.65/$17,258.35

Annualized Return (If options exercised early): +63.9%

= (+$241.65/$17,258.35) * (365/8 days); or

2. Absolute Return (If Tapestry shares assigned at $35.00 strike price on Dec. 16th, 2022 expiration): +2.3%

= +$391.65/$17,285.35

Annualized Return (If Tapestry stock assigned at $35.00 at the Dec. 16, 2022 expiration): +48.6%

= (+$391.65/$17,285.35) *(365/17 days)

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 Tapestry Inc. Covered Calls position.

Covered Calls Established in Bank of America Corporation

A December 16th, 2022 Covered Calls buy/write limit order was executed today in Bank of America (ticker BAC) at a net debit price of $35.13 per share.  Five hundred shares were purchased at $36.80 and five December 16th, 2022 $35.50 strike price Call options were sold at $1.67 per share.  The corresponding extrinsic value (i.e. time value) was $.37 per share [$1.67 Call options premium - ($36.80 stock purchase price - $35.50 strike price)].   There is an intervening ex-dividend prior to the options expiration date in two days (on December 1st) at $.22 per share which is included in the potential return-on-investment results shown below.  The Implied Volatility of the Call options was 27.9 and the Delta was 72.6 when this position was established.  And as preferred, there is no quarterly earnings report prior to the options expiration date.

Some key numbers for this Bank of America Covered Calls position are:
Covered Calls Net Investment: $17,568.35
Time Value Profit if Assigned on Expiration Date: $181.65
Dividend Income if Assigned on the Options Expiration Date: $110.00
Total Potential Profit if Assigned ($181.65 time value profit + $110.00 dividend income): $291.65
Days Until the December 16th, 2022 Options Expiration: 18
Absolute Return-on-Investment if Assigned at Expiration: +1.7%
Annualized Return-on-Investment if Assigned at Expiration: +33.7%

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

November 25th, 2022 Options Expiration Results

There was one Covered Calls position in the Covered Calls Advisor Portfolio with a  November 25th, 2022 weekly options expiration date.   This position in Exxon Mobil Corporation (ticker XOM) was closed out yesterday since its stock price of $113.21 at the market close yesterday was in-the-money, so the 200 shares owned were assigned (i.e. sold) at their $108.00 strike price.  

As detailed below, the return-on-investment (ROI) result was a +1.9% absolute return-on-investment (equivalent to +32.0% annualized return-on-investment) for the 22 days holding period).  This position was established using my Dividend Capture Strategy, so the return-on-investment result achieved includes receiving Exxon's $.91 per share quarterly dividend since the ex-dividend date occurred on November 14th which was during the 22 day period between November 4th when this Covered Calls position was established and the November 25th options expiration date.

Exxon Mobil Corporation (XOM) -- Covered Calls Position Assigned on the November 25th Options Expiration Date

The original simultaneous buy/write transactions was as follows: 11/4/2022 Bought 200 Exxon Mobil shares @ $112.53
11/4/2022 Sold 2 Exxon Mobil November 25th, 2022 $108.00 Call options @ $5.69 per share
11/14/2022 Quarterly ex-dividend at $.91 per share
11/25/2022 Two XOM $108.00 Calls expired in-the-money (Exxon Mobil stock was $113.21 at the market close yesterday (11/25/2022) and the 200 stock shares were sold at the $108.00 strike price to close out this Covered Calls position.

The overall performance result (including commissions) was as follows:
Covered Calls Net Investment: $21,369.34
= ($112.53 - $5.69) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,136.66
= ($5.69 * 200 shares) - $1.34 commission
(b) Dividend Income (XOM shares assigned at the Nov. 25th, 2022 expiration): +$182.00
= ($.91 dividend per share x 200 shares)
(c) Capital Appreciation (Exxon Mobil shares assigned at $108.00 strike price at options expiration): -$906.00
+($108.00 -$112.53) * 200 shares

Total Net Profit: +$412.66

= (+$1,136.66 options income +$182.00 dividend income -$906.00 capital appreciation)
 

Absolute Return-on-Investment: +1.9%

= +$412.66/$21,369.34

Annualized Return-on-Investment: +32.0%

= (+$412.66/$21,369.34) *(365/22 days)

Established Covered Calls in Kohl's Corporation

Late this afternoon, a Covered Calls position was established in Kohl's Corporation (ticker KSS) when the Covered Calls Advisor's buy/write limit order for the December 16th, 2022 $30.00s executed at a net debit price of $29.40.  Four hundred KSS shares were purchased at $31.98 and 4 December 16th, 2022 $30.00 Calls were sold at $2.58 per share.  So, the corresponding time value (aka extrinsic value) was $.60 per share = [$2.58 Call options premium - ($31.98 stock purchase price - $30.00 strike price)].  Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Call position was established--the Delta was 71.4, which closely approximates the probability that the Call options will be in-the-money on the options expiration date.  In addition, the Implied Volatility of the Calls was 48.0 when the position was established which, as desired, was above the VIX which was at 20.5. 

Kohl's goes ex-dividend at $.50 per share (6.3% annualized dividend yield at the current stock price) on December 6th, 2022, so this dividend is included in the potential return-on-investment results shown below.  There is no earnings report prior to the options expiration date.

Two potential return-on-investment results for this Kohl's Covered Calls position are: (a) +2.0% absolute return (equivalent to +67.3% annualized return for the next 11 days) if the stock is assigned early [i.e. on December 5th which is the last trading day prior to the December 6th ex-dividend date]; OR (b) +3.7% absolute return (equivalent to +61.9% annualized return over the next 22 days) if the stock is assigned on its December 16th, 2022 options expiration date. 

Kohl's Corporation (KSS) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
11/25/2022 Bought 400 shares of Kohl's Corporation stock @ $31.98 per share 
11/25/2022 Sold 4 Kohl's Dec. 16th, 2022 $30.00 Call options @ $2.58 per share
12/6/2022 Upcoming ex-dividend at $.50 per share

The overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $11,761.34
= ($31.98 - $2.58) * 400 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,030.66
= ($2.58 * 400 shares) - $1.34 commission
(b) Dividend Income (If Kohl's stock assigned on the Dec. 6th ex-dividend date): $0.00
(b) Dividend Income (If Kohl's stock assigned on the December 16th options expiration date): +$200.00
= $.50 dividend per share x 400 shares
(c) Capital Appreciation (If Kohl's stock assigned on the 12/6/2022 ex-dividend date): -$792.00
= ($30.00 - $31.98) * 400 shares
(c) Capital Appreciation (If KSS stock is above $30.00 strike price and therefore assigned at the December 16th expiration): -$792.00
= ($30.00 - $31.98) * 400 shares

1. Potential Net Profit (If Kohl's shares assigned early on 12/5/2022, the day prior to the December 6th ex-dividend date): +$238.66
= (+$1,030.66 options income +$0.00 dividend income - $792.00 capital appreciation)
2. Potential Net Profit (If Kohl's stock price is above $30.00 strike price at the Dec.16th options expiration): +$438.66
= (+$1,030.66 options income +$200.00 dividend income - $792.00 capital appreciation)

1. Absolute Return-on-Investment (If Kohl's shares assigned on 12/5/2022, the day prior to the December 6th, 2022 ex-dividend date): +2.0%
= +$238.66/$11,761.34
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +67.3%
= (+$238.66/$11,761.34 ) * (365/11 days)
2. Absolute Return-on-Investment (If KSS share price is above $30.00 strike price at the December 16th options expiration): +3.7%
= +$438.66/$11,761.34
Equivalent Annualized Return-on-Investment (If Kohl's shares assigned on the 12/16/2022 options expiration date): +61.9%
= (+$438.66/$11,761.34) * (365/22 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved for this Kohl's Corporation Covered Calls position.