A January 21st, 2022 Covered Calls buy/write limit order was placed in Nucor Corporation (ticker NUE) at a net debit price of $113.39 per share. The order was executed by purchasing 300 shares at $121.94 and simultaneously selling three Jan. 21st, 2022 Call options at the $115.00 strike price for $8.55 per share. When this in-the-money position was established today it had a probability of assignment on the options expiration date of 77.1%.
This is the second Covered Calls position in Nucor. The first one at the $107.00 strike price has an options expiration date this Friday and will likely be assigned. Since the Covered Calls Advisor wants to maintain a position in Nucor, this new position was established today at a later (January 21st) options expiration date. As preferred by the Covered Calls Advisor, Nucor's next (Q4 2021) earnings report on January 27th, 2022 will be after the January 21st options expiration date.
Nucor appeared in the Covered Calls Advisor's 'Acquirers Multiple' screener which combines two valuation factors: EV/EBITDA and P/E Ratio in addition to several other factors. It has an especially attractive valuation since its P/E Ratio is only 5.2 for FY2021 (just ended on Dec. 31st) based on today's $121.94 stock purchase price and the average EPS estimates of $23.36 per share.
As detailed below for this Nucor Covered Calls position, the maximum potential return-on-investment result is +1.4% absolute
return in 17 days (equivalent to a +30.4% annualized
return-on-investment) if the stock price is above the $115.00 strike price on the January 21st, 2022 options expiration date.
Nucor Corporation (NUE) -- New Covered Calls Position
The simultaneous buy/write transaction today was as follows:
1/5/2022 Bought 300 Nucor shares @ $121.94
1/5/2022 Sold 3 Nucor 1/21/2022 $115.00 Call options @ $8.55
Note: the Implied Volatility of the Calls was 37.5 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 16.7.
A possible overall performance result (including commissions) for this Nucor Covered Calls position are as follows:
Covered Calls Cost Basis: $34,019.01
= ($121.94 - $8.55) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$2,562.99
= ($8.55 * 300 shares) - $2.01 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Nucor shares assigned at $115.00 strike price at options expiration): -$2,082.00
+($115.00 - $121.94) * 300 shares
