Established Covered Calls Position in Schlumberger N.V. Using the Dividend Capture Strategy

Today a Covered Calls position was established in Schlumberger (ticker symbol SLB) when the Covered Calls Advisor's buy/write limit order was executed -- 300 shares were purchased at $35.35 and 3 February 18th, 2022 Call options were sold at $3.58 at the $32.50 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 74.5, 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 $.125 per share on February 8th.  Potential results for this Covered Calls position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the February 18th options expiration date.

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

•  +2.3% absolute return (equivalent to +55.9% annualized return-on-investment for the next 15 days) if the stock is assigned early (business day prior to the February 8th ex-dividend date); OR 

• +2.7% absolute return (equivalent to +37.8% annualized return over the next 26 days) if the stock is assigned on the February 18th options expiration date.

Schlumberger N.V. (SLB) -- New Covered Calls Position
The buy/write transaction was:
01/24/2022 Bought 300 Schlumberger shares @ $35.35
01/24/2022 Sold 3 Schlumberger 2/18/2022 $32.50 Call options @ $3.58
Note: the Time Value (aka Extrinsic Value) in the Call options was $.73 per share = [$3.58 Call options premium - ($35.35 stock price - $32.50 strike price)]
02/08/2022 Upcoming quarterly ex-dividend of $.125 per share

Two possible overall performance results (including commissions) for this Schlumberger Covered Calls position are as follows:
Covered Calls Cost Basis: $9,533.01
= ($35.35 - $3.58) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,074.00
= ($3.58 * 300 shares)
(b) Dividend Income (If option exercised early on Feb 7th, the business day prior to the Feb. 8th ex-div date): +$0.00; or
(b) Dividend Income (If Schlumberger stock assigned at Feb. 18th, 2022 expiration): +$37.50
= ($.125 dividend per share x 300 shares)

(c) Capital Appreciation (If Schlumberger Call options assigned early on Feb. 7th): -$855.00
+($32.50 - $35.35) * 300 shares; or
(c) Capital Appreciation (If SLB shares assigned at $32.50 strike price at the Feb. 18th options expiration): -$855.00
+($32.50 - $35.35) * 300 shares

1. Total Net Profit [If option exercised on Feb. 7th (business day prior to the Feb. 8th ex-dividend date)]: +$219.00

= (+$1,074.00 options income +$0.00 dividend income -$855.00 capital appreciation); or

2. Total Net Profit (If Schlumberger shares assigned at $32.50 strike price at Feb 18th, 2022 expiration): +$256.50

= (+$1,074.00 options income +$37.50 dividend income -$855.00 capital appreciation)

1. Absolute Return (If three SLB Call options exercised early on Feb. 7th): +2.3%

= +$219.00/$9,533.01

Annualized Return (If options assigned early): +55.9%

= (+$219.00/$9,533.01)*(365/15 days); or

2. Absolute Return (If Schlumberger shares assigned at $32.50 at Feb 18th, 2022 options expiration): +2.7%

= +$256.50/$9,533.01

Annualized Return (If Schlumberger shares assigned at $32.50 at Feb 18th, 2022 expiration): +37.8%

= (+$256.50/$9,533.01)*(365/26 days)

Either outcome provides an attractive return-on-investment result for this Schlumberger investment.  These returns will be achieved as long as the stock is above the $32.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $31.645 ($35.35 -$3.58 -$.125) provides 10.5% 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 Schlumberger position, eight of the nine criteria were met.