Covered Calls Advisor: Closed Covered Calls Position Early in Schlumberger N.V.

Wednesday, February 9, 2022

Closed Covered Calls Position Early in Schlumberger N.V.

On January 24th, 2022, a Covered Calls position was established in Schlumberger N.V. (SLB) with a February 18th, 2022 options expiration date. Three hundred shares of Schlumberger N.V. stock were purchased at $35.35 and three February 18th, 2022 $32.50 Call options were sold at $3.58 per share. Schlumberger's price had risen to $39.21 today when the Covered Calls Advisor's net credit limit order to unwind (i.e. close out) this Covered Calls position at $32.44 was executed. The original time value in this Covered Calls position was $.73 per share [$3.58 options premium - ($35.35 original stock price - $32.50 strike price)]. Along with the stock price increase, the accompanying remaining time value in the Calls had declined from their original $.73 to only $.06 per share ($32.50 strike price - $32.44 net credit Covered Calls unwind price). In addition, the quarterly dividend of $.125 per share went ex-dividend yesterday, so that will also be captured in the Covered Calls Advisor Portfolio.

Since the stock has been on a price uptrend since this position was established and with only $.06 time value remaining in the Call options this morning, I decided to close out the position early and secure an annualized return-on-investment (aroi) today of +56.1% since this outcome exceeded the maximum potential +37.8% aroi if the original position would instead be assigned next Friday on the February 18th, 2022 options expiration date.

Schlumberger N.V. (SLB) -- Covered Calls Position Closed Early
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)]
2/08/2022 Quarterly ex-dividend of $.125 per share
2/09/2022 Unwound SLB Covered Calls position by simultaneously Selling-to-Close 300 Schlumberger shares at $39.21 and Buying-to-Close the 3 SLB February 18th, 2022 $32.50 Call options at $6.77 at a net credit of $32.44 per share.

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

Net Profit Components:
(a) Options Income: -$961.02
= ($3.58 - $6.77) * 300 shares - $4.02 commissions
(b) Dividend Income: +$37.50
= ($.125 dividend per share x 300 shares)
(c) Capital Appreciation (SLB shares sold at $39.21 per share): +$1,158.00
+($39.21 - $35.35) * 300 shares