As posted last Friday, the original Covered Calls position in Lennar Corporation closed deep-out-of-the-money, so 200 LEN shares now remain in the Covered Calls Advisor portfolio. This morning, when the stock was $91.65, I sold two short-term (this upcoming Friday, February 11th expiration) $93.50 Calls at $1.90 per share. Doing this gives me a few days to further evaluate the company and whether to close out the position at a loss or to continue to try to repair it. The details of the transactions so far and two potential return on investment results are detailed below.
Lennar Corp. (LEN) -- Continuation of Covered Calls Position
The simultaneous buy/write transaction was:
1/13/2022 Bought 200 Lennar Corp. shares @ $107.76
1/13/2022 Sold 2 LEN 2/04/2022 $103.00 Call options @ $6.18
Note: the Implied Volatility of the Call options was 29.3 when this position was transacted and the Delta (approximately the probability of assignment at expiration) was 72.2.
1/26/2022 Upcoming quarterly ex-dividend of $.375 per share
2/4/2022 Two Call options expired out-of-the-money and 200 shares of Lennar stock retained in the Covered Calls Advisor Portfolio.
2/07/2022 Rolled-Down-and-Out by selling two 2/11/2022 $93.50 Calls at $1.90.
Two possible overall performance results (including commissions) for this Lennar Corp. Covered Calls position are as follows:
Covered Calls Cost Basis: $20,317.34
= ($107.76 - $6.18) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$1,614.66
= ($6.18 + $1.90) * 200 shares - $1.34 commissions
(b) Dividend Income: +$75.00
= $.375 per share x 200 shares
(c) Capital Appreciation (If Lennar share price unchanged at $91.65 at Feb. 11th, 2022 expiration): -$3,222.00
= +($91.65 - $107.76) * 200 shares ;or
(c) Capital Appreciation (If LEN shares assigned at $93.50 strike price at 2/11/2022 options expiration): -$2,846.00
= +($93.50 - $107.73) * 200 shares
1. Total Net Profit (If Lennar Corp. share price unchanged at $91.65 at Feb. 11th, 2022 expiration): -$1,532.34
= (+$1,614.66 options income +$75.00 dividend income - $3,222.00 capital appreciation); or
2. Total Net Profit (If Lennar shares assigned at $93.50 strike price at Feb. 11th, 2022 expiration): -$1,156.34
= (+$1,614.66 + $75.00 - $2,846.00)
1. Absolute Return-on-Investment (If Lennar share price unchanged at $91.65 at Feb. 11th, 2022 expiration): -7.5%
= -$1,532.34/$20,317.34
Annualized Return-on-Investment: -91.8%
= (-$1,532.34/$20,317.34) * (365/30 days); or
2. Absolute Return-on-Investment (If Lennar shares assigned at $93.50 strike price at the Feb. 11th, 2022 options expiration date): -5.7%
= -$1,156.34/$20,317.34
Annualized Return-on-Investment (If LEN stock assigned at $25.00 at Jan. 14th, 2022 expiration): -69.2%
= (-$1,156.34/$20,317.34) *(365/30 days)
