On January 5th, 2022 the Covered Calls Advisor established a Covered Calls position in Nucor Corporation (ticker NUE) at the January 21st, 2022 options expiration date at the $115.00 strike price. The stock price declined precipitously to the low $90s largely because of the decline in the spot steel price. At that time (on January 24th) Nucor out-of-the-money February 18th, 2022 $97.50 Call options were sold to begin an attempt to repair this losing Covered Calls position. Prices had bounced back to $110.34 on January 21st when I decided to roll up $12.50 from the $97.50 strike price to the $110.00 strike price and at the same February 18th, 2022 options expiration date. A vertical debit spread transaction was executed at a net debit of $9.20 ($13.20 - $4.50) per share -- so $3.30 time value per share ($110.00 new strike price - $97.50 old strike price - $9.20 net debit) was added to the Covered Calls position profit potential.
As of today, Nucor's stock price has continued to increase and I decided to continue to try to repair this losing position by rolling-up once again, this time to the $119.00 strike price at the same February 18th, 2021 options expiration date. A vertical debit spread transaction was executed at a net debit of $6.70 ($10.08 - $3.38) per share -- so $2.30 time value per share ($119.00 new strike price - $110.00 old strike price - $6.70 net debit) was added to the Covered Calls position profit potential.
A potential return-on-investment result for this Nucor Corporation Covered Calls position is now -6.4% absolute
return in 44 days (equivalent to a -53.2% annualized
return-on-investment) if the stock price closes above the $119.00 strike price on the February 18th options expiration date.
Nucor Corporation (NUE) -- Continuation of 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.
1/21/2022 Three Nucor Call options expired out-of-the-money and 300 shares of Nucor retained in the Covered Calls Advisor Portfolio.
1/24/2022 Continued the Nucor Covered Calls position by rolling it out to
the February 18th, 2022 $97.50 strike by selling 3 NUE Calls at $3.05
per share.
2/02/2022 Rolled-Up the NUE Covered Calls position by the following
debit spread transaction: Simultaneously Bought-to-Close the three Feb. 18th $97.50 Calls @ $13.20 per share and Sold-to-Open three Feb. 18th
$110.00 Calls @ $4.50 per share.
2/11/2022 Rolled-Up the NUE Covered Calls position by the following
debit spread transaction: Simultaneously Bought-to-Close the three Feb.
18th $110. Calls @ $10.08 per share and Sold-to-Open three Feb. 18th
$119.00 Calls @ $3.38 per share.
A possible overall performance result (including commissions) for this rolled-up Nucor Corporation Covered Calls position is as follows:
Covered Calls Cost Basis: $34,019.01
= ($121.94 - $8.55) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: -$1,298.04
= ($8.55 + $3.05 - $13.70 + $4.50 +3.38 - $10.08) * 300 shares - $8.04 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Nucor shares assigned at $119.00 strike price at options expiration): -$882.00
+($119.00 - $121.94) * 300 shares
Total Net Profit (If Nucor shares assigned at the $119.00 strike price at the Feb. 18th, 2022 expiration): -$2,180.04 = (-$1,298.04 options income + $0.00 dividend income - $882.00 capital appreciation)
Absolute Return-on-Investment (If Nucor shares assigned at $119.00 strike price on Feb. 18th, 2022 expiration): -6.4% = -$2,180.04/$34,019.01
