1. Three positions in General Motors Corporation, iShares China Large-Cap ETF, and Uber Technologies Inc. closed out-of-the-money (i.e. stock price below the strike price), so the Call options expired and stocks remain in the Covered Calls Advisor Portfolio (as shown in the current positions list in the right sidebar of this blog). Decisions for each of these three positions will
be made early next week to either sell these shares or
to attempt to repair these losing positions by continuing these Covered
Calls positions by selling future Call options against
the shares currently held. As always, whatever transactions are made for these three positions, details will be posted on this blog on the same day that they occur.
2. One position in Nucor Corporation was in-the-money, and shortly before market close yesterday (on options expiration Friday), a decision was made to continue to repair this Covered Calls position back to profitability. I am continuing this repair strategy since I remain as bullish on Nucor as when I originally established this position on January 5th, 2022. A narrative summary of the history of this Nucor position is as follows:
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. Then, on February 11th, Nucor had continued to increase further to the $118 range when I rolled up again to the same Feb 18th expiration but at the $119.00 strike price. In mid-afternoon of the Feb 18th expiration, Nucor's stock price had continued its rise to $123.245 and I continued my position repair approach and rolled-up-and-out to the $124.00 strike price for two weeks more to the March 4th expiration date. Late in the trading day of the March 4th (yesterday) options expiration, Nucor's stock had continued its increase further to $137.28 when I decided to continue my position repair approach once again and rolled-up-and-out to the $130.00 strike price for two more weeks to the March 18th, 2022 options expiration date. A vertical debit spread transaction was executed at a net debit of $2.75 ($13.55 - $10.80) per share -- so $3.25 time value per share ($130.00 new strike price - $124.00 old strike price - $2.75 net debit) was added to this Covered Calls position.
As detailed below, a potential return-on-investment result for this Nucor Corporation Covered Calls position is now +0.6% absolute
return in 72 days (equivalent to a +2.8% annualized
return-on-investment) if the stock price closes above the $130.00 strike price on the March 18th, 2022 options expiration date.
Nucor Corporation (NUE) -- Continuation of Covered Calls Position
The original simultaneous buy/write transaction 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.
2/18/2022 Rolled-Up-and-Out the NUE Covered Calls position by the following
debit spread transaction: Simultaneously Bought-to-Close the three Feb.
18th $119.00 Calls @ $4.37 per share and Sold-to-Open three March 4th
$124.00 Calls @ $4.03 per share.
3/04/2022 Rolled-Up-and-Out the NUE Covered Calls position by the following
debit spread transaction: Simultaneously Bought-to-Close the three March 4th $124.00 Calls @ $13.55 per share and Sold-to-Open three March 18th
$130.00 Calls @ $10.80 per share.
A possible overall performance result (including commissions) for this 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: -$2,229.06
= ($8.55 + $3.05 - $13.70 + $4.50 +3.38 - $10.08 -$4.37 +$4.03 -$13.55 + $10.80) * 300 shares - $12.06 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Nucor shares assigned at $130.00 strike price at options expiration): +$2,418.00
+($130.00 - $121.94) * 300 shares
Total Net Profit (If Nucor shares assigned at the $130.00 strike price at the March 18th, 2022 expiration): +$188.94 = (-$2,229.06 options income + $0.00 dividend income + $2,418.00 capital appreciation)
Absolute Return-on-Investment (If Nucor shares assigned at $130.00 strike price on the March 18th, 2022 options expiration date): +0.6% = +$188.94/$34,019.01
Have a Great Weekend,
Jeff Partlow
The Covered Calls Advisor
partlow@cox.net
