Closed Covered Calls Positions in American Eagle Outfitters Inc., Fifth Third Bancorp, and Lennar Corporation

The Covered Calls positions in American Eagle Outfitters Inc. (ticker AEO), Fifth Third Bancorp (FITB), and Lennar Corporation (LEN) closed out-of-the-money at last Thursday's April monthly options expiration date.  All three positions are currently at substantial losses and I decided to close out the positions early in this morning's trading session.  For American Eagle and Lennar, I have been attempting to repair declining stock positions to move back closer to a breakeven result, but these stocks have continued their price declines and at a rate of decline greater than that of the overall market.  For Fifth Third Bank, they report their quarterly earnings before market open tomorrow morning and I decided to follow my preferred approach of not holding positions in companies through their quarterly earnings reports.  In addition, many banks have reported their earnings during the past week with mixed earnings and revenue results followed by only tepid stock price reactions.

In general, my market outlook remains cautious (Slightly Bearish on my Overall Market Meter).  Only about 7% of companies have reported their earnings from the first quarter this year and a flood of companies will be issuing their quarterly results during the next five weeks.  My plan is to gradually add new positions as I await more information from these upcoming earnings reports (and the stock market reaction to them) before deciding which companies to establish new positions in.

The results for these three companies are detailed below.

1. American Eagle Outfitters Inc. (AEO) -- Covered Calls Position Closed
The original transaction was as follows:
11/24/2021 Bought 500 American Eagle Outfitters Inc. shares @ $27.43
11/24/2021 Sold 5 AEO 12/17/2021 $26.00 Call options @ $2.11
12/09/2021 Quarterly ex-dividend of $.18 per share
12/17/2021 5 Call options expired out-of-the-money and 500 shares of AEO retained in the Covered Calls Advisor Portfolio.
12/23/2021 Sold 5 AEO 12/31/2021 $24.00 Call options @ $.22 per share when the stock price was $23.23 per share.
12/30/2021 Rolled-Up-and-Out: Bought-to-Close the 12/31/2021 $24.00 Calls for $1.92 and simultaneously Sold-to-Open the 1/7/2022 $26.00 Calls at $.77.  The AEO stock price was $25.90 when this debit spread transaction was executed.
1/07/2021 Rolled-Down-and-Out: Bought-to-Close the 1/07/2022 $26.00 Calls for $.01 and simultaneously Sold-to-Open the 1/14/2022 $25.00 Calls at $.44.  The AEO stock price was $23.99 when this credit spread transaction was executed.
1/14/2022 5 AEO Calls expired out-of-the-money so the 500 shares remain in the Covered Calls Advisor Portfolio.
1/24/2022 Continued the American Eagle Covered Calls position by rolling it out to the February 18th, 2022 $23.00 strike by selling 5 AEO Calls at $.70 per share.
2/18/2022 5 AEO Calls expired out-of-the-money so the 500 shares remained in the Covered Calls Advisor Portfolio.
2/22/2022 Continued this American Eagle Covered Calls position by selling 5 March 18th, 2022 $23.00 Call options @ $.82 per share.
3/18/2022 5 AEO Calls expired out-of-the-money so the 500 shares remained in the Covered Calls Advisor Portfolio.
3/22/2022 Continued this American Eagle Covered Calls position by selling 5 April 14th, 2022 $20.00 Call options @ $.38 per share.  The American Eagle shares were $18.66 when these Calls were sold.
04/14/2022 5 AEO Calls expired out-of-the-money so the 500 shares remain in the Covered Calls Advisor Portfolio.
04/18/2022 Closed out this American Eagle Covered Calls position by selling the 500 shares at $17.51 per share.

The overall performance results (including commissions) for this American Eagle Outfitters Inc. Covered Calls position were as follows:
Covered Calls Cost Basis: $12,663.35
= ($27.43 - $2.11) * 500 shares + $3.35 commissions

Net Profit Components:
(a) Options Income: +$1,734.90
= ($2.11 + $.22 - $1.92 +$.77 - $.01 +$.44 + $.70 +$.82 + $.38) * 500 shares - $16.75 commissions
(b) Dividend Income: +$90.00
= $.18 per share x 500 shares
(c) Capital Appreciation (American Eagle shares sold at $17.51 per share): -$4,960.00
= +($17.51 - $27.43) * 500 shares

Total Net Profit (American Eagle shares sold at $17.51 per share): -$3,135.10

= (+$1,734.90 options income +$90.00 dividend income - $4,960.00 capital appreciation)

 

Absolute Return-on-Investment: -24.8%

= -$3,135.10/$12,663.35

Annualized Return-on-Investment: -62.3%

= (-$2,560.10/$12,663.35) * (365/145 days)

2. Fifth Third Bancorp (FITB) -- Covered Calls Position Closed
The transactions were:
3/23/2022 Bought 300 Fifth Third Bancorp shares @ $45.69
3/23/2022 Sold 3 FITB 4/14/2022 $44.00 Call options @ $2.36 per share.
Note: the Implied Volatility of these Call options was 31.2 when this position was established.
3/30/2022 Upcoming quarterly ex-dividend of $.30 per share
04/14/2022 3 FITB Calls expired out-of-the-money so the 300 shares remain in the Covered Calls Advisor Portfolio.
04/18/2022 Closed out this Fifth Third Bancorp Covered Calls position by selling the 300 shares at $17.51 per share.

The overall performance results (including commissions) for this
Fifth Third Bancorp Covered Calls position were as follows:
Covered Calls Cost Basis: $13,001.01
= ($45.69 - $2.36) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$708.00
= ($2.36 * 300 shares)
(b) Dividend Income: +$90.00
= ($.30 dividend per share x 300 shares)
(c) Capital Appreciation (FITB shares sold at $39.3637 per share): -$1,897.89
+($39.3637 stock selling price - $45.69 original stock purchase price) * 300 shares

Total Net Profit (Fifth Third Bancorp shares sold at $39.3637 per share): -$1,099.89

= (+$708.00 options income +$90.00 dividend income -$1,897.89 capital appreciation); or

Absolute Return-on-Investment: -8.5%

= -$1,099.89/$13,001.01

Annualized Return-on-Investment: -102.9%

= (-$1,099.89/$13,001.01) * (365/30 days)

3. Lennar Corporation (LEN) -- Covered Calls Position Closed
The original 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.
2/11/2022 Two LEN $93.50 closed out-of-the-money at $91.54, so the options expired and two hundred Lennar shares remain in the Covered Calls Advisor Portfolio.
02/14/2022 Continued this Lennar Covered Calls position by selling 2 3/18/3033 Calls @ $3.71 per share at the $95.00 strike price when the stock was selling at $91.96.
3/18/2022 Two LEN Calls expired out-of-the-money so the 200 shares remained in the Covered Calls Advisor Portfolio.
3/22/2022 Continued this Lennar Corporation Covered Calls position by selling 2 April 14th, 2022 $92.00 Call options @ $2.20 per share.  The Lennar shares were $89.30 when these Call options were sold.
04/14/2022 2 Lennar Calls expired out-of-the-money so the 200 shares remain in the Covered Calls Advisor Portfolio.
04/18/2022 Closed out this Lennar Corporation Covered Calls position by selling the 200 shares at $17.51 per share.

The overall performance results (including commissions) for this Lennar Corp. Covered Calls position were as follows:
Covered Calls Cost Basis: $20,317.34
= ($107.76 - $6.18) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$2,793.98
= ($6.18 + $1.90 + $3.71 + $2.20) * 200 shares - $4.02 commissions
(b) Dividend Income: +$75.00
= $.375 per share x 200 shares
(c) Capital Appreciation (Lennar shares sold at $77.24 per share): -$6,098.00
= +($77.24 - $107.73) * 200 shares

 Total Net Profit (Lennar shares sold at $77.24 per share): -$3,229.02

= (+$2,793.98 + $75.00 - $6,098.00)

 Absolute Return-on-Investment: -15.9%

= -$3,229.02/$20,317.34

Annualized Return-on-Investment: -61.1%

= (-$823.02/$20,317.34) * (365/95 days)