Last Thursday, the five April 14th $72.50 Micron Technology Inc. 100% Cash-Secured Put options expired in-the-money (the stock closed at $70.13 which was below the $72.50 strike price). This morning, Micron's stock opened higher and when its stock price was $71.68, the Covered Calls Advisor continued by establishing a Covered Calls position by selling five May 6th, 2022 $73.00 Call options at $2.28 per share against the 500 Micron shares owned. As preferred by the Covered Calls Advisor, the next earnings report on June 30th, 2022 is after the May 6th, 2022 options expiration date.
If you want to understand some of the rationale for my bullish outlook on Micron, you can read it in the post made on March 31st when the original Micron Cash-Secured Puts position was established (see here).
As detailed below, two potential return-on-investment results are:
- +3.3% absolute return (equivalent to +33.1% annualized return for 36 days) if the stock price is unchanged from today's price of $71.68 on the May 6th, 2022 options expiration date; OR
- +5.1% absolute return (equivalent to +51.6% annualized return for 36 days) if the stock is in-the-money and therefore assigned at the $73.00 strike price on the May 6th, 2022 options expiration date.
Micron Technology Inc. (MU) -- Continuation of Micron Position as Covered Calls
The original transaction was as follows:
03/31/2022 Sold 5 Micron April 14th, 2022 $72.50 100% Cash-Secured Put options @ $.92 per share.
04/14/2022 5 Micron $72.50 Puts expired in-the-money (stock price below the strike price), so 500 shares were purchased at $72.50 in the Covered Calls Advisor Portfolio
04/18/2022 Continued Micron position by selling 5 May 6th, 2022 $73.00 Call options @ $2.28 per share against the 500 Micron shares owned to establish a Micron Covered Calls position. The Implied Volatility of these Calls was 43.4 and the Delta was 44.5 when these Calls were sold.
Two possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Puts Cost Basis: $36,246.65
= ($72.50 - $.92) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$1,593.30
= ($.92 + $2.28) * 500 shares - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron stock price is unchanged at $71.68 at the May 6th, 2022 options expiration date): -$410.00
= ($71.68 - $72.50 original Put strike price) * 500 shares; OR
(c) Capital Appreciation (If Micron stock is above the $73.00 strike price at the May 6th options expiration): +$250.00
= ($73.00 - $72.50) * 500 shares
1. Total Net Profit (If Micron stock price is unchanged at $71.68 at options expiration): +$1,183.30
= (+$1,593.30 options income +$0.00 dividend income -$410.00 capital appreciation); OR
2. Total Net Profit (If Micron stock price is above the $73.00 strike price at options expiration): +$1,843.30
= (+$1,593.30 options income +$0.00 dividend income +$250.00 capital appreciation)
1. Absolute Return-on-Investment (If Micron stock is unchanged at $71.68 at the options expiration date of May 6th, 2022) : +3.3%
= +$1,183.30/$36,246.65
Annualized Return-on-Investment: +33.1%
= (+$1,183.30/$36,246.65)*(365/36 days); OR
2. Absolute Return-on-Investment (If Micron stock is above $73.00 strike
price at the May 6th, 2022 options expiration date) : +5.1%
= +$1,843.30/$36,246.65
Annualized Return-on-Investment: +51.6%
= (+$1,843.30/$36,246.65)*(365/36 days)
