As detailed below, two potential return-on-investment results are:
- +3.9% absolute return (equivalent to +28.5% annualized return for 50 days) if the stock price is unchanged from today's price of $70.13 on the May 20th, 2022 options expiration date; OR
- +7.2% absolute return (equivalent to +52.4% annualized return for 50 days) if the stock is in-the-money and therefore assigned at the $72.50 strike price on the May 20th, 2022 options expiration date.
Micron Technology Inc. (MU) -- Continuation of Covered Calls Position
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.
05/06/2022 Five Micron $73.00 Call options expired out-of-the-money, so 500 MU shares remain in the Covered Calls Advisor Portfolio.
05/09/2022 Continued Micron position by selling 5 May 20th, 2022 $72.50 Call options @ $2.02 per share against the 500 Micron shares owned.
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: +$2,599.95
= ($.92 + $2.28 + $2.02) * 500 shares - $10.05 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Micron stock price is unchanged at $70.13 at the May 20th, 2022 options expiration date): -$1,185.00
= ($70.13 - $72.50 original Put strike price) * 500 shares; OR
(c) Capital Appreciation (If Micron stock is above the $72.50 strike price at the May 20th options expiration): +$0.00
= ($72.50 May 20th strike price - $72.50 original strike price) * 500 shares
1. Total Net Profit (If Micron stock price is unchanged at $70.13 at options expiration): +$1,414.95
= (+$2,599.95 options income +$0.00 dividend income -$1,185.00 capital appreciation); OR
2. Total Net Profit (If Micron stock price is above the $72.50 strike price at options expiration): +$2,599.95
= (+$2,599.950 options income +$0.00 dividend income +$0.00 capital appreciation)
1. Absolute Return-on-Investment (If Micron stock is unchanged at $70.13 at the options expiration date of May 20th, 2022) : +3.9%
= +$1,414.95/$36,246.65
Annualized Return-on-Investment: +28.5%
= (+$1,414.95/$36,246.65) * (365/50 days); OR
2. Absolute Return-on-Investment (If Micron stock is above $72.50 strike
price at the May 20th, 2022 options expiration date) : +7.2%
= +$2,599.95/$36,246.65
Annualized Return-on-Investment: +52.4%
= (+$2,599.95/$36,246.65)*(365/50 days)
