Today a Covered Calls position was established in Airbnb,Inc. (ticker symbol ABNB) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $115.68 and 2 June 17th, 2022 Call options were sold at $19.54 at the $100.00 strike price. The corresponding extrinsic value (i.e. time value) was $3.86 per share [$19.54 Call options premium - ($115.68 stock purchase price - $100.00 strike price)]. The $3.86 per share all will be profit if the stock remains above the $100.00 strike price (and therefore assigned) on the June 17th options expiration date.
Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Calls position was established -- the Delta was 77.8, which closely approximates the probability that the Call option will be in-the-money on the options expiration date. In addition, the Implied Volatility of the Call was very high at 71.8 when the position was established [well above the current VIX of 28.7 and Airbnb's HV(5) which is the actual average Historic Volatility of its options during the prior 5 trading days]. This very high Implied Volatility is indicative of the volatile nature of Airbnb's stock price, but I believe it will be a strong market performer during the years ahead.
Its Q1 2022 earnings report two weeks ago exceeded analysts' estimates to a substantial degree--so there is no quarterly earnings report (or ex-dividend date) prior to the options expiration date. I believe Airbnb is now reaching an inflection point in which their earnings are transitioning from consistently negative to positive beginning this quarter (Q2 2022) with post-pandemic travel demand for this summer and beyond growing substantially, not only this year but for years to come. As this occurs, it should cause additional investors (those who avoid investing in unprofitable companies) to increasingly consider making investing commitments in this company.
Given its current $77 Billion market capitalization, Airbnb is the second largest company in the Hotels, Resorts, and Cruise Lines sub-industry within the Consumer Discretionary sector (behind only Booking Holdings Inc.). They have been a public company for only about 2 years now, but have established their brand as the global leader in the short-term rental stays and experiences business. Wall Street analysts are very bullish on the company's future with a current average target price of $190.52 (a full +64.7% above today's purchase price).
Some key numbers for this Airbnb, Inc. Covered Calls position are:
Covered Calls Cost Basis: $23,137.34
Profit if Assigned on Expiration Date: $770.66
Days Until June 17th, 2022 Options Expiration: 33
Absolute Return-on-Investment if Assigned at Expiration: +3.3%
Annualized Return-on-Investment if Assigned at Expiration: +36.8%
As always, I encourage your email questions related to the Covered Calls investing strategy.
Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
