Note: On yesterday's Pioneer Natural Resources post, I indicated an upcoming $7.38 ex-dividend. Schwab had reported it yesterday as an "extra dividend" of $7.38, but today they are reporting it as a $.78 regular dividend and a $6.60 "special dividend". Special dividends reduce the options strike price by the amount of the special dividend, so the maximum potential return-on-investment results are reduced accordingly. I will be updating yesterday's post to reflect this adjustment.
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Early this morning, I was notified via email by my broker that the two Exxon Mobil Corporation May 20th, 2022 $80.00 Call options were exercised yesterday (the last business day prior to today's 5/12/2022 ex-dividend date). The Exxon Mobil stock price had increased from its purchase price of $85.73 to $86.79 at yesterday's market close.
This early exercise was expected by the Covered Calls Advisor since these Call options were deep-in-the-money and had only $.035 time value remaining [($80.00 strike price +$6.825 midpoint of $6.60/$7.05 bid/ask spread) - $86.79 stock price at yesterday's market close]. So, the time value had declined from $.78 when the Covered Calls position was established to $0.035 at market close on the day prior to the ex-dividend date. The owners of the Call options elected to purchase the 200 shares at the $80.00 strike price and thus also capture the $.88 per share ex-dividend, so I captured all the original $.78 per share time value as profit.
The return-on-investment results are: +1.0% absolute return-on-investment (equivalent to +35.6% annualized-return-on-investment) for the 6 days this position was held.
The transactions and detailed results for this Exxon Mobil Covered Calls position were as follows:
The buy/write transaction was:
05/2/2022 Sold 2 XOM 5/20/2022 $80.00 Call options @ $6.51
05/12/2022 Upcoming quarterly ex-dividend of $.88 per share
The overall performance results (including commissions) for this Exxon Mobil Corp. Covered Calls position are as follows:
Covered Calls Cost Basis: $15,845.34
= ($85.73 - $6.51) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,300.66
= ($6.51 * 200 shares) - $1.34 commission
(b) Dividend Income (Call options exercised early on May 11th, the business day prior to the May 12th ex-div date): +$0.00
+($80.00 - $85.73) * 200 shares
