Three Devon Energy Corp. June 17th, 2022 $72.00 Call options were exercised yesterday (the last business day prior to today's 6/10/2022 ex-dividend date). This early exercise was expected by the Covered Calls Advisor since these Call options had close to $0.00 time value remaining at yesterday's market close. The owners of the Call options elected to purchase the 300 shares at the $72.00 strike price and thus also capture today's $1.27 per share ex-dividend. So, I captured all the original $1.16 per share [$5.36 Call options premium - ($76.20 stock purchase price - $72.00 strike price)] time value as profit.
The return-on-investment results are: +1.6% absolute return-on-investment (equivalent to +66.0% annualized-return-on-investment) for the 9 days this position was held.
The transactions and detailed results for this Devon Covered Calls position were as follows:
Devon Energy Corp. (DVN) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was:
6/01/2022 Bought 300 Devon Energy shares @ $76.20
6/01/2022 Sold 3 Devon 6/17/2022 $72.00 Call options @ $5.36 Note: the Implied Volatility of these Call options was 44.9 when this position was established and their Bid/Ask spread was $5.20/$5.55.
6/10/2022 3 DVN Call options exercised early (on the day prior to the ex-dividend date), so the Devon Covered Calls position was closed by assignment--the 3 Call options expired and the 300 Devon shares were sold at the $72.00 strike price.
The overall performance results (including commissions) for this Devon Energy Covered Calls position were as follows:
Covered Calls Cost Basis: $21,254.01
= ($76.20 - $5.36) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$1,605.99
= ($5.36 * 300 shares) - $2.01 commissions
(b) Dividend Income (Call options exercised early on the business day prior to the June 10th ex-div date): +$0.00
(c) Capital Appreciation: -$1,260.00
+($72.00 - $76.20) * 300 shares
Total Net Profit [Call options exercised on June 9th (business day prior to the June 10th ex-dividend date)]: +$345.99
= (+$1,605.99 options income +$0.00 dividend income - $1,260.00 capital appreciation)
Absolute Return-on-Investment: +1.6%
= +$345.99/$21,254.01
Annualized Return-on-Investment: +66.0%
= (+$345.99/$21,254.01) * (365/9 days)
The Covered Calls Advisor Portfolio normally maintains about a dozen positions, but given the current elevated volatility in the market along with my current Overall Market Meter sentiment of "Slightly Bearish", I will continue to be very selective in my stock selections and continue to establish only moderately in-the-money Covered Calls on value-oriented companies and with short-term options expiration dates of one month or less. As was the case with this Devon Energy position, I will also continue to include among my new positions quality companies with ex-dividend dates prior to the options expiration date that meet the Dividend Capture Strategy criteria that I have established.
