Established Covered Calls in Best Buy Inc.

Today at 1:45pm, a new short-term (one week) Covered Calls position was entered in Best Buy Inc. (ticker BBY) for the June 17th, 2022 options expiration and at the $70.00 strike price when the stock was at $72.56.  The Call options premium received was $3.12 per share and the Implied Volatility of these Calls was 33.7 which, as I prefer, exceeds the current S&P 500 Volatility Index (VIX) of 28.1.  Based on the Covered Calls Advisor's current cautious sentiment, a moderately in-the-money position was established at a Delta of 76.0 (which approximates a 76.0% probability that the Calls will expire in-the-money on the options expiration date).  There is an upcoming ex-dividend on Monday (June 13th) of $.88 per share (4.9% annualized dividend yield) which is included in the potential return-on-investment results detailed below. 

Analysts covering Best Buy have an average target price of $94.71 (+30.5% above today's purchase price).  The Covered Calls Advisor also likes the valuation based on its P/E Ratio -- based on estimates for this fiscal year's earnings per share, the P/E would be 8.5 based on today's stock purchase price, which compares very favorably with their prior 5-year average of 14.7. 

As detailed below, a potential return-on-investment result is +2.1% absolute return (equivalent to +94.2% annualized return for the next 8 days) if the stock is assigned on the June 17th, 2021 options expiration date.

Best Buy Inc. (BBY) -- New Covered Calls Position

The transactions were as follows:
6/10/2022 Bought 200 shares of Best Buy shares @ $72.56 per share 
6/10/2022 Sold 2 Best Buy June 17th, 2022 $70.00 Call options @ $3.12 per share
Note: this was a net debit limit simultaneous Buy/Write transaction
06/13/2022 Upcoming quarterly ex-dividend of $.88 per share

A possible overall performance result (including commissions) for this Best Buy Covered Calls position are as follows:
Covered Calls Cost Basis: $13,889.34
= ($72.56 - $3.12) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$622.66
= ($3.12 * 200 shares) - $1.34 commissions
(b) Dividend Income (If BBY shares assigned at the June 17th, 2022 options expiration): +$176.00
= ($.88 dividend per share x 200 shares)
(c) Capital Appreciation (If Best Buy shares assigned at $70.00 strike price at options expiration): -$512.00
+($70.00 - $72.56) * 200 shares

Total Net Profit (If Best Buy shares assigned at $70.00 strike price at the June 17th, 2022 expiration): +$286.66

= (+$622.66 options income +$176.00 dividend income - $512.00 capital appreciation)
 

Absolute Return-on-Investment (If BBY shares are in-the-money and therefore assigned at the $70.00 strike price on the June 17th, 2022 options expiration date): +2.1%

= +$286.66/$13,889.34

Annualized Return-on-Investment (If Best Buy stock assigned at $70.00 at the 6/17/2022 expiration): +94.2%

= (+$286.66/$13,889.34) *(365/8 days)

These returns will be achieved as long as the stock is above the $70.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $68.56 ($72.56 -$3.12 -$.88) provides 5.5% downside protection below today's purchase price.