Each month on the day after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So this post covers the period from the day after last month's May 20th, 2022 options expiration through yesterday's June 17th, 2022 monthly options expiration date.
The recent decline in the overall market (as measured by the S&P 500) has been especially dramatic with weekly declines for ten of the past eleven weeks. Consequently, we are now well into bear market territory. But as referenced in the "Words of Wisdom" in the right sidebar: "For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity." -- John Templeton
During this past month, the Covered Calls Advisor Portfolio held a total of eleven positions. Five positions were closed out at a profit, three are continuing positions that expired out-of-the-money on yesterday's June 17th monthly options expiration date, and three current positions have options expirations during the upcoming month. A summary of results for these eleven positions is provided below:
- The five positions that were closed out at a profit were:
- Ally Financial Inc. (ALLY) -- +3.8% absolute return in 34 days (equivalent to +40.6% annualized return-on-investment).
- Best Buy Inc. (BBY) -- +2.1% absolute return in 8 days (equivalent to +94.2% annualized return-on-investment).
- Cleveland-Cliffs Inc. (CLF) -- +6.4% absolute return in 14 days (equivalent to +167.8% annualized return-on-investment).
- Devon Energy Corp. (DVN) -- +1.6% absolute return in 9 days (equivalent to +66.0% annualized return-on-investment).
- Moderna Inc. (MRNA) -- +4.8% absolute return in 19 days (equivalent to +92.5% annualized return-on-investment).
- Three Covered Calls positions expired out-of-the-money on yesterday's June 17th, 2022 options expiration date. In each case, the shares remain in the Covered Calls Advisor Portfolio and are currently held at an unrealized loss. These positions are shown in the right sidebar of this blog and are as follows: (1) 200 shares of Airbnb, Inc.; (2) 100 shares of Cigna Corporation; and (3) 500 shares of Micron Technology Inc. Early in the upcoming week, decisions will be made to either sell these shares or to continue them as Covered Calls positions by selling future Call options against the shares currently held.
- Three existing positions with options expirations during the upcoming month are: (1) 300 Energy Select Sector SPDR Fund ETF (Covered Calls); (2) 600 iShares China Large-Cap ETF (Covered Calls); and (3) 5 Warner Brothers Discovery Inc. (Cash-Secured Puts). The detailed results for each of these positions will be published on this blog on their respective options expiration dates.
During the past year
(last 12 months) 117 of 128 positions (91.4%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit. The
Covered Calls Advisor Portfolio weighted average annualized-return-on-investment (aroi) was +26.4% during the past year and the average
holding period for these 128 closed positions was 21.9 days. In comparison, the benchmark S&P 500 returned -13.1% during the same prior one-year period. As demonstrated by these past year's results, the Covered Calls strategy can be exceptionally beneficial during Slightly Bearish time periods such as we have experienced during the past year. However, my one caveat is that this exceptionally large outperformance by the Covered Calls Advisor Portfolio relative to the S&P 500 substantially exceeds that which would normally be expected over a period of several years using the Covered Calls investing strategy. As indicated in this post made last year on this blog site (Link) -- "by exploiting our Covered Calls investing "edges", we can expect to achieve (over a period of several years) an average annualized-return-on-investment above the S&P 500 benchmark index of at least 3 to 5 percentage points on an annualized-return-on-investment basis". Please consider carefully re-reading the article in the link shown above.
As shown in the
right sidebar, there are currently six open positions in
the Covered Calls Advisor Portfolio. Future transactions and
return-on-investment results for these positions plus the details of all future newly established positions will be posted on
this blog site on the same day the transactions occur. In this current bear market, new Covered Call and Cash-Secured Put positions are being established (1) for short durations (one month or less); (2) at moderately in-the-money strike prices; and (3) in companies with the following characteristics: (a) good valuation metrics (such as low P/E ratios and high free cash flow yields); (b) appear in at least one of the many stock screeners that have been developed over the years by the Covered Calls Advisor; (c) estimated next year earnings-per-share above that of their actual prior year results; and (d) analysts' average target price at least 10% above the current stock price.
My preference is to identify opportunities to utilize my Dividend Capture Strategy (with ex-dividend dates prior to the options expiration dates) by selling moderately in-the-money strike prices for relatively low-growth dividend-paying companies in these lower-growth Sectors -- Consumer Staples, Energy, Financials, Industrials, Materials, Real Estate, and Utilities. Higher growth companies in Sectors with fewer dividend-paying companies includes the Communication Services, Consumer Discretionary, Healthcare, and Information Technology Sectors. There is a greater likelihood that Covered Calls or Cash-Secured Puts positions in these higher-growth Sectors will be established without utilizing the Dividend Capture Strategy (i.e. without ex-dividend dates prior to their options expiration dates).
This Covered Calls Advisor blog is a free service available to anyone interested in learning how to implement a successful Covered Calls investing strategy. As always, I
welcome your emails with any comments or
questions related to this post or anything related to Covered Calls
investing.
Jeff Partlow
Covered Calls Advisor
partlow@cox.net
