The return-on-investment (ROI) result was +2.9% absolute return (equivalent to +61.6% annualized return-on-investment for the 17 days holding period).
As always, I encourage any email questions you might have related to the Covered Calls investing strategy.
Best Wishes and Godspeed,
Jeff Partlow--The Covered Calls Advisor
partlow@cox.net
I decided to maintain the FXI Covered Calls position by rolling-down-and-out the existing Covered Calls an additional two weeks to the August 12th, 2022 expiration and from the current $31.00 strike price to the $30.50 strike price. This credit spread transaction was executed at a net credit of $.67 per share ($.68 credit - $.01 debit).
As detailed below, a potential return-on-investment result is +1.1% absolute return (equivalent to +10.4% annualized
return for the 39 days holding period) if the FXI price is in-the-money (i.e. above the $30.50 strike price) and therefore assigned on the August 12th options expiration date. If this result is achieved, it will demonstrate an advantage of hedging our investments with the Covered Calls investing strategy (i.e. selling Call options against our long stock holdings). In this case, FXI will have declined by -8.2% (from a buy price of $33.21 to a sold price of $30.50). But the income received from continually selling Calls more than offsets the loss from the stock price decline -- so a -8.2% stock price loss is avoided and a +1.1% gain (a +10.4% annualized return-on-investment) would be achieved for this Covered Calls position if it is assigned at the August 12th options expiration.
iShares China Large-Cap ETF (FXI) -- Covered Calls Position Rolled Out
The original net debit limit order buy/write transaction was as follows:
7/5/2022 Bought 500 shares of iShares China Large-Cap ETF shares @ $33.21 per share
7/5/2022 Sold 5 FXI July 15th, 2022 $32.00 Call options @ $1.62 per share
7/15/2022 Bought-to-Close 5 FXI July 15th, 2022 $32.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 5 FXI July 29th, 2022 $31.00 Calls @ $.80 per share.
7/29/2022 Bought-to-Close 5 FXI July 29th, 2022 $31.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 5 FXI August 12th, 2022 $30.50 Calls @ $.68 per
share per
share.
A possible overall performance result (including commissions) if this iShares China Large-Cap ETF Covered Calls position is assigned at the 8/12/2022 options expiration date is as follows:
Original Net Investment: $15,798.35
= ($33.21 - $1.62) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$1,529.95
= ($1.62 -$.01 +$.80 -$.01 +$.68) * 500 shares - $10.05 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 iShares China Large-Cap ETF shares assigned at $30.50 strike price at expiration): -$1,355.00
+($30.50 - $33.21) * 500 shares
Total Net Profit (If 500 iShares China Large-Cap ETF shares assigned at $30.50 strike price at expiration): +$174.95
= (+$1,529.95 options income +$0.00 dividend income -$1,355.00 capital appreciation)
Absolute Return-on-Investment: +1.1%
= +$174.95/$15,798.35
Annualized Return-on-Investment: +10.4%
= (+$174.95/$15,798.35) * (365/39 days)
An August 19th, 2022 Covered Calls buy/write limit order was placed in Valero Energy Corporation (ticker VLO) at a net debit limit price of $98.70 per share. The order was executed at 2:57pm ET when 200 shares were purchased at $107.85 and two 8/19/2022 Call options were simultaneously sold at the $100.00 strike price for $9.15 per share. The Implied Volatility of these Call options was 40.8 when this transaction was executed which, as preferred by the Covered Calls Advisor, is well above the current 22.5 of the S&P 500 Volatility Index (VIX). In addition, there is an upcoming quarterly ex-dividend of $.98 per share (3.6% annual dividend yield) on August 3rd, which is included in the potential return-on-investment calculations detailed below. When this in-the-money Covered Calls position was established today it had a probability of assignment on the options expiration date of 77.8%.
Valero is a large, high quality oil refiner with 15 refineries located primarily in the U.S. but also in Canada and the United Kingdom. All refiners are benefiting now from tight refining capacity relative to demand, a situation unlikely to change significantly in the near-term future. Valero expects to continue its operational excellence in the current quarter (Q3 2022) at a 90%+ refinery utilization rate. Management is shareholder friendly since they intend to continue share buybacks, debt reduction, and given their declining dividend payout ratio, they will most likely increase their quarterly dividend payout in the future.
Valero meets the five primary criteria currently preferred for new positions established by the Covered Calls Advisor:
As detailed below, two potential return-on-investment results are:
I have now returned from vacation and am now catching up on my emails. Last Tuesday morning, I was notified by Schwab that my Covered Calls position in Lowe's Companies Inc. was assigned early (on the day prior to their ex-dividend date). The owners of the Call options elected to purchase the 200 shares at the $170.00 strike price and thus also capture Lowe's $1.05 per share ex-dividend. So, I captured all the original $1.48 per share [$11.92 Call options premium - ($180.44 stock purchase price - $170.00 strike price)] time value as profit.
As detailed below, the early assignment of this Lowe's Covered Calls position resulted in a return-on-investment of: +0.9% absolute return-on-investment (equivalent to +45.6% annualized-return-on-investment) for the 7 days this position was held. This result exceeded the maximum potential annualized roi of +30.4% if the stock would instead be assigned on its July 29th, 2022 options expiration date. The reason early assignment is preferred is that the Covered Calls Advisor's Dividend Capture Strategy spreadsheet was designed to identify positions where the annualized return-on-investment (aroi) from early assignment is greater than what might be achieved if the stock was instead assigned later on its options expiration date.
The transactions and detailed results for this Lowe's Covered Calls position were as follows:
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 July 15th, 2022 options expiration through yesterday's August 19th, 2022 monthly options expiration date.
During this past month, the Covered Calls Advisor Portfolio held a total of seven positions. All seven positions were closed out at a profit. A summary of results for these seven positions is provided below:
During the past year (last 12 months) 115 of 125 positions (92%) 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 +24.6% during the past year and the average holding period for these 125 closed positions was 22.1 days. In comparison, the benchmark S&P 500 returned -4.8% 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.
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.
Best Wishes and Godspeed,
Jeff Partlow
Covered Calls Advisor
partlow@cox.net
The Covered Calls Advisor Portfolio has a Covered Calls position in iShares China Large-Cap ETF (ticker FXI) that has an expiration date today at the $32.00 strike price. FXI's price was out-of-the-money at $30.975 with less than an hour remaining in today's trading session and the remaining time value in the Calls had declined to only $.01.
I remain confident in the iShares China Large-Cap ETF. Some valuation metrics such as P/E ratio and Price-to-Sales (P/S) ratio for FXI are approximately only sixty percen of those of SPY. Also, although China's economic policies are erratic, which complicates analysis of the impact on its stock market, it is now a rare country that is in the process of implementing quantitative easing this year--which is normally favorable to economies and stocks. In contrast, the U.S. Federal Reserve Board which has now begun both regular Federal Funds Rate increases and also quantitative tightening--which is normally unfavorable to economies and stocks. So, I decided to maintain the FXI Covered Calls position by rolling-down-and-out the existing Covered Calls two weeks to the July 29th, 2022 expiration and from the original $32.00 strike price to the $31.00 strike price. This credit spread transaction was executed at a net credit of $.79 per share ($.80 credit - $.01 debit).
As detailed below, a potential return-on-investment result is +0.6% absolute return (equivalent to +8.6% annualized
return for the 25 days holding period) if the stock price is in-the-money (i.e. above the $31.00 strike price) and therefore assigned on the July 29th options expiration date.
iShares China Large-Cap ETF (FXI) -- Covered Calls Position Rolled Out
The original net debit limit order buy/write transaction was as follows:
7/5/2022 Bought 500 shares of iShares China Large-Cap ETF shares @ $33.21 per share
7/5/2022 Sold 5 FXI July 15th, 2022 $32.00 Call options @ $1.62 per share
7/15/2022 Bought-to-Close 5 FXI July 15th, 2022 $32.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 5 FXI July 29th, 2022 $31.00 Calls @ $.80 per
share.
A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
Stock Purchase Cost: $15,798.35
= ($33.21 - $1.62) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$1,198.30
= ($1.62 -$.01 + $.80) * 500 shares - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 iShares China Large-Cap ETF shares assigned at $31.00 strike price at expiration): -$1,105.00
+($31.00 - $33.21) * 500 shares
Total Net Profit (If 500 iShares China Large-Cap ETF shares assigned at $31.00 strike price at expiration): +$93.30
= (+$1,198.30 options income +$0.00 dividend income -$1,105.00 capital appreciation)
Absolute Return-on-Investment: +0.6%
= +$93.30/$15,798.35
Annualized Return-on-Investment: +8.6%
= (+$93.30/$15,798.35) * (365/25 days)
Since today is the July 2022 monthly options expiration date, I will post a summary of my results during the past month on this Covered Calls Advisor blog tomorrow morning.
This morning at 10:00am ET, a Covered Calls position was established in Delta Air Lines Inc. (ticker symbol DAL) when the Covered Calls Advisor's buy/write limit order was executed -- 300 shares were purchased at $28.67 and 3 July 29th, 2022 Call options were sold at $2.43 at the $27.00 strike price. The corresponding extrinsic value (i.e. time value) was $.76 per share [$2.43 Call options premium - ($28.67 stock purchase price - $27.00 strike price)]. The $.76 per share will be profit if the stock remains above the $27.00 strike price (and therefore assigned) on the July 29th options expiration date.
Given the Covered Calls Advisor's current Bearish Overall Market Meter outlook, a moderately in-the-money Covered Calls position was
established -- the Delta was 69.2, 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 high at 59.3 when the position was established (well above the current VIX of 29.9).
Its Q2 2022 earnings were reported before market open this morning. Quarterly revenue exceeded expectations (in fact they were at an all-time high) but earnings per share were below estimates. The earnings miss was attributed to higher than anticipated payroll and operational expenses along with a spike higher in jet fuel during the quarter. To me, the sharp price decline early in today's trading seemed like an overreaction to the earnings miss. The current (Q3) quarter seems promising given that CEO Ed Bastien expects revenue to exceed that of the comparable quarter in 2019 (i.e. pre-pandemic), which was a time frame when Delta's stock price was in the $50s.
Some key numbers for this Delta Air Lines Inc. Covered Calls position are:
Covered Calls Cost Basis: $7,874.01
Profit if Assigned on Expiration Date: $225.99
Days Until July 29th, 2022 Options Expiration: 17
Absolute Return-on-Investment if Assigned at Expiration: +2.9%
Annualized Return-on-Investment if Assigned at Expiration: +61.6%
I like to diversify the Covered Calls Advisor Portfolio across at least 5 Sectors and this Delta Air Lines position provides some exposure to the Industrials Sector:
As always, I encourage your email questions on anything related to the Covered Calls investing strategy.
Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
As detailed below, two potential return-on-investment results are:
The return-on-investment results are: +0.8% absolute return-on-investment (equivalent to +34.1% annualized-return-on-investment) for the 9 days this position was held.
The transactions and detailed results for this Toll Brothers Inc. Covered Calls position were as follows:
This morning, the Covered Calls Advisor decided to close out the Energy Select Sector SPDR Fund ETF (ticker XLE) Covered Calls position. Since this position was established 20 days ago, the price of XLE has declined substantially which mirrors the recent decline in the price of WTI Crude Oil which this morning traded below $97. A primary reason attributed to this recent steep price decline is global recession fears which would cause significant oil demand destruction. In addition in the U.S., we have just passed the July 4th holiday which normally is the peak driving period.
The details of this position and the negative return-on-investment results are as follows:
Energy Select Sector SPDR Fund ETF (XLE) -- Covered Calls Position Closed 
The buy/write transaction today was as follows:
6/16/2022 Bought 300 Energy Select Sector SPDR Fund ETF shares @ $78.62 per share
6/16/2022 Sold 3 XLE 7/01/2022 $75.00 Call option @ $4.71 per share
6/21/2022 Upcoming quarterly ex-distribution estimated at $.71 per share
7/1/2022 XLE Calls expired out-of-the-money and 300 shares remain in the Covered Calls Advisor Portfolio.
7/6/2022 Sold 300 XLE Shares @ $68.78 per share to close out this position.
The overall performance results (including commissions) for this Energy Select Sector SPDR Fund ETF Covered Call position are as follows:
Covered Call Cost Basis: $22,175.01
= ($78.62 - $4.71) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$1,410.99
= ($4.71 * 300 shares) - $2.01 commissions
(b) Dividend Income: +$213.00
= ($.71 dividend per share x 300 shares)
(c) Capital Appreciation (300 XLE shares sold on July 6th, 2022 at $68.78 per share): -$3,252.00
+($67.78 selling price - $78.62 purchase price) * 300 shares
As detailed below, a potential return-on-investment result is +1.3% absolute return (equivalent to +42.4% annualized
return for the next 11 days) if the stock price is in-the-money (i.e. above the $32.00 strike price) and therefore assigned on the July 15th options expiration date.
iShares China Large-Cap ETF (FXI) -- New Covered Calls Position 
The Buy/Write transaction was as follows:
7/5/2022 Bought 500 shares of iShares China Large-Cap ETF shares @ $33.21 per share
7/5/2022 Sold 5 FXI July 15th, 2022 $32.00 Call options @ $1.62 per share
A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
Stock Purchase Cost: $15,798.35
= ($33.21 - $1.62) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$806.65
= ($1.62 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 iShares China Large-Cap ETF shares assigned at $32.00 strike price at expiration): -$605.00
+($32.00 - $33.21) * 500 shares
Total Net Profit (If 500 iShares China Large-Cap ETF shares assigned at $32.00 strike price at expiration): +$201.65
= (+$806.65 options income +$0.00 dividend income -$605.00 capital appreciation)
Absolute Return-on-Investment: +1.3%
= +$201.65/$15,798.35
Annualized Return-on-Investment: +42.4%
= (+$201.65/$15,798.35) * (365/11 days)
1. Energy Select Sector SPDR Fund ETF (XLE) Covered Calls -- Three hundred shares
were out-of-the-money since the closing price yesterday of $72.58 was below the
$75.00 strike price. So, the Call options expired and 300 XLE shares now remain
in the
Covered Calls Advisor
Portfolio. A decision will
be made early next week to either sell these shares or, more likely, to
continue this Covered Calls position by selling future XLE Call options
against
the shares currently held.
2. iShares Large-Cap China ETF (FXI) Covered Calls -- -0.9% absolute return (equivalent to -2.5% annualized return-on-investment) for the 134 days of this investment. The most recent post detailing all transactions for this position is here.
The cash now available from the assignment (i.e. closing) of this position will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established. Given the Covered Calls Advisor's currently Bearish Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at in-the-money strike prices with good downside protection.
3. Warner Brothers Discovery Inc. (WBD) Cash-Secured Puts -- Five Cash-Secured Puts expired since the $14.25 closing price was above the $13.00 strike price. The results were: +3.7% absolute return (equivalent to +71.5% annualized return-on-investment) for the 19 days of this investment. The post detailing this position when it was originally established is here.
Please email me at the address shown below with questions you might have related to information on this blog or anything related to the Covered Calls investing strategy.
Best Wishes and Godspeed,
Jeff Partlow
The Covered Calls Advisor
partlow@cox.net
For any Covered Calls position where there is an ex-dividend date prior to the options expiration date, the Covered Calls Advisor usually prefers to have the stock called away (assigned) early, normally on the last business day prior to the ex-div date (as it was in this case). The reason early assignment is preferred is that the Covered Calls Advisor's Dividend Capture Strategy spreadsheet was designed to identify positions where the annualized return-on-investment (aroi) from early assignment is greater than what might be achieved if the stock was instead assigned at its options expiration date--which was the case for this JPMorgan Chase position.
As detailed below, the early assignment for this JPMorgan position provided a return-on-investment result for the Covered Calls Advisor Portfolio of +1.2% absolute return-on-investment (equivalent to +35.6% annualized roi for the 12 days this position was held). This result exceeded the maximum potential annualized roi of +33.8% if the stock would instead be assigned on its July 15th, 2022 options expiration date.
JPMorgan Chase & Co. (JPM) -- Covered Calls Position Closed by Early Assignment
The transactions were:
6/23/2022 Bought 200 JPM shares @ $112.44
6/23/2022 Sold 2 JPM April 15th, 2022 $105.00 Call options @ $8.66 per share
7/01/2022 2 JPM Call options exercised early (on the last business day prior to the ex-dividend
date), so the JPMorgan Covered Calls position was closed out by early assignment--the
2 Call options expired and the 200 JPM shares were sold at the $105.00
strike price.
The overall performance results (including commissions) for this JPM Covered Calls position were as follows:
Stock Purchase Cost Basis: $20,757.34
= ($112.44 - $8.66) *200 shares + $1.34 commission
Net Profit:
(a) Options Income: +$1,730.66
= ($8.66 *200 shares) - $1.34 commission
(b) Dividend Income (Call options exercised early on July 1st, the business day prior to the July 5th ex-div date): +$0.00
(c) Capital Appreciation (JPM assigned early): -$1,488.00
+($105.00 -$112.44) * 200 shares
This morning at 11:05am, my Covered Call net debit limit order was executed. A position was established in Meta Platforms Inc. (formerly Facebook Inc.) when 100 shares were purchased at $155.16 and 1 July 15th, 2022 Call option was sold at $12.98 at the $145.00 strike price. The corresponding extrinsic value (i.e. time value) was $2.82 per share [$12.98 Call options premium - ($155.16 stock purchase price - $145.00 strike price)]. The $2.82 per share will be profit if the stock remains above the $145.00 strike price (and therefore assigned) on the July 15th options expiration date.
Given the Covered Calls Advisor's current Bearish Overall Market Meter outlook, a moderately in-the-money Covered Calls position was established -- the Delta was 75.2, which closely approximates a 75.2% probability that the Call option will be in-the-money on the options expiration date. In addition, the Implied Volatility of the Calls was high at 54.6 when the position was established (well above the current VIX of 28.1), so the options premium received for selling this Call was very attractive. Also, the next earnings report on July 27th is after the July 15th options expiration date.
Meta Platforms has declined by more than 50% since its peak last October to a level that I believe is a good entry point for establishing this Covered Call position. The trailing twelve months (TTM) P/E ratio has declined to below 12.0, it's cheapest P/E ever, which is amazing for a company with over $40 billion cash and both the operating profit margins and the return on invested capital above 30%; and they have done this despite spending tens of billions of dollars on their metaverse initiatives for future growth. In short, the growth opportunity relative to the current valuation makes today's stock price very compelling.
Some key numbers for this Meta Platforms Inc. Covered Call position are:
Covered Call Cost Basis: $14,217.33
Profit if Assigned on Expiration Date: $281.33
Days Until July 15th, 2022 Options Expiration: 15
Absolute Return-on-Investment if Assigned at Expiration: +2.0%
Annualized Return-on-Investment if Assigned at Expiration: +48.2%
Best Wishes to All,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net