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
