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
