Early Assignment of Covered Calls Position in JPMorgan Chase & Co.

Early this morning, the Covered Calls Advisor was notified by Schwab that the two JPMorgan Chase & Co. July 15th, 2022 $105.00 Call options were exercised yesterday (the last business day prior to next Tuesday's July 5th ex-dividend date).   JPMorgan stock has increased from its purchase price of $112.44 to $114.05 at the market close yesterday.  When this Covered Calls position was established, the time value (i.e. extrinsic value) was $1.22 per share [$8.66 Call options premium - ($112.44 stock purchase price - $105.00 strike price)].  The original $1.22 time value had declined on yesterday's market close to only $.02 and the owner of the Calls exercised their option to buy the 200 shares at the $105.00 strike price in order to receive the $1.00 per share dividend.

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

Total Net Profit: +$242.66

= (+$1,730.66 options income +$0.00 dividend income -$1,488.00 capital appreciation)

 

Absolute Return-on-Investment: +1.2%

= +$242.66/$20,757.34

Annualized Return-on-Investment: +35.6%

= (+$242.66/$20,757.34) * (365/12 days)