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:
The original simultaneous buy/write transaction was:
7/12/2022 Bought 200 Lowe's shares @ $180.44
7/12/2022 Sold 2 Lowe's July 29th, 2022 $170.00 Call options @ $11.92 per share
7/19/2022 Owners of 2 Lowe's July 29th, 2022 $170.00 Calls exercised their options and 200 LOW shares sold at the $170.00 strike price.
The overall performance results (including commissions) for this Lowe's Covered Calls position are as follows:
Lowe's Covered Calls Position Net Investment: $33,702.66
= ($180.44 - $11.92) *200 shares + $1.34 commission
Net Profit:
(a) Options Income: +$2,382.66
= ($11.92 *200 shares) - $1.34 commission
(b) Dividend Income: +$0.00
+($170.00 -$180.44) * 200 shares
Total Net Profit [Two LOW Call options exercised on July 18th (the last business day prior to the July 19th ex-dividend date)]: +$294.66
