October 28th, 2022 Weekly Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with October 28th, 2022 weekly options expiration dates.  Both positions (DraftKings Inc. and Lowe's Companies Inc.) were in-the-money and therefore assigned on their October 28th options expiration date with the following results:

1. DraftKings Inc. (DKNG) -- +5.4% absolute return (equivalent to +103.3% annualized return-on-investment) for the 19 days of this investment.  The original post for this position is here.  The eight hundred shares were in-the-money since the closing price yesterday of $15.23 was above the $13.00 strike price--so the options expired and the 800 shares were sold at the $13.00 strike price. 

2. Lowe's Companies Inc. (LOW) -- +1.6% absolute return (equivalent to +36.4% annualized return-on-investment) for the 16 days of this investment.  The original post for this position is here.  The two hundred shares were in-the-money at yesterday's market close since the closing price of $198.69 was greater than the $180.00 strike price. 

The cash now available from the assignment (i.e. closing) of these two positions will be retained until new Covered Calls positions are established.  Given the Covered Calls Advisor's currently Bearish Overall Market outlook, new positions will be hedged by establishing Covered Calls at in-the-money strike prices with good downside protection. 

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Early Assignment of Covered Calls Position in Bank of New York Mellon

Early this morning, the Covered Calls Advisor was notified by my broker (Schwab) that the four Bank of New York Mellon (ticker BK) November 4th, 2022 $38.00 Call options were exercised yesterday--Note: it is commonplace with early assignments that they normally occur on the last business day prior to the ex-dividend date.  Bank of New York Mellon stock has increased from its purchase price of $39.88 to $41.23 at the market close yesterday.  The original $.50 time value had declined on yesterday's market close to an amount close to $0.00, so as I expected and with 9 days remaining until the options expiration date, the owner of the Calls exercised their option to buy the 400 shares at the $38.00 strike price in order to receive today's $.37 per share ex-dividend.  

The post showing the details of this position when it was originally established is here .  Although I will not receive the $.37 per share dividend, I preferred the Early Assignment since the early assignment for this Bank of New York position provided a higher annualized-return-on-investment result (and I always compare "annualized return-on-investments" when comparing investments with differing total days of duration).  In this case, the +1.3% absolute return-on-investment (equivalent to +60.0% annualized roi for the 8 days this position was held) exceeded the maximum potential annualized roi of +46.7% if the stock would instead be assigned nine days later on its original November 4th, 2022 options expiration date.    As a replacement for this position, I will likely establish a new Covered Calls position later today in the same Financial Sector (as this Bank of New York position was).  As is the norm with almost all positions established in the Financial Sector, I will attempt to identify a company I am bullish on where I can also apply my Dividend Capture Strategy in order to boost the potential annualized return-on-investment.    
 

Bank of New York Mellon Corp. (BK) -- Covered Calls Position Closed by Early Assignment

The simultaneous buy/write transaction was:
10/18/2022 Bought 400 Bank of New York Mellon Corp. shares @ $39.88
10/18/2022 Sold 4 BK November 4th, 2022 $38.00 Call options @ $2.38 per share
10/25/2022 Bank of New York Mellon Call options owner exercised their options, so the Covered Calls position was closed out early. The 4 BK Call options expired worthless and the 400 BK shares were sold at the $38.00 strike price.
 

The overall performance results (including commissions) for this Bank of New York Mellon Covered Calls position are as follows:
Stock Purchase Net Investment: $15,002.68
= ($39.88 - $2.38) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$949.32
= ($2.38 * 400 shares) - $2.68 commission
(b) Dividend Income (Four Call options exercised early on October 25th, the business day prior to the October 26th ex-div date): +$0.00
(c) Capital Appreciation (BK's shares assigned early at $38.00 strike price on Oct. 25th): -$752.00
+($38.00-$39.88) * 400 shares

Total Net Profit (Bank of New York's shares assigned early at $38.00 on Oct. 25th): +$197.32

= (+$949.32 options income +$0.00 dividend income -$752.00 capital appreciation)

Absolute Return-on-Investment: +1.3%

= +$197.32/$15,002.68

Annualized Return-on-Investment: +60.0%

= (+$197.32/$15,002.68) * (365/8 days)

Rolled-Down-and-Out Medtronic PLC Covered Calls

Last Friday, the Covered Calls position in Medtronic PLC (ticker symbol MDT) expired out-of-the-money (the stock price was $83.26 and the strike price was $84.00).  This morning, when Medtronic's strike price had risen to $84.05, this Covered Calls position was continued by selling two November 4th, 2022 $81.00 Calls at $3.85 per share against the 200 Medtronic shares.  An in-the-money position was chosen with a Delta of 73.1. 

As detailed below, a potential return-on-investment result if the Medtronic stock price remains in-the-money at the Nov. 4th options expiration is +1.5% absolute return (equivalent to +11.5% annualized return-on-investment over the 46 days period).   This result provides another example of the benefit of the downside protection inherent in selling in-the-money Covered Calls in bearish markets.  If this positive return is achieved, it will be a welcome recovery to profitability from a losing position in which Medtronic's stock price will have declined by -8.2% (from its $88.19 purchase price to the $81.00 assignment price at the positions closing).

Medtronic PLC (MDT) -- Continuation of Covered Calls Position
The buy/write transaction was:
09/19/2022 Bought 200 Medtronic PLC shares @ $88.19
09/19/2022 Sold 2 MDT 9/30/2022 $86.00 Call options @ $2.77
Note 1: the Implied Volatility of the Calls was 23.2 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.58 per share = [$2.77 Call options premium - ($88.19 stock price - $86.00 strike price)]
09/22/2022 Upcoming quarterly ex-dividend of $.68 per share
9/30/2022 Bought-to-Close 2 MDT Sept 30th, 2022 $86.00 Call Options @ $.01 per share and simultaneously Sold-to-Open 2 MDT October 21st, 2022 $84.00 Calls @ $1.16 per share.      10/21/2022 Two Call options expired out-of-the-money and 200 shares of Medtronic stock retained in the Covered Calls Advisor Portfolio.
10/24/2022 Rolled-Down-and-Out by selling two MDT November 4th, 2022 $81.00 Calls at $3.85. 

A possible overall performance result (including commissions) for this Medtronic Covered Calls position is as follows:
Covered Calls Net Investment: $17,085.34
= ($88.19 - $2.77) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,549.98
= ($2.77 -$.01 +1.16 + $3.85) * 200 shares - $4.02 commissions
(b) Dividend Income: +$136.00
= ($.68 dividend per share x 200 shares)
(c) Capital Appreciation (If MDT shares assigned at $81.00 strike price at the Nov. 4th, 2022 options expiration): -$1,438.00
+($81.00 - $88.19) * 200 shares

Total Net Profit (If Medtronic shares assigned at $81.00 strike price at the Nov. 4th, 2022 expiration): +$247.98

= (+$1,549.98 options income +$136.00 dividend income -$1,438.00 capital appreciation)
 

Absolute Return-on-Investment (If Medtronic shares assigned at $81.00 at the Nov. 4th, 2022 options expiration): +1.5%

= +$247.98/$17,085.34

Annualized Return-on-Investment (If MDT shares assigned at $81.00 at the Nov. 4th, 2022 expiration): +11.5%
= (+$247.98/$17,085.34) * (365/46 days)

Monthly Options Expiration Results through October 21st, 2022

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 September 16th, 2022 options expiration through yesterday's October 21st, 2022 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio held a total of twelve Covered Calls positions.  Nine positions were closed out at a profit, two positions were closed out at a loss, and one position expired out-of-the-money on yesterday's October 21st monthly options expiration date. 

The specific results for each position are summarized as follows: 

• Three Covered Calls positions expired in-the-money (stock price above the strike price) on the October 21st, 2022 monthly options expiration date with the following results: 

1. General Motors Companny (GM) -- +2.0% absolute return in 16 days (equivalent to a +44.6% annualized return-on-investment).  
2. Energy Select Sector ETF (XLE) -- +2.2% absolute return in 38 days (equivalent to a +20.9% annualized return-on-investment).
3. Qualcomm Inc. (QCOM) -- +1.8% absolute return in 15 days (equivalent to a +43.7% annualized return-on-investment).  This position is a good example of how Covered Calls make it possible to achieve profitability despite a declining stock price by selling Calls at in-the-money strike prices. Qualcomm stock declined from a purchase price of $121.77 to $115.74 (a -5.0% decline) on yesterday's options expiration date.  But since an in-the-money ($115.00) strike price was selected, the stock was assigned at expiration yesterday at a +1.8% absolute return-on-investment. 
   

• One Covered Calls position in Suncor Energy expired in-the-money during the past month on its Weekly options expiration date and was therefore assigned at a +0.6% absolute return in 44 days (equivalent to a +5.0% annualized return-on-investment).

• One Covered Call position in JPMorgan Chase & Co. was closed out by early assignment on the day prior to its ex-dividend date for a +1.2% absolute return in 12 days (equivalent to a +37.4% annualized return-on-investment).            
  

• Six Covered Calls positions were closed early based on my decision at that time to close out the positions with the following results:

1. Abbvie Inc. (ABBV) -- +1.2% absolute return in 13 days (equivalent to a +33.8% annualized return-on-investment).
2. Applied Materials Inc. (AMAT) --  -7.1% absolute return in 37 days (equivalent to a -69.8% annualized return-on-investment).
3. Best Buy Inc. (BBY) -- -7.7% absolute return in 18 days (equivalent to a -156.9% annualized return-on-investment).
4. Caterpillar Inc. (CAT) --  +1.7% absolute return in 7 days (equivalent to a +88.4% annualized return-on-investment).
   
5. Cleveland-Cliffs Inc. (CLF) -- +3.4% absolute return in 22 days (equivalent to a +56.3% annualized return-on-investment).
6. Meta Platforms Inc. (META) --  +0.8% absolute return in 20 days (equivalent to a +14.5% annualized return-on-investment).

• One Covered Calls positions in Medtronic PLC expired out-of-the-money on yesterday's October 21st, 2022 options expiration date.  These 200 MDT shares remain in the Covered Calls Advisor Portfolio and are currently held at a small unrealized loss.  Early next week, a decision will be made to either sell these shares or to continue this Covered Calls positions by selling future Call options against the shares currently held.

During the past year (last 12 months) 113 of 123 positions (91.9%) 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 +21.7% during the past year and the average holding period for these 123 closed positions was 23.0 days.  In comparison, the benchmark S&P 500 returned -17.8% during the same prior one-year period.   

As demonstrated by these past year's results, the Covered Calls strategy can be extraordinarily beneficial during Bearish time periods such as we have experienced during the past year, and especially by selling moderately in-the-money strike prices to provide added downside protection in bearish markets.  However, be advised that these return-on-investment results by the Covered Calls Advisor Portfolio above that of the benchmark S&P 500 (i.e. +21.7% versus -17.8%) 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". 

Investing Words of Wisdom from a legendary investor: "For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity." -- John Templeton

This Covered Calls Advisor blog is freely available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I also encourage you to email me at partlow@cox.net any time you would like my feedback on your comments or questions on anything related to the Covered Calls investing strategy. 

Best Wishes and Godspeed,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Covered Calls Established in Mosaic Company

A November 4th, 2022 Covered Calls buy/write limit order was executed today in the Mosaic Company (ticker MOS) at a net debit price of $46.31 per share.  Three hundred shares were purchased at $51.96 and three Nov. 4th, 2022 $47.00 strike price Call options were sold at $5.65 per share.  The corresponding extrinsic value (i.e. time value) was $.69 per share [$5.65 Call options premium - ($51.96 stock purchase price - $47.00 strike price)].   The Implied Volatility of the Calls was very high at 57.8 and the approximate probability of assignment at options expiration was 81.0% when this transaction was executed.  There is no ex-dividend and, as I prefer, no earnings report prior to the options expiration date.

Mosaic's trailing twelve months earnings per share is $9.35 (a P/E ratio is only 5.6) which is slightly less than one-half of its prior 10-year average P/E ratio.  Regarding its near-term future, Mosaic's FY2022 EPS are expected to increase further from the current TTM of $9.35 to $12.95.  This positive trend should benefit the stock price.  In addition, Wall Street analysts' current average target price is $65.31 (+41.0% above today's purchase price).  

Some key numbers for this Mosaic Company Covered Calls position are:
Covered Calls Net Investment: $13,895.01
Profit if Assigned on Expiration Date: $204.99
Days Until November 4th, 2022 Options Expiration: 15
Absolute Return-on-Investment if Assigned at Expiration: +1.5%
Annualized Return-on-Investment if Assigned at Options Expiration: +35.9%

Closed Out Caterpillar Inc. Covered Call Position

Today, I decided to close out my Caterpillar Inc. 10/28/2022 $170.00 Covered Call position early.  Today was the $1.20 per share ex-dividend date, so by waiting until today I was able to capture the dividend.  But I decided not to retain this Covered Calls position until next Friday's (October 28th) options expiration since CAT's quarterly earnings report is before market open on the October 28th options expiration date.  Because of the usual stock price volatility immediately after quarterly earnings releases, I prefer not holding positions then.  Caterpillar's bullish price move this morning provided an opportunity to lock in a very attractive return-on-investment for this investment.  

As detailed below, the return-on-investment result for this Caterpillar Covered Call position was +1.7% absolute return-on-investment in 7 days (equivalent to a +88.4% annualized return-on-investment).  This +88.4% annualized return-on-investment (aroi) achieved is greater than the maximum +57.2% aroi that might have been achieved if the stock would instead remain in-the-money and therefore assigned on its original expiration date next Friday.
 
Caterpillar Inc. (CAT) -- Covered Call Position Closed Out

The simultaneous buy/write transaction was as follows:
10/14/2022 Bought 100 shares of Caterpillar stock @ $178.61 per share 
10/14/2022 Sold 1 Caterpillar October 28th, 2022 $170.00 Call option @ $11.35 per share.  Note: the Implied Volatility of this Call option was 43.8 when this buy/write transaction was executed.
10/21/2022 $1.20 per share ex-dividend captured
10/21/2022 Closed out (i.e. unwound) this Caterpillar Covered Call position by Selling-to-Close 100 CAT shares at $184.50 and simultaneously Buying-to-Close 1 10/28/2022 $170.00 Call at $15.59 per share.  

The overall performance result (including commissions) was as follows:
Covered Call Net Investment: $16,726.67
= ($178.61 - $11.35)* 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: -$425.34
= ($11.35 - $15.59) * 100 shares - $1.34 commissions
(b) Dividend Income: +$120.00 = $1.20 per share x 100 shares 
(c) Capital Appreciation (100 CAT shares sold at $184.50 each): +$589.00
= ($184.50 -$178.61) * 100 shares

Total Net Profit: +$283.66
= (-$425.34 option income +$120.00 dividend income +$589.00 capital appreciation)

Absolute Return-on-Investment: +1.7%
= +$283.66/$16,726.67
Equivalent Annualized Return-on-Investment: +88.4%
= (+$283.66/$16,726.67) * (365/7 days)

Established Covered Calls Position in the Bank of New York Mellon Corp.

A November 4th, 2022 Covered Calls buy/write limit order was placed in Bank of New York Mellon Corp. (ticker BK) at a net debit limit price of $37.50 per share.  The order was executed and 400 shares were purchased at $39.88 and four November 4th Call options were sold at the $38.00 strike price for $2.38 per share.  The Implied Volatility of these Call options was 34.3 when this transaction was executed and the Delta was 72.5.  In addition, there is an upcoming quarterly ex-dividend of $.37 per share (3.7% annual dividend yield) on October 26th which is prior to the options expiration date; so it is included in the potential return-on-investment calculations detailed below. 

The Bank of New York Mellon Corp. 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: 

•  +1.3% absolute return (equivalent to +60.0% annualized return for the next 8 days) if the stock is assigned early (business day prior to the October 26th, 2022 ex-dividend date); OR 

• +2.3% absolute return (equivalent to +46.7% annualized return over the next 18 days) if the stock is assigned on the November 4th, 2022 options expiration date.

These returns will be achieved as long as the Bank of New York Mellon's stock price is above the $38.00 strike price at options expiration.  If the stock declines below the strike price, the breakeven price of $37.13 per share ($39.88 stock purchase price - $2.38 Call options selling price - $.37 ex-dividend amount) provides a substantial 6.9% downside breakeven protection below today's stock purchase price.
 

Bank of New York Mellon Corp. (BK) -- New Covered Calls Position

In the unlikely event that the stock price increases to the point where the current time value (i.e. extrinsic value) of $.50 remaining in the short Call options decays substantially (down to about $.15 or less) by October 25th, 2022 (the last business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 400 Bank of New York Mellon shares away to capture the dividend payment.  As detailed in the Dividend Capture spreadsheet below, early assignment would be a very desirable outcome since its +60.0% annualized return-on-investment (aroi) exceeds the +46.7% aroi that would be achieved if the assignment was instead at the November 4th options expiration date.

The simultaneous buy/write transaction was:
10/18/2022 Bought 400 Bank of New York Mellon Corp. shares @ $39.88
10/18/2022 Sold 4 BK Nov. 4th, 2022 $38.00 Call options @ $2.38 per share
10/26/2022 Upcoming quarterly ex-dividend at $.37 per share

Two possible overall performance results (including commissions) for this Bank of New York Mellon Covered Calls position are as follows:
Stock Purchase Cost Basis: $15,002.68
= ($39.88 - $2.38) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$949.32
= ($2.38 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on October 25th, the business day prior to the October 26th ex-div date): +$0.00; or
(b) Dividend Income (If Bank of New York's shares assigned at the Nov 4th, 2022 expiration): +$148.00
= ($.37 dividend per share x 400 shares)

(c) Capital Appreciation (If Bank of New York Mellon's stock assigned early): -$752.00
+($38.00 -$39.88) * 400 shares; or
(c) Capital Appreciation (If BK's shares assigned at $38.00 strike price at expiration): -$752.00
+($38.00-$39.88) * 400 shares

1. Total Net Profit [If option exercised on the last business day prior to the Oct. 26th ex-dividend date)]: +$197.32

= (+$949.32 options income +$0.00 dividend income -$752.00 capital appreciation); or

2. Total Net Profit (If Bank of New York's shares assigned at $38.00 at November 4th, 2022 expiration): +$345.32

= (+$949.32 options income +$148.00 dividend income -$752.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on business day prior to ex-dividend date): +1.3%

= +$197.32/$15,002.68

Annualized Return-on-Investment (If option exercised early): +60.0%

= (+$197.32/$15,002.68) * (365/8 days); or

2. Absolute Return-on-Investment (If shares assigned at $38.00 at Nov. 4th expiration date): +2.3%

= +$345.32/$15,002.68

Annualized Return-on-Investment (If BK shares assigned at $38.00 at Nov. 4th, 2022 options expiration): +46.7%

= (+$345.32/$15,002.68) * (365/18 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved in this Bank of New York Mellon Corp. position.

Covered Call Position Established in Caterpillar Inc.

Today at 12:12 pm (EDT), a new Covered Call position was established in Caterpillar Inc. (ticker CAT) with an October 28th, 2022 options expiration date.  A buy/write limit order with a debit price of $167.26 was executed when one hundred shares of Caterpillar stock were purchased at $178.61 and one in-the-money 10/28/2022 $170.00 strike price Call option was sold for $11.35 per share.  The time value when this Covered Calls position was established was $2.74 per share = [$11.35 Call option price - ($178.61 stock price - $170.00 strike price)].  Given the Covered Calls Advisor's current cautious outlook, an in-the-money Covered Call position was established.  The Delta was 71.7 which approximates a probability of 71.7% that the Call option will be in-the-money and therefore the stock assigned (i.e. sold) on the options expiration date.  

There is a $1.20 per share ex-dividend next Friday (October 21st) which is included in the potential return-on-investment results detailed below.   There is an earnings report before market open on the October 28th options expiration date.  Because of the usual stock price volatility immediately after quarterly earnings releases, I prefer not holding positions then.  So, I will be monitoring this Caterpillar Covered Call position closely every day starting on next Friday's ex-dividend date since closing out the position on or after the ex-dividend date but prior to the earnings date is a likely possibility. 

As detailed below, a potential return-on-investment result if assigned on the Oct. 28th options expiration date is +2.4% absolute return in 15 days (equivalent to a +57.2% annualized return-on-investment). 

 
Caterpillar Inc. (CAT) -- New Covered Call Position

The simultaneous buy/write transaction was as follows:
10/14/2022 Bought 100 shares of Caterpillar stock @ $178.61 per share 
10/14/2022 Sold 1 Caterpillar October 28th, 2022 $170.00 Call option @ $11.35 per share.  Note: the Implied Volatility of this Call option was 43.8 when this buy/write transaction was executed.
10/21/2022 Upcoming $1.20 per share ex-dividend

A possible overall performance result (including commissions) if assigned on the Oct. 28th options expiration date would be as follows:
Covered Call Net Investment: $16,726.67
= ($178.61 - $11.35)* 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,134.33
= ($11.35 * 100 shares) - $.67 commission
(b) Dividend Income: +$120.00 = $1.20 per share x 100 shares 
(c) Capital Appreciation (If CAT stock is above $170.00 strike price at the Oct. 28th options expiration date): -$861.00
= ($170.00 -$178.61) * 100 shares

Total Net Profit: +$393.33
= (+$1,134.33 option income +$120.00 dividend income -$861.00 capital appreciation)

Absolute Return-on-Investment: +2.4%
= +$393.33/$16,726.67
Equivalent Annualized Return-on-Investment: +57.2%
= (+$393.33/$16,726.67) * (365/15 days)

Closed Out Abbvie Inc. Covered Calls Position

Yesterday, with no time value remaining the October 21st, 2022 $130.00 Call options, the Covered Calls position was rolled-up-and-out to the October 28th, 2022 $137.00 strike price -- see yesterday's post here .  The objective in this rollout transaction was to ensure that Abbvie's $1.41 per share ex-dividend today would be captured along with the potential to achieve a higher annualized-return-on-investment by closing the position before the October 28th expiration date.  By owning the Abbvie shares at yesterday's close, I will receive the $1.41 per share dividend.  But, with the strong upside move in Abbvie's stock today, I decided to go ahead and close out this Covered Calls position.  

As detailed below, the return-on-investment result for this Abbvie Inc. position is +1.2% absolute return in 13 days (equivalent to a +33.8% annualized return-on-investment). 

Abbvie Inc. (ABBV) -- Covered Calls Position Closed
The simultaneous buy/write transaction was as follows:
9/30/2022 Bought 200 shares of Abbvie Inc. stock @ $136.86 per share 
9/30/2022 Sold 2 ABBV October 21st, 2022 $130.00 Call options @ $8.24 per share.  The Implied Volatility of these Calls was 31.4 when this position was established.
10/12/2022 Rolled-Up-and-Out: Bought-to-Close the 10/21/2022 $130.00 Calls for $12.55 and simultaneously Sold-to-Open the 10/28/2022 $137.00 Calls at $6.75.
10/13/2022 Captured the Abbvie quarterly ex-dividend of $1.41 per share
10/13/2022 Closed out (i.e. unwound) this Abbvie Covered Calls position by Selling-to-Close 200 ABBV shares at $140.89 and simultaneously Buying-to-Close 2 10/28/2022 $137.00 Calls at $6.31 per share.  

The overall performance results (including commissions) are as follows:
Covered Calls Net Investment: $25,725.34
= ($136.86 - $8.24) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: -$778.02
= ($8.24 - $12.55 + $6.75 -$6.31) * 200 shares - $4.02 commission
(b) Dividend Income: +$282.00
= $1.41 per share x 200 shares
(c) Capital Appreciation (ABBV shares sold today at $140.89): +$806.00
= ($140.89 stock sales price - $136.86 stock purchase price) * 200 shares

Net Profit: +$309.98
= (-$778.02 options income +$282.00 dividend income + $806.00 capital appreciation)

Absolute Return-on-Investment: +1.2%
= +$309.98/$25,725.34
Equivalent Annualized Return-on-Investment (If assigned on the 10/21/2022 options expiration date): +33.8%
= (+$309.98/$25,725.34) * (365/13 days)

Established Covered Calls Position in Lowe's Companies Inc.

An October 28th, 2022 Covered Calls buy/write limit order was placed in Lowe's Companies Inc. (ticker LOW) at a net debit limit price of $178.20 per share.  The order was executed by purchasing 200 shares at $190.48 and simultaneously selling two October 28th Call options at the $180.00 strike price for $12.28 per share.  The Implied Volatility of these Call options was 34.4 when this transaction was executed and the Delta was 78.5.  In addition, there is an upcoming quarterly ex-dividend of $1.05 per share (2.2% annual dividend yield) on October 18th which is prior to the options expiration date so it is included in the potential return-on-investment calculations detailed below. 

Lowe's 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: 

•  +1.0% absolute return (equivalent to +73.5% annualized return for the next 5 days) if the stock is assigned early (business day prior to the October 18th, 2022 ex-dividend date); OR 

• +1.6% absolute return (equivalent to +36.4% annualized return over the next 16 days) if the stock is assigned on the October 28th, 2022 options expiration date.

These returns will be achieved as long as the Lowe's stock price is above the $180.00 strike price at options expiration.  If the stock declines below the strike price, the breakeven price of $177.15 per share ($190.48 stock purchase price - $12.28 Call options selling price - $1.05 ex-dividend amount) provides a substantial 7.0% downside breakeven protection below today's stock purchase price.
 

Lowe's Companies Inc. (LOW) -- New Covered Calls Position

In the relatively unlikely event that the stock price increases to the point where the current time value (i.e. extrinsic value) of $1.80 remaining in the short Call options decays substantially (down to about $.15 or less) by October 17th, 2022 (the last business day prior to the ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 200 Lowe's shares away to capture the dividend payment.  As detailed in the Dividend Capture spreadsheet below, early assignment would be a very desirable outcome since its +73.5% annualized return-on-investment (aroi) exceeds the +36.4% aroi that would be achieved if the assignment was instead at the October 28th options expiration date.

The simultaneous buy/write transaction was:
10/13/2022 Bought 200 Lowe's shares @ $190.48
10/13/2022 Sold 2 Lowe's Oct. 28th, 2022 $180.00 Call options @ $12.28 per share
10/18/2022 Upcoming quarterly ex-dividend at $1.05 per share

Two possible overall performance results (including commissions) for this Lowe's Companies Covered Calls position are as follows:
Stock Purchase Cost Basis: $35,641.34
= ($190.48 - $12.28) *200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$2,454.66
= ($12.28 *200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on October 17th, the business day prior to the October 18 ex-div date): +$0.00; or
(b) Dividend Income (If Lowe's shares assigned at the Oct. 28th, 2022 expiration): +$210.00
= ($1.05 dividend per share x 200 shares)

(c) Capital Appreciation (If Lowe's stock assigned early): -$2,096.00
+($180.00 -$190.48) * 200 shares; or
(c) Capital Appreciation (If Lowe's assigned at $180.00 strike price at expiration): -$2,096.00
+($180.00-$190.48) * 200 shares

1. Total Net Profit [If option exercised on the last business day prior to the Oct. 18th ex-dividend date)]: +$358.66

= (+$2,454.66 options income +$0.00 dividend income -$2,096.00 capital appreciation); or

2. Total Net Profit (If Lowe's assigned at $180.00 at October 28th, 2022 expiration): +$568.66

= (+$2,454.66 options income +$210.00 dividend income -$2,096.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on business day prior to ex-dividend date): +1.0%

= +$358.66/$35,641.34

Annualized Return-on-Investment (If option exercised early): +73.5%

= (+$358.66/$35,641.34) * (365/5 days); or

2. Absolute Return-on-Investment (If Lowe's assigned at $180.00 at October 28th expiration date): +1.6%

= +$568.66/$35,641.34

Annualized Return-on-Investment (If Lowe's shares assigned at $180.00 at Oct 28th, 2022 options expiration): +36.4%

= (+$568.66/$35,641.34) *(365/16 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved in this Lowe's Companies Inc. position.

Roll-Up-and-Out Abbvie Inc. Covered Calls

Abbvie Inc. (ticker symbol ABBV) goes ex-dividend tomorrow at $1.41 per share.  With the stock trading today at $142.50, the existing Covered Calls position at the October 21st, 2022 $130.00 strike price had $0.00 remaining time value.  Rather than have these Calls exercised later today and the stock assigned (i.e. sold) at the $130.00 strike price, I decided to roll-up-and-out one week to the October 27th, 2022 $137.00 strike price at a net debit of $5.80 per share. The transaction was: Bought-to-Close the 10/21/2022 $130.00 Calls for $12.55 and simultaneously Sold-to-Open the 10/28/2022 $137.00 Calls at $6.75. 

This remains a conservative in-the-money Covered Calls position since the Delta for these new Calls when this rollout transaction was executed was 74.8 which closely approximates the probability of assignment at options expiration (i.e. 74.8% probability). The Q3 2022 quarterly earnings report for Abbvie is before market open on the new October 28th options expiration date, so because of the uncertainty and accompanying volatility immediately after earnings releases, it is likely that this Covered Calls position will be unwound (i.e. closed out) prior to the Oct. 28th expiration date.

As detailed below, a potential return-on-investment result for this Abbvie Inc. position is +3.1% absolute return in 29 days (equivalent to a +38.9% annualized return-on-investment) if the stock closes above the $137.00 strike price at the October 28th, 2022 options expiration.  This potential +38.9% exceeds the +29.9% annualized return that would have been achieved if the original Abbvie Covered Calls position had instead been assigned early later today (i.e. the day prior to tomorrow's ex-dividend date).

Abbvie Inc. (ABBV) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
9/30/2022 Bought 200 shares of Abbvie Inc. stock @ $136.86 per share 
9/30/2022 Sold 2 ABBV October 21st, 2022 $130.00 Call options @ $8.24 per share.  The Implied Volatility of these Calls was 31.4 when this position was established.
10/12/2022 Rolled-Up-and-Out: Bought-to-Close the 10/21/2022 $130.00 Calls for $12.55 and simultaneously Sold-to-Open the 10/28/2022 $137.00 Calls at $6.75.
10/13/2022 Abbvie quarterly ex-dividend of $1.41 per share

A possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $25,725.34
= ($136.86 - $8.24) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$485.32
= ($8.24 - $12.55 + $6.75) * 200 shares - $2.68 commission
(b) Dividend Income (If Abbvie shares assigned at the October 28th, 2022 options expiration): +$282.00
= $1.41 per share x 200 shares
(c) Capital Appreciation (If ABBV shares assigned with stock above $137.00 strike price on the Oct. 28th, 2022 options expiration): +$28.00
= ($137.00 strike price - $136.86 stock purchase price) * 200 shares

Potential Net Profit (If ABBV price is above $137.00 strike price at October 28th options expiration): +$795.32
= (+$485.32 options income +$282.00 dividend income + $28.00 capital appreciation)

Absolute Return-on-Investment (If Abbvie price is above $137.00 strike price at the October 28th options expiration date): +3.1%
= +$795.32/$25,725.34
Equivalent Annualized Return-on-Investment (If assigned on the 10/21/2022 options expiration date): +38.9%
= (+$795.32/$25,725.34) * (365/29 days)

Established Covered Calls in DraftKings Inc.

This afternoon, an October 28th, 2022 Covered Calls buy/write limit order was executed today in DraftKings Inc. (ticker DKNG) at a net debit price of $12.33 per share.  Eight hundred shares were purchased at $14.34 and eight Oct. 28th, 2022 $13.00 strike price Call options were sold at $2.01 per share.  The corresponding extrinsic value (i.e. time value) was $.67 per share [$2.01 Call options premium - ($14.34 stock purchase price - $13.00 strike price)].   

Normally, I avoid highly speculative companies (such as DraftKings), but I do occasionally allow myself to establish one such position in the Covered Calls Advisor Portfolio.  On the downside, DraftKings' continues to lose money in each quarterly earnings, largely because of the huge marketing expense required to attract new customers in the U.S. States that are continuing to approve online sports gambling.  But they have now established themselves as one of the few likely long-term winners in the growing sports betting business.  

Their Trailing Twelve Months Price-to-Enterprise Value multiple has now declined to an attractive level now below 4.0.  The Implied Volatility of the DraftKings Calls was very high today at 98.0 when this position was established, so the options premium received (and therefore also the 103.3% potential annualized-return-on-investment) are very attractive.  The current average target price of the 30 Wall Street analysts currently covering DraftKings is $25.87 (+80.4% above today's purchase price).  The probability that the position will be assigned at expiration is approximately 70.5%.  There is no ex-dividend and no earnings report prior to the options expiration date.

Some key numbers for this DraftKings Inc. Covered Calls position are:
Covered Calls Net Investment: $9,869.36
Profit if Assigned on Expiration Date: $530.64
Days Until October 28th, 2022 Options Expiration: 19
Absolute Return-on-Investment if Assigned at Expiration: +5.4%
Annualized Return-on-Investment if Assigned at Expiration: +103.3%

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

October 7th, 2022 Options Expiration Results

Yesterday, the Covered Calls position in Suncor Energy Inc. (ticker SU) was closed out on its September 7th, 2022 options expiration date.  The strike price was $31.00 and Suncor closed in-the-money at market closing yesterday (the Suncor stock price was $32.80).  So, the 400 Suncor shares were assigned (i.e. sold) at the $31.00 strike price.  As detailed below, the return-on-investment (ROI) result was  +0.6% absolute return (equivalent to +5.0% annualized return-on-investment for the 44 days holding period).
 

Suncor Energy Inc. (SU) -- Covered Calls Position Assigned on the October 7th Options Expiration Date
The original simultaneous buy/write transactions was as follows:
08/25/2022 Bought 400 shares of Suncor stock @ $34.77 per share 
08/25/2022 Sold 4 Suncor Sept. 16th, 2022 $32.50 Call options @ $2.62 per share
09/01/2022 Ex-dividend at $.3573 per share
9/16/2022 Four Suncor Call options expired out-of-the-money and 400 Suncor shares remain in the Covered Calls Advisor Portfolio.
9/19/2022 Continued Suncor Covered Calls position by selling four October 7th, 2022 $31.00 Call options @ $1.00 per share.
10/7/2022 Four SU $31.00 Calls expired in-the-money (Suncor stock was $32.80 at market close on Friday, 10/7/2022) and the 400 Suncor shares were sold at the $31.00 strike price.

The overall performance result (including commissions) was as follows:
Covered Calls Net Investment: $12,865.36
= ($34.77 - $2.62) * 400 shares + $5.36 commission

Net Profit Components:
(a) Options Income: +$1,442.64
= ($2.62 + $1.00) * 400 shares - $5.36 commission
(b) Dividend Income: $142.92
= $.3573 per share x 400 shares
(c) Capital Appreciation (Suncor stock was above $31.00 strike price and therefore assigned on its Oct. 7th options expiration): -$1,508.00
= ($31.00 - $34.77) * 400 shares

Total Net Profit: +$77.56
= (+$1,442.64 options income +$142.92 dividend income -$1,508.00 capital appreciation)

Absolute Return-on-Investment: +0.6%
= +$77.56 net profit/$12,865.36 net investment
Equivalent Annualized Return-on-Investment: +5.0%
= (+$77.56/$12,865.36) * (365/44 days)

Covered Calls Established in Qualcomm Inc.

An October 21st, 2022 Covered Calls buy/write limit order was executed today in Qualcomm Inc. (ticker QCOM) at 10:03a.m. at a net debit price of $112.96 per share.  Two hundred shares were purchased at $121.77 and two Oct. 21st, 2022 $115.00 strike price Call options were sold at $8.81 per share.  The corresponding extrinsic value (i.e. time value) was $2.04 per share [$8.81 Call options premium - ($121.77 stock purchase price - $115.00 strike price)].   The Implied Volatility of the Calls was high at 49.0 and the approximate probability of assignment at options expiration was 72.9% when this transaction was executed.  There is no ex-dividend and, as I prefer, no earnings report prior to the options expiration date.

When this position was established it was 5.9% in-the-money which is consistent with my current cautious Covered Calls approach during a bearish market environment.  Like most semiconductor industry companies, Qualcomm's stock price has  declined substantially (-35% for Qualcomm) so far this year, but their current valuation is attractive--for example, their trailing twelve months P/E ratio is now 10.2. In addtion, analysts' current average target price is $183.95 (+51.1% above today's purchase price).  

Some key numbers for this Qualcomm Inc. Covered Calls position are:
Covered Calls Net Investment: $22,594.68
Profit if Assigned on Expiration Date: $405.32
Days Until October 21st, 2022 Options Expiration: 15
Absolute Return-on-Investment if Assigned at Expiration: +1.8%
Annualized Return-on-Investment if Assigned at Options Expiration: +43.7%

Covered Calls Established in General Motors Company

An October 21st, 2022 Covered Calls buy/write limit order was executed today in General Motors Company (ticker GM) at a net debit price of $31.38 per share.  Five hundred shares were purchased at $34.53 and five Oct. 21st, 2022 $32.00 strike price Call options were sold at $3.15 per share.  The corresponding extrinsic value (i.e. time value) was $.62 per share [$3.15 Call options premium - ($34.53 stock purchase price - $32.00 strike price)].   The Implied Volatility of the Calls was very high at 54.8 and the approximate probability of assignment at options expiration was 75.6% when this transaction was executed.  There is no ex-dividend and, as I prefer, no earnings report prior to the options expiration date.

When this position was established it was 7.9% in-the-money which is consistent with my current cautious Covered Calls approach during a bearish market environment.  GM's stock price has experienced a dramatic decline of 43% so far this year, but their current valuation is attractive--for example, their trailing twelve months P/E ratio is only 5.7.  Their year-over-year sales have begun to inflect positive during the past two quarters and their Q3 2022 earnings are expected to show year-over-year improvements beginning this quarter when they report on October 25th.  This positive trend should begin to benefit the stock price.  Analysts' current average target price is $50.89 (+47.4% above today's purchase price).  

Some key numbers for this General Motors Company Covered Calls position are:
Covered Calls Net Investment: $15,693.35
Profit if Assigned on Expiration Date: $306.65
Days Until October 21st, 2022 Options Expiration: 16
Absolute Return-on-Investment if Assigned at Expiration: +2.0%
Annualized Return-on-Investment if Assigned at Options Expiration: +44.6%

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. October 21st, 2022 $100.00 Call options were exercised yesterday (the last business day prior to today's October 5th ex-dividend date).   JPMorgan Chase & Co. stock has increased from its purchase price of $108.93 to $112.77 at the market close yesterday.  The original Delta of 79.3 (which approximates the probability of assignment at options expiration) had increased to a very high 96.2 at yesterday's market close. When this Covered Calls position was established, the time value (aka extrinsic value) was $1.22 per share [$10.15 Call options premium - ($108.93 stock purchase price - $100.00 strike price)].  This original $1.22 time value had declined on yesterday's market close to $0.00 so, as expected, the owner of the Calls exercised their option to buy the 200 shares at the $100.00 strike price in order to receive today's $1.00 per share dividend.  

Although I will not receive the $1.00 per share dividend, I preferred the Early Assignment for two reasons: (1) As detailed below, the early assignment for this JPMorgan Chase & Co.  position provided a higher annualized-return-on-investment result for the Covered Calls Advisor Portfolio of +1.2% absolute return-on-investment (equivalent to +37.4% annualized roi for the 12 days this position was held).  This result exceeded the maximum potential annualized-roi of +28.2% if the stock would instead be assigned on its October 21st, 2022 monthly options expiration date; and (2) Because of the stock price volatility that normally occurs immediately following the quarterly earnings report of any company, I strongly prefer not holding the stock of any company on that day; and in this case, JPMorgan's Q3 2022 earnings report on October 14th, 2022 is prior to the Oct. 21st options expiration date. 

JPMorgan Chase & Co. (JPM) -- Covered Calls Position Closed by Early Assignment

The simultaneous buy/write transaction was:
9/23/2022 Bought 200 JPM shares @ $108.93
9/23/2022 Sold 2 JPM October 21st, 2022 $100.00 Call options @ $10.15 per share
10/04/2022 JPM Call options owner exercised their option, so the Covered Calls position was closed out early.  The 2 JPM Call options expired worthless and my 200 JPM shares were sold at the $100.00 strike price.

The overall performance results (including commissions) for this JPM Covered Calls position were as follows:
Stock Purchase Net Investment: $19,757.34
= ($108.93 - $10.15) *200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,028.66
= ($10.15 *200 shares) - $1.34 commission
(b) Dividend Income (JPM Call options exercised early on October 4th, the business day prior to the October 5th ex-div date): +$0.00

(c) Capital Appreciation (JPM shares assigned at $100.00 strike): -$1,786.00
+($100.00 -$108.93) * 200 shares

Total Net Profit: +$242.66

= (+$2,028.66 options income +$0.00 dividend income -$1,786.00 capital appreciation)

 

Absolute Return-on-Investment: +1.2%

= +$242.66/$19,757.34

Annualized Return-on-Investment: +37.4%

= (+$242.66/$19,757.34) * (365/12 days)

Closed Covered Calls Positions in Cleveland-Cliffs Inc. and Meta Platforms Inc.

At last Friday's September 30th, 2022 options expiration, Covered Calls positions in both Cleveland-Cliffs Inc. and Meta Platforms Inc. expired with the stock price below their respective strike prices, so the Calls expired and the shares remained in the Covered Calls Advisor Portfolio.  With the increase in the overall stock market (and both Cleveland-Cliffs and Meta) early this morning, I decided to close out both positions.  

As detailed below, the return-on-investment results are:

• Cleveland-Cliffs Inc.: +3.4% absolute return in 22 days (equivalent to a +56.3% annualized return-on-investment; and
• Meta Platforms Inc.:  +0.8% absolute return in 20 days (equivalent to a +14.5% annualized return-on-investment.  
  

These two Covered Calls positions demonstrate the benefit of selling moderately in-the-money Covered Calls in bearish markets.  The Cleveland-Cliffs stock price declined by 8.7% since its original purchase price just 22 days ago and Meta Platforms' price declined by 5.6% over the past 20 days.  However, because of the substantial downside protection provided with in-the-money Covered Calls, profitable return-on-investment results were still achieved for both positions.

1. Cleveland-Cliffs Inc. (CLF) -- Covered Calls Position Closed
The original simultaneous buy/write transactions was as follows:
09/14/2022 Bought 500 shares of Cleveland-Cliffs stock @ $15.47 per share 
09/14/2022 Sold 5 Cleveland-Cliffs Sept.30th, 2022 $14.00 Call options @ $1.81 per share
09/30/2022 5 CLF $14.00 Call options expired out-of-the-money at $13.66 per share and the 500 Cliff shares remained in the Covered Calls Advisor Portfolio.
10/03/2022 Cleveland-Cliffs position closed out by sell 500 shares at $14.1302.

The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $6,833.35
= ($15.47 - $1.81) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$901.65
= ($1.81 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Cleveland-Cliffs stock sold on 10/03/2022 @ $14.1302 per share): -$669.90
= ($14.1302 sales price - $15.47 purchase price) * 500 shares

Net Profit: +$231.75
= (+$901.65 options income +$0.00 dividend income - $669.90 capital appreciation)

Absolute Return-on-Investment: +3.4%
= +$231.75/$6,833.35
Equivalent Annualized Return-on-Investment: +56.3%
= (+$231.75/$6,833.35) * (365/22 days)

2. Meta Platforms Inc. (CLF) -- Covered Call Position Closed
The original simultaneous buy/write transactions was as follows:

09/16/2022 Bought 100 shares of Meta Platforms stock @ $145.83 per share 
09/16/2022 Sold 1 Meta Sept. 30th, 2022 $140.00 Call option @ $9.25 per share
09/30/2022 Meta stock closed below the $140.00 strike price @ $136.58 per share, so the Meta Call option expired and 100 Meta shares remained in the Covered Calls Advisor Portfolio.
10/03/2022 Closed out this Meta Covered Calls position by selling 100 shares @ $137.675 early in today's trading day.

The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $13,658.67
= ($145.83 - $9.25) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$924.33
= ($9.25 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Meta Platforms stock sold on 10/03/2022 @ $137.675 per share): -$815.50
= ($137.675 - $145.83) * 100 shares

Net Profit: +$108.83
= (+$924.33 options income +$0.00 dividend income - $815.50 capital appreciation)

Absolute Return-on-Investment: +0.8%
= +$108.83/$13,658.67
Equivalent Annualized Return-on-Investment: +14.5%
= (+$108.83/$13,658.67) * (365/20 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Weekly Options Expiration Results for September 30th, 2022

The Covered Calls Advisor Portfolio held a total of six Covered Calls positions with September 30th, 2022 expirations.  Despite hedging all these positions by establishing in-the-money strike prices, all six stocks declined to below their strike prices (i.e. were out-of-the-money) as of yesterday afternoon on their options expiration date.  

• Two positions (Energy Select Sector ETF and Medtronic Inc.) were rolled-down-and-out to the October 21st monthly options expiration date.  I continue with my original bullish outlook for these equities and by rolling them out am attempting to repair them back toward profitability. 
  
• Two positions (Applied Materials Inc. and Best Buy Inc.) were closed out at a loss.  Both the Semiconductor industry and the Consumer Discretionary sector continue to be hit harder than most during this bear market; so I chose to exit both these positions at a loss.
  
• Two positions (Cleveland-Cliffs Inc. and Meta Platforms Inc.) had their Call options expire out-of-the-money at yesterday's options expiration.  In each case, the shares remain in the Covered Calls Advisor Portfolio.  Early next week, decisions will be made to either sell these shares or to continue these Covered Calls positions by selling future Call options against the shares currently held.

Detailed results for the two rollout and two closed-out positions are as follows: 

 1. Energy Select Sector SPDR Fund ETF (XLE) -- Rolled-Down-and-Out Covered Calls Position
The buy/write transaction today was as follows:
9/13/2022 Bought 300 Energy Select Sector SPDR Fund ETF shares @ $80.31 per share
9/13/2022 Sold 3 XLE 9/30/2022 $76.00 Call options @ $4.91 per share
9/19/2022 Quarterly ex-distribution at $.8462 per share
9/30/2022 Bought-to-Close 3 XLE Sept 30th, 2022 $76.00 Call Options @ $.01 per share and simultaneously Sold-to-Open 3 XLE October 21st, 2022 $74.00 Calls @ $2.22 per share.

The overall performance results (including commissions) for this Energy Select Sector SPDR Fund ETF Covered Call position if assigned on the October 21st options expiration date are as follows:
Covered Call Net Investment: $22,622.01
= ($80.31 - $4.91) * 300 shares + $2.01 commissions

Net Profit Components:
(a) Options Income: +$2,130.99
= ($4.91+$2.22-$.01) * 300 shares - $5.01 commissions
(b) Dividend Income: +$240.00
= ($.8462 dividend per share x 300 shares)
(c) Capital Appreciation (If shares assigned at $74.00 strike price at options expiration): -$1,893.00
+($74.00 - $80.31) * 300 shares

Total Net Profit (If XLE shares assigned at $74.00 strike price at the October 21st, 2022 expiration): +$491.85

= (+$2,130.99 options income + $253.86.00 distribution income - $1,893.00 capital appreciation)
 

Absolute Return-on-Investment (If XLE shares assigned at $74.00 strike price on October 21st, 2022 expiration): +2.2%

= +$491.85/$22,622.01

Annualized Return-on-Investment (If XLE shares assigned at $74.00 at Oct. 21st, 2022 expiration): +20.9%

= (+$491.85/$22,622.01) *(365/38 days)

2. Medtronic PLC (MDT) -- Rolled-Down-and-Out Covered Calls Position
The buy/write transaction was:
09/19/2022 Bought 200 Medtronic PLC shares @ $88.19
09/19/2022 Sold 2 MDT 9/30/2022 $86.00 Call options @ $2.77
Note 1: the Implied Volatility of the Calls was 23.2 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.58 per share = [$2.77 Call options premium - ($88.19 stock price - $86.00 strike price)]
09/22/2022 Upcoming quarterly ex-dividend of $.68 per share
9/30/2022 Bought-to-Close 2 MDT Sept 30th, 2022 $86.00 Call Options @ $.01 per share and simultaneously Sold-to-Open 2 MDT October 21st, 2022 $84.00 Calls @ $1.16 per share.

The overall performance results (including commissions) for this Medtronic Covered Calls position if assigned on the October 21st options expiration date are as follows:
Covered Calls Net Investment: $17,085.34
= ($88.19 - $2.77) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$784.00
= ($2.77 + $1.16 - $.01) * 200 shares
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MDT shares assigned at $84.00 strike price at options expiration): -$838.00= +($84.00 - $88.19) * 200 shares

Total Net Profit (If Medtronic shares assigned at $84.00 strike price at Oct 21st, 2022 expiration): -$54.00

= (+$784.00 options income +$0.00 dividend income -$838.00 capital appreciation)
 

Absolute Return-on-Investment (If Medtronic shares assigned at $84.00 at Oct 21st, 2022 options expiration): -0.3%

= -$54.00/$17,085.34

Annualized Return-on-Investment (If MDT shares assigned at $84.00 at the Oct 21st, 2022 expiration): -3.6%
= (-$54.00/$17,085.34) * (365/32 days)

3. Applied Materials Inc. (AMAT) -- Covered Calls Position Closed Out
The original $94.06 net debit buy/write limit order was transacted as follows:
08/24/2022 Bought 200 AMAT shares @ $100.76
08/24/2022 Sold 2 AMAT Sept. 2nd, 2022 $95.00 Call options @ $6.70 per share.
Note: as is often the case, these Call options were transacted slightly below the midpoint of the $6.65/$6.80 bid/ask spread.
9/2/2022 AMAT shares closed at $91.35, well below the $95.00 strike price, so the Calls expired and 200 AMAT shares remain in the Covered Calls Advisor Portfolio.
9/7/2022 Continued Applied Materials Covered Calls position by selling two Sept 16th, 2022 $92.50 Call options @ $2.30 per share.  The stock price was $91.42 when this transaction was executed.
9/16/2022 Two AMAT Call options expired out-of-the-money and 200 AMAT shares remain in the Covered Calls Advisor Portfolio.
9/19/2022 Continued Applied Materials Covered Calls position by selling two Sept 30th, 2022 $91.00 Call options @ $2.42 per share.
9/30/2022 Bought-to-Close 2 AMAT Sept 30th, 2022 $91.00 Call Options @ $.02 per share and simultaneously Sold-to-Close 200 Applied Materials shares @ $82.72 per share.

The overall performance result (including commissions) was as follows:
Covered Calls Net Investment: $18,813.34
= ($100.76 - $6.70) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,275.98
= ($6.70 + $2.30 + $2.42 - $.02) * 200 shares - $4.02 commission
(b) Dividend Income: $0.00
(c) Capital Appreciation: -$3,608.00
= ($82.72 -$100.76) * 200 shares

Total Net Profit (If stock assigned on the September 30th options expiration date): -$1,332.02
= (+$2,279.98 options income +$0.00 dividend income -$3,608.00 capital appreciation)

Absolute Return-on-Investment: -7.1%
= -$1,332.02/$18,813.34
Equivalent Annualized Return-on-Investment: -69.8%
= (-$1,332.02/$18,813.34) * (365/37 days)

4. Best Buy Inc. (BBY) -- Covered Calls Position Closed Out
The buy/write transaction was:
9/13/2022 Bought 200 shares of Best Buy shares @ $74.90 per share 
9/13/2022 Sold 2 Best Buy September 30th, 2022 $71.00 Call options @ $4.64 per share
Note: this was a $70.26 net debit limit Buy/Write transaction
09/19/2022 Upcoming quarterly ex-dividend of $.88 per share
9/30/2022 Bought-to-Close 2 Best Buy Sept 30th, 2022 $71.00 Call Options @ $.02 per share and simultaneously Sold-to-Close 200 BBY shares @ $63.95 per share.

The overall performance results (including commissions) for this Best Buy Covered Calls position was as follows:
Covered Calls Net Investment: $14,053.34
= ($74.90 - $4.64) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$922.66
= ($4.64 - $.02) x 200 shares - $1.34 commissions
(b) Dividend Income: +$176.00
= ($.88 dividend per share x 200 shares)
(c) Capital Appreciation (200 Best Buy shares sold at $63.95 per share): -$2,190.00
+($63.95 - $74.90) * 200 shares 

Total Net Profit: -$1,087.34

 = (+$926.66 options income +$176.00 dividend income - $2,190.00 capital appreciation)

 

Absolute Return-on-Investment: -7.7%

= -$1,087.34/$14,053.34

Annualized Return-on-Investment (If Best Buy stock assigned at $71.00 at the 9/30/2022 expiration): -156.9%

= (-$1,087.34/$14,053.34) *(365/18 days)

 

Jeff Partlow
Covered Calls Advisor
partlow@cox.net