At last Friday's options expiration, two December 16th, 2022 Covered Calls in Devon Energy Corporation (ticker DVN) expired out-of-the-money with the stock price below the $63.00 strike price, so the Calls expired and the 300 Devon shares remained in the Covered Calls Advisor Portfolio.
I decided to close this position this morning given the current Bearish outlook of my Overall Market Meter as well as the impact the current worldwide economic slowdown might continue to have on the U.S. stock market early in 2023. The price of crude oil was higher by about 3% in early trading today attributed to a combination of Russia's indication of possible declines in production as well as the potential impact of energy demand throughout North America from the plummeting temperatures caused by the current Polar vortex. So early in this morning's trading, when Devon was trading 1.88% above yesterday's close, I closed out the position by selling the 300 shares at a market price of $61.24 per share.
The return-on-investment results for this Devon Energy position was: +1.5% absolute
return in 30 days (equivalent to a +18.2% annualized
return-on-investment).
This Covered Calls position demonstrates the benefit of selling moderately in-the-money Covered Calls in bearish markets using the Dividend Capture Strategy. This Devon Energy stock price declined by 9.0% since its original purchase price one month ago, however a satisfactory annualized return-on-investment profit of +18.2% was still achieved (as detailed below).
The original buy/write transaction was:
11/23/2022 Bought 300 Devon Energy shares @ $67.27 each
11/23/2022 Sold 3 DVN 12/16/2022 $63.00 Call options @ $5.61 per share
12/9/2022 Quarterly ex-dividend of $1.35 per share
12/16/2022 Three DVN $63.00 Call options expired out-of-the-money and 300 shares remain in the Covered Calls Advisor Portfolio
12/23/2022 Sold 300 Devon Energy shares @ $61.24 per share to close out this Covered Calls position
The overall performance results (including commissions) for this Devon Covered Calls position were as follows:
Covered Calls Net Investment: $18,500.01
= ($67.27 - $5.61) * 300 shares + $2.01 commission
Net Profit:
(a) Options Income: +$1,680.99
= ($5.61 * 300 shares) - $2.01 commission
(b) Dividend Income: +$405.00
= ($1.35 dividend per share x 300 shares)
(c) Capital Appreciation (Devon shares sold at $61.24 to close out the Covered Calls position): -$1,809.00
+($61.24 stock selling price - $67.27 stock purchase price) * 300 shares
