Early Assignment of Covered Calls Position in EOG Resources Inc.

Early this morning, the Covered Calls Advisor was notified by my broker (Schwab) that the two EOG Resources Inc. (ticker EOG) January 20th, 2023 $117.20 Call options were exercised yesterday.  EOG Resources stock has increased from its purchase price of $124.13 one week ago to $130.45 at the market close yesterday.  The original $1.62 time value [$8.55 Call options premium - ($124.13 stock purchase price - $117.20 strike price)] had declined on yesterday's market close to $0.15 at the Call options Bid/Ask midpoint, so I was not surprised that (with 7 days remaining until the options expiration date), the owner of these EOG Calls exercised their option to buy the 200 shares at the $117.20 strike price in order to receive today's $.825 per share ex-dividend.  

The post when this EOG Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this EOG Resources Covered Calls position was +1.4% absolute return in 10 days (equivalent to a +50.9% annualized return-on-investment).   I am pleased to forgo EOG's $.825 ex-dividend today since the +50.9% annualized-return-on-investment achieved by early assignment is greater than the +42.8% that would have been achieved if this position was instead assigned in another week on its January 20th options expiration date.  

 

EOG Resources Inc. (EOG) -- Covered Calls Position Closed by Early Assignment

The simultaneous buy/write transaction was:
1/3/2023 Bought 200 EOG shares @ $124.13
1/3/2023 Sold 2 EOG January 20th, 2023 $117.20 Call options @ $8.55 per share
1/13/2023 EOG Resources Call options owner exercised their two Call options, so the Covered Calls position was closed out early. The two EOG Call options expired worthless and the 200 EOG Resources shares were sold at the $117.20 strike price.

The overall performance results (including commissions) for this EOG Resources Covered Calls position are as follows:
Buy/Write Purchase Net Investment: $23,117.34
= ($124.13 - $8.55) *200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,708.66
= ($8.55 * 200 shares) - $1.34 commission
(b) Dividend Income (Two EOG Call options exercised early on January 12th, the business day prior to the January 13th ex-div date): +$0.00
(c) Capital Appreciation (EOG assigned early): -$1,386.00
+($117.20 -$124.13) * 200 shares

Total Net Profit [Call options exercised on the last business day prior to the Jan. 13th ex-dividend date)]: +$322.66

= (+$1,708.66 options income +$0.00 dividend income -$1,386.00 capital appreciation)

 

Absolute Return-on-Investment: +1.4%

= +$322.66/$23,117.34

Annualized Return-on-Investment: +50.9%

= (+$322.66/$23,117.34) * (365/10 days)