Early Close Out of Covered Calls in Freeport McMorRan Inc. and iShares China Large-Cap ETF

Last Friday (December 30th, 2022), Covered Calls positions were established in Freeport-McMoRan Inc. (ticker FCX) and iShares China Large-Cap ETF (FXI) and both had January 20th, 2023 monthly options expiration dates. Both equities have had substantial price increases during the past week and early in this morning's trading I decided to close out both positions. I have a "Rule-of-Thumb for Early Close" and as shown below, both positions exceeded the minimum annualized-return-on-investment (aroi) threshold for closing out a position early. Since both positions have been held for 7 days now and there were 22 days total duration until the 1/20/2023 options expiration date, they fall into category #2 in the rules table below. Category #2 requires that the aroi if closed early be at least 80% higher than the aroi if the position was instead in-the-money and therefore assigned on the original options expiration date. Those minimum aroi thresholds are +76.0% for FCX and +64.8% for FXI. As detailed in the remainder of this post below, the positions were closed out since the aroi results for early close out exceeded these thresholds for both positions.

1.  Freeport-McMoRan Inc. (FCX) -- Covered Calls Position Closed Out Early 
The buy/write transaction was:
12/30/2022 Bought 400 Freeport-McMoRan shares @ $37.72 each
12/30/2022 Sold 4 FCX 1/20/2023 $35.50 Call options @ $2.96 per share
1/6/2023 Unwound FCX Covered Calls position by simultaneously Selling-to-Close 400 shares @ $41.24 and Buying-to-Close 4 FCX 1/20/2023 $35.50 Call options @ $5.80 per share. 

The overall performance results (including commissions) for this Freeport McMoRan Covered Calls position are as follows:
FCX Covered Calls Net Investment: $13,906.68
= ($37.72 - $2.96) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: -$1,141.36
= ($2.96 - $5.80) * 400 shares - $5.36 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$1,408.00
+($41.24 selling price - $37.72 purchase price) * 400 shares

Total Net Profit: +$266.64

= (-$1,141.36 options income +$0.00 dividend income +$1,408 capital appreciation)

 

Absolute Return-on-Investment: +1.9%

= +$266.64/$13,906.68

Annualized Return-on-Investment: +100.0%

= (+$266.64/$13,906.68) * (365/7 days)

2. iShares China Large-Cap ETF (FXI) -- Covered Calls Position Closed Out Early
The Buy/Write transaction was as follows:
12/30/2023 Bought 500 shares of iShares China Large-Cap ETF @ $28.28 per share 
12/30/2023 Sold 5 FXI Jan. 20th, 2023 $27.00 Call options @ $1.86 per share
1/6/2023 Unwound FXI Covered Calls position by simultaneously Selling-to-Close 500 shares @ $30.59 and Buying-to-Close 5 FXI 1/20/2023 $27.00 Call options @ $3.74 per share.  

The overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position was as follows:
FXI Covered Calls Net Investment: $13,213.35
= ($28.28 - $1.86) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: -$946.70
= ($1.86 - $3.74) * 500 shares - $6.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$1,155.00
+($30.59 selling price  - $28.28 purchase price) * 500 shares

Total Net Profit: +$208.30
= (-$946.70 options income +$0.00 dividend income +$1,155.00 capital appreciation)

Absolute Return-on-Investment: +1.6%
= +$208.30/$13,213.35
Annualized Return-on-Investment: +82.2%
= (+$208.30/$13,213.35) * (365/7 days)