Early Assignment of Covered Call Position in Marathon Petroleum Corporation

Early this morning, the Covered Calls Advisor was notified by my broker that the one Marathon Petroleum Corporation (ticker MPC) February 24th, 2023 $116.00 Call option was exercised yesterday.  Marathon Petroleum stock has increased from its purchase price of $121.29 last Wednesday to $127.89 at the market close yesterday.  The original $1.26 time value in the Call when the position was established had declined on yesterday's market close to $0.00, so I was not surprised that (with ten calendar days remaining until the options expiration date), the owner of these MPC Calls exercised their option to buy the 100 shares at the $116.00 strike price in order to receive today's $.75 per share ex-dividend.  I am pleased for this early assignment despite losing the opportunity to capture the $.75 ex-dividend since the +57.0% annualized-return-on-investment (aroi) achieved by early assignment is greater than the +37.5% aroi that would have been achieved if this position was instead assigned on its February 24th options expiration date.       

The post when this Marathon Petroleum Covered Call position was originally established is here.  As detailed below, the return-on-investment result for this MPC Covered Calls position was +1.1% absolute return in 7 days (equivalent to a +57.0% annualized return-on-investment)

Marathon Petroleum Corp. (MPC) -- Covered Call Position Closed Out by Early Assignment

The buy/write transaction was:
2/8/2023 Bought 100 Marathon Petroleum Corp. shares @ $121.29
2/8/2023 Sold 1 MPC 2/24/2023 $116.00 Call option @ $6.55 per share
Note: the Implied Volatility of the Call options was 31.6 when this buy/write transaction was executed.  As preferred, this exceeds the Implied Volatility of a comparable Delta for a S&P 500 (i.e. SPY) Covered Calls position (whose Implied Volatility is currently 23.2).
2/14/2023 Marathon Petroleum Call option owner exercised their Call option, so the Covered Call position was closed out early. The MPC Call option expired worthless and the 100 Marathon Petroleum shares were sold at the $116.00 strike price.

The overall performance results (including commissions) for this Covered Call position were as follows:
Covered Call Net Investment: $11,474.67
= ($121.29 - $6.55) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$654.33
= ($6.55 * 100 shares) - $.67 commission
(b) Dividend Income (MPC Call option exercised early on Feb. 14th, the last business day prior to the February 15th ex-div date): +$0.00
(c) Capital Appreciation: -$529.00
+($116.00 strike price - $121.29 stock price) * 100 shares

Total Net Profit: +$125.33

= (+$654.33 options income +$0.00 dividend income -$529.00 capital appreciation)

 

Absolute Return-on-Investment: +1.1%

= +$125.33/$11,474.67

Annualized Return-on-Investment: +57.0%

= (+$125.33/$11,474.67) * (365/7 days)