Established Covered Calls in United Airlines Holdings Inc.

This morning, a short-term Covered Calls position was established by buying 500 shares of United Airlines Holdings Inc.(ticker symbol UAL) stock at $48.36 and simultaneously selling 5 March 3rd, 2023 $47.00 Call options at $2.11 per share -- a net debit of $46.25 per share -- so the time value was $.75 per share [$2.11 Call options premium - ($48.36 stock purchase price - $47.00 strike price)].  The approximate probability that this position will be in-the-money and therefore assigned on the options expiration date is 67.0%.

UAL's recent 4th quarter earnings report was outstanding in both revenues and earnings per share and yet the stock has declined since then despite the fact that their valuation is now very attractive based on their projected continuing earnings growth this year that would give them a FY2023 P/E Ratio of only 5.8 based on today's stock purchase price. I was further encouraged to establish this position when: (1) Scott Kirby, United's impressive CEO, was on CNBC earlier this week and stated that January and February bookings have been stellar; and (2) UAL is benefiting further since jet fuel, which is a substantial cost to airlines, is at a 20%+ lower cost than it was this time last year. Finally, the seventeen analysts that cover United Airlines agree with me that the stock is currently undervalued. Their average target price is $57.63 (+19.2%) above today's purchase price.    
 

As detailed below, a potential outcome for this United Airlines investment is +1.6% absolute return-on-investment for the next 10 days (equivalent to +58.7% annualized-return-on-investment) if the stock closes above the $47.00 strike price on the March 3rd, 2023 options expiration date.

United Airlines Holdings Inc. (UAL) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
2/22/2023 Bought 500 shares of United Airlines stock @ $48.36 per share 
2/22/2023 Sold 5 UAL March 3rd, 2023 $47.00 Call options @ $2.11 per share
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 39.3 when this position was established.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Net Investment: $23,128.35
= ($48.36 - $2.11) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,051.65
= ($2.11 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If UAL stock is above the $47.00 strike price at the March 3rd expiration): -$680.00
= ($47.00 -$48.36) * 500 shares

Potential Total Net Profit (If assigned at expiration): +$371.65
= (+$1,051.65 options income +$0.00 dividend income -$680.00 capital appreciation)

Absolute Return-on-Investment: +1.6%
= +$371.65/$23,128.35
Equivalent Annualized-Return-on-Investment: +58.7%
= (+$371.65/$23,128.35) * (365/10 days)