The Covered Calls Advisor Portfolio has Covered Calls positions in
Bank of America Corporation (ticker BAC) and Qualcomm Inc. (QCOM) both
of which expired out-of-the-money at last Friday's options expiration.
Both positions are now at unrealized losses and since I remain bullish
on both companies, I decided to continue both positions in an effort to begin to
repair them back toward breakeven in the case of Bank of America and to profitability in the case of Qualcomm.
Shortly after market open this morning, the Bank of America Covered Calls position was continued by rolling out to the March 24th, 2023 $30.50 strike price by selling-to-open five Calls at $.87 per share when the price of BAC was $30.02. The Qualcomm Covered Calls position was continued by rolling out to the March 24th, 2023 $118.00 strike price by selling-to-open two Calls at $2.87 per share when the price of Qualcomm stock was $116.90. Both rollout strike prices selected were higher than today's current stock price but lower than their original strike prices. Since both companies have liquid weekly options with reasonably tight bid/ask spreads, continuing these Covered Calls positions by rolling out at approximately two week intervals (as is being done with today's rollouts) is a viable approach. The transactions history of both positions so far is detailed below along with two potential return-on-investment results for each position as follows:
1. Bank of America Corporation (BAC) -- Continuation of Covered Calls Position
The original buy/write transaction was as follows:
2/23/2023 Bought 500 shares of Bank of America Corp. stock @ $33.96 per share
8/23/2023 Sold 5 BAC March 10th, 2023 $33.00 Call options @ $1.20 per share
Note: The Implied Volatility of these Calls was 22.8 when this position was established.
3/2/2023 Ex-dividend of $.22 per share
3/10/2023 5 BAC Call options expired out-of-the-money and 500 shares remain in the Covered Calls Advisor Portfolio
3/14/2023
Continued BAC Covered Calls position by selling 5 March 24th, 2023
$30.50 Call options @ $.87 per share when the stock price was $30.02.
Two possible overall performance results (including commissions) for this
Bank of America Corp. Covered Calls position are as follows:
Original Net Investment: $17,568.35
= ($36.80 - $1.67) * 500 shares + $3.35 commission
Net Profit:
(a) Options Income: +$1,028.30
= ($1.20 + $.87) * 500 shares - $6.70 commissions
(b) Dividend Income: +$110.00 = $.22/share x 500 shares
(c) Capital Appreciation (If 500 BAC shares unchanged at current $30.02 price at the 3/24/2023 expiration): -$1,965.00
+($30.02 current stock price - $33.96 original stock purchase price) * 500 shares
(c) Capital Appreciation (If 500 BAC shares assigned at $30.50 strike price at expiration): -$1,730.00
+($30.50 strike price - $33.96 original stock purchase price) * 500 shares
1. Potential Total Net Profit (If 500 Bank of America price unchanged at $30.02 at the 3/24/2023 options expiration): -$826.70
= (+$1,028.30 options income +$110.00 dividend income -$1,965.00 capital appreciation)
2. Potential Total Net Profit (If 500 Bank of America shares assigned at $30.50 strike price at the 3/24/2023 expiration): -$591.70
= (+$1,028.30 options income +$110.00 dividend income -$1,730.00 capital appreciation)
1. Absolute Return-on-Investment (If stock price at $30.02 at expiration): -4.7%
= -$826.70/$17,568.35
Annualized Return-on-Investment: -59.2%
= (-$826.70/$17,568.35) * (365/29 days)
2. Absolute Return-on-Investment (If BAC shares assigned at $30.50 at the 3/24/2023 expiration date): -3.4%
= -$591.70/$17,568.35
Annualized Return-on-Investment: -42.4%
= (-$591.70/$17,568.35) * (365/29 days)
The simultaneous buy/write transactions was as follows:
2/28/2023 Bought 200 shares of Qualcomm stock @ $124.05 per share
2/28/2023 Sold 2 Qualcomm March 10th, 2023 $120.00 Call options @ $4.93 per share
3/1/2023 Upcoming ex-dividend at $.75 per share
3/10/2023 Two QCOM Call options expired out-of-the-money and 200 shares remain in the Covered Calls Advisor Portfolio
3/14/2023 Continued Qualcomm Covered Calls position by selling 2 March 24th, 2023 $118.00 Call options @ $2.87 per share when the stock price was $116.90.
The overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $23,825.34
= ($124.05 - $4.93) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,557.32
= ($4.93 + $2.87) * 200 shares - $2.68 commission
(b) Dividend Income: $150.00
= $.75 dividend per share x 200 shares
(c) Capital Appreciation (If Qualcomm stock is unchanged at $116.90 at the March 24th, 2023 options expiration): -$1,430.00
= ($116.90 - $124.05) * 200 shares
(c) Capital Appreciation (If Qualcomm stock is above $118.00 strike
price and therefore assigned at the March 24th expiration): -$1,210.00
= ($118.00 - $124.05) * 200 shares
1. Potential Total Net Profit (If QCOM price is unchanged at $116.90 at the March 24th, 2023 options expiration): +$277.32
= (+$1,557.32 options income +$150.00 dividend income - $1,430.00 capital appreciation)
2. Potential Total Net Profit (If QCOM price is above $120.00 strike price at the March 24th options expiration): +$497.32
= (+$1,557.32 options income +$150.00 dividend income - $1,210.00 capital appreciation)
1. Absolute Return-on-Investment (If QCOM price is unchanged at $116.90 at the March 24th, 2023 options expiration): +1.2%
= +$277.32/$23,825.34
Equivalent Annualized Return-on-Investment: +17.7%
= (+$277.32/$23,825.34) * (365/24 days)
2. Absolute Return-on-Investment (If QCOM price is above $118.00 strike price at the 3/24/2023 options expiration): +2.1%
= +$497.32/$23,825.34
Equivalent Annualized Return-on-Investment: +31.7%
= (+$497.32/$23,825.34) * (365/24 days)
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
