As preferred by the Covered Calls Advisor, Cigna's next quarterly earnings report on May 5th, 2023 will be after the March 17th options expiration date. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Call position was established with a Delta of 72.9 and the Implied Volatility of the Call option was approximately 19.8 when the buy/write limit order was executed. Cigna is currently at an attractive valuation. It appears in three of my stock screeners: (1) Large-Cap Value+Profitability+Growth; (2) Acquirers' Multiple; and (3) Piotroski(All)--which means that it meets all nine Piotroski F-Score criteria.
As detailed below, a potential return-on-investment result is +0.8% absolute return (equivalent to +50.2% annualized
return for the next 6 days) if the stock is assigned early on March 6th (the last business day prior to the March 7th ex-date); OR +1.3%
absolute return (equivalent to +27.2% annualized return over the next 17 days) if the stock is assigned on the March 17th, 2023 options expiration date.
The buy/write transaction today was as follows:
3/1/2023 Bought 100 Cigna Corp. shares @ $289.40
3/1/2023 Sold 1 Cigna 3/17/2023 $280.00 Call option @ $11.70
3/7/2023 Upcoming quarterly ex-dividend of $1.23 per share
Two possible overall performance results (including commissions) for this Cigna Covered Call position are as follows:
Covered Call Cost Basis: $27,770.67
= ($289.40 - $11.70) * 100 shares + $.67 commissions
Net Profit Components:
(a) Options Income: +$1,169.33
= ($11.70 * 100 shares) - $.67 commissions
(b) Dividend Income (If option exercised early on the business day prior to the March 7th ex-div date): +$0.00; or
(b) Dividend Income (If Cigna shares assigned at March 17th, 2023 options expiration): +$123.00
= ($1.23 dividend per share x 100 shares)
(c) Capital Appreciation (If CI shares assigned early on March 6th): -$940.00
+($280.00 - $289.40) * 100 shares ;or
(c) Capital Appreciation (If Cigna shares assigned at $280.00 strike price at options expiration): -$940.00
+($280.00 - $289.40) * 100 shares
These returns will be achieved as long as the stock is above the $280.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $276.47 ($289.40 -$11.70 -$1.23) provides 4.5% downside protection below today's purchase price.
The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy. The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved. As shown in the table below, eight of the nine criteria are met for this Cigna Corporation Covered Call position.
