Early this morning, the Covered Calls Advisor was notified by my broker that the four U.S. Bancorp (ticker USB) April 6th, 2023 $33.00 Call options were exercised yesterday. U.S. Bancorp stock has increased from its purchase price of $34.65 on March 16th to $35.74 at the market close yesterday.
The original $1.20 time value in the Calls when the position was established had declined on yesterday's market close to $0.46 at the Call options Bid/Ask midpoint, so I was somewhat surprised that, with only one week until the 4/6/2023 options expiration date, the owner of these USB Calls exercised their option to buy the 400 shares at the $33.00 strike price in order to receive today's $.48 per share ex-dividend. I am pleased for this early assignment despite losing the opportunity to capture the dividend since the +97.8%
annualized-return-on-investment (aroi) achieved by early assignment is greater
than the +87.3% aroi that would be achieved if this position remained in-the-money for another week and was therefore assigned instead on its April 6th options expiration
date.
The post when this U.S. Bancorp Covered Calls position was originally established is here. As detailed below, the return-on-investment result for this U.S. Bancorp Covered Calls position was +3.8% absolute
return in 14 days (equivalent to a +97.8% annualized
return-on-investment).
U.S. Bancorp (USB) -- Covered Calls Position Closed Out by Early Assignment
The simultaneous buy/write transaction was:
3/16/2023 Bought 400 U.S. Bancorp shares @ $34.65
3/16/2023 Sold 4 USB April 6th, 2023 $33.00 Call options @ $2.85 per share. The Implied Volatility of these Calls was very high at 56.5 and the Delta was 64.4 when this position was established.
3/30/2023 U.S. Bancorp Call options owner exercised their four Call options, so the Covered Calls position was closed out early. The four USB Call options expired worthless and the 400 U.S. Bancorp shares were sold at the $33.00 strike price.
The overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Buy/Write Purchase Net Investment: $12,722.68
= ($34.65 - $2.85) * 200 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,137.32
= ($2.85 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
+($33.00 -$34.65) * 400 shares
Total Net Profit: +$477.32
