Established Covered Calls Position in Valero Energy Corporation

An April 6th, 2023 Covered Calls buy/write limit order was placed in Valero Energy Corporation (ticker VLO) at a net debit limit price of $120.96 per share.  Two hundred shares were purchased at $129.66 and two 4/6/2023 Call options were simultaneously sold at the $123.00 strike price for $8.70 per share.  The Implied Volatility of these Call options was 47.2 when this transaction was executed which, as preferred by the Covered Calls Advisor, is well above the current 22.2 of the S&P 500 Volatility Index (VIX).  When this in-the-money Covered Calls position was established today it had a probability of assignment on the options expiration date of 72.2%. 

Valero is a large, high quality oil refiner with 15 refineries located primarily in the U.S. but also in Canada and the United Kingdom.  All refiners are benefiting now from tight refining capacity relative to demand, a situation unlikely to change significantly in the near-term future.   

Valero meets the primary criteria currently preferred for new positions established by the Covered Calls Advisor:

As detailed below, the potential return-on-investment results if the stock price remains above the $123.00 strike price on the April 6th, 2023 options expiration date is +1.7% absolute return-on-investment (equivalent to a +43.8% annualized return-on-investment for the next 14 days).

If the Valero stock declines below the strike price, the breakeven price of $120.96 per share ($129.66 stock purchase price - $8.70 Call options selling price) provides a substantial 6.7% downside breakeven protection below today's stock purchase price.
 

Valero Energy Corporation (VLO) -- New Covered Calls Position

The simultaneous buy/write transaction was:
3/24/2023 Bought 200 Valero shares @ $129.66
3/24/2023 Sold 2 Valero April 6th, 2023 $123.00 Call options @ $8.70 per share

Two possible overall performance results (including commissions) for this Valero Energy Covered Calls position are as follows:
Net Investment: $24,193.34
= ($129.66 - $8.70) *200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,738.66
= ($8.70 *200 shares) - $1.34 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If Valero shares assigned at $123.00 strike price at options expiration): -$1,332.00
+($123.00-$129.66) * 200 shares

 

Total Net Profit (If Valero stock assigned at $123.00 at the April 6th, 2023 expiration): +$406.66

= (+$1,738.66 options income +$0.00 dividend income -$1,332.00 capital appreciation)
 

Absolute Return-on-Investment (If Valero stock assigned at $123.00 at the April 6th options expiration date): +1.7%

= +$406.66/$24,193.34

Annualized Return-on-Investment (If Valero shares assigned at $123.00 at the 4/6/2023 options expiration date): +43.8%

= (+$406.66/$24,193.34) * (365/14 days)