As detailed below, two potential return-on-investment results are: (1) +1.5% absolute return (equivalent to +18.2% annualized return-on-investment for the 31 days holding period) if Cigna's price is unchanged at today's $276.68 price on the March 31st, 2023 expiration date; and (2) +1.8% absolute return (equivalent to +21.7% annualized return-on-investment for the 31 days holding period) if it is in-the-money (i.e. above the $277.50 strike price) on the March 31st options expiration date.
The Cigna Corporation (CI) -- Covered Call Position Continued by Rollout
The original buy/write transaction 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 Quarterly ex-dividend of $1.23 per share
3/17/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
3/21/2023
Continued Cigna Covered Call position by selling one March 31st,
2023 $27.50 Call option @ $4.10 per share. The stock price was $276.68
when this transaction was made.
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: +$1,578.66
= ($11.70 + $4.10) * 100 shares - $1.34 commissions
(b) Dividend Income: +$123.00
= ($1.23 dividend per share x 100 shares)
(c) Capital Appreciation (If CI stock price unchanged at $276.68 on the March 31st options expiration date): -$1,272.00
+($276.68 - $289.40) * 100 shares; or
(c) Capital Appreciation (If Cigna shares assigned at $277.50 strike price at options expiration): -$1,190.00
+($277.50 - $289.40) * 100 shares
