Bank of America Corporation (BAC) -- Bank stocks have had a very difficult past few weeks leading up to and including the aftermath of the recent bank crisis. At yesterday's options expiration date, I decided to allow my BAC Covered Calls position to be closed out by assignment since the $29.52 stock price was above yesterday's $29.00 strike price. The detailed history of this losing position is provided below. I could have continued to try to repair this losing position back toward profitability, but since I prefer to avoid holding stocks during quarterly earnings reports (and Bank of America's next report is upcoming this Tuesday), I decided to allow this position to be closed out at a loss.
Bank of America Corporation (BAC) -- Covered Calls Position Closed Out by Assignment
The original buy/write transaction was as follows:
2/23/2023 Bought 500 shares of Bank of America Corp. stock @ $33.96 per share
2/23/2023 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.
3/24/2023 5 BAC Call options expired out-of-the-money and 500 shares remain in the Covered Calls Advisor Portfolio
3/27/2023
Continued BAC Covered Calls position by selling 5 April 14th, 2023
$29.00 Call options @ $.62 per share when the stock price was $28.16.
04/14/2023 This BAC Covered Calls position was in-the-money on its 4/14/2023 expiration date, so the 5 Call options expired and the 500 BAC shares were sold at the $29.00 strike price.
The 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: +$1,334.95
= ($1.20 + $.87 + $.62) * 500 shares - $10.05 commissions
(b) Dividend Income: +$110.00 = $.22/share x 500 shares
(c) Capital Appreciation (500 BAC shares assigned at $29.00 strike price at expiration): -$2,480.00
+($29.00 strike price - $33.96 original stock purchase price) * 500 shares
Total Net Profit: -$1,035.05
= (+$1,334.95 options income +$110.00 dividend income -$2,480.00 capital appreciation)
Absolute Return-on-Investment: -5.9%
= -$1,035.05/$17,568.35
Annualized Return-on-Investment: -42.2%
= (-$1,035.05/$17,568.35) * (365/51 days)
Jeff Partlow
The Covered Calls Advisor
partlow@cox.net
