I am pleased for this early assignment (despite losing the opportunity to capture the $.70 ex-dividend) since the +40.1%
annualized-return-on-investment (aroi) achieved by early assignment is greater
than the +33.6% aroi that would have been achieved 9 days from today if this position remained in-the-money and so instead would be assigned on its June 2nd options expiration
date.
The post when this Discover Covered Calls position was originally established is here. As detailed below, the return-on-investment result for this position was +0.9% absolute
return in 8 days (equivalent to a +40.1% annualized
return-on-investment).
Discover Financial Services (DFS) -- Covered Calls Position Closed Out by Early Assignment
The simultaneous buy/write transaction was as follows:
5/16/2023 Bought 300 shares of Discover Financial Services @ $95.69 per share; and
5/16/2023 Sold 3 DFS June 2nd, 2023 $91.00 Call options @ $5.49 per share. The Implied Volatility of these Calls was 28.7 when this position was established.
5/24/2023 This DFS Covered Calls position was closed out by early assignment. The owner of the DFS Calls exercised their option, so the Calls expired worthless and the 300 Discover shares were sold at the $91.00 strike price.
The overall performance results (including commissions) are as follows:
Covered Calls Cost Basis: $27,062.01
= ($95.69 - $5.49) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$1,644.99
= ($5.49 * 300 shares) - $1.34 commission
(b) Dividend Income (Call options exercised early on the last business day prior to the ex-div date): +$0.00
(c) Capital Appreciation (If Discover shares assigned early): -$1,407.00
+($91.00 strike price - $95.69 stock purchase cost) * 300 shares
