In addition to this $.79 time value profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.40 (annual dividend yield of 2.4%) in 4 days on May 12th 9th, 2023. So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the May 12th ex-dividend is
prior to the May 19th, 2023 options expiration date; and (2) the possibility that this Covered Calls position is in-the-money (and therefore assigned) on the options expiration date. This buy/write transaction occurred at a Delta of 71.9 which approximates the probability that the Call options will be in-the-money and therefore assigned on the options expiration date. Wall Street analysts' current average target price is $92.90 (+37.4% above today's purchase price).
CF Industries Holdings Inc. (CF) -- New Covered Calls Position
The buy/write transaction was:
5/8/2023 Bought 400 CF Industries shares @ $67.60
5/8/2023 Sold 4 CF 5/19/2023 $65.00 Call options @ $3.39 per share
Note: the Implied Volatility of the Call options was 36.6 when this buy/write transaction was executed. As preferred, this exceeds the Implied Volatility of a comparable Delta for a SPY Covered Calls position (whose IV is currently only 17.0).
5/12/2023 Upcoming quarterly ex-dividend of $.40 per share
Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Calls Net Investment: $25,686.68
= ($67.60 - $3.39) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,353.32
= ($3.39 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on May 11th, the last business day prior to the May 12th ex-div date): +$0.00; or
(b) Dividend Income (If CF Industries stock assigned at the May 19th, 2023 expiration): $160.00
= ($.40 dividend per share x 400 shares)
(c) Capital Appreciation (If CF Industries Call options assigned early on May 11th): -$1,040.00
+($65.00 strike price - $67.60 stock price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $65.00 strike price at the May 19th options expiration): -$1,040.00
+($65.00 - $67.60) * 400 shares
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position. As shown below with this CF Industries Holdings Inc. position, all nine criteria were met.
As detailed below, two potential return-on-investment results are:
- +1.2% absolute return (equivalent to +111.3% annualized return for the next 4 days) if the stock is assigned early (on the last business day prior to the May 12th, 2023 ex-dividend date); OR
- +1.8% absolute return (equivalent to +56.0% annualized return over the next 12 days) if the stock is assigned on the May 19th options expiration date.
CF Industries Holdings Inc. (CF) -- New Covered Calls Position
5/8/2023 Bought 400 CF Industries shares @ $67.60
5/8/2023 Sold 4 CF 5/19/2023 $65.00 Call options @ $3.39 per share
Note: the Implied Volatility of the Call options was 36.6 when this buy/write transaction was executed. As preferred, this exceeds the Implied Volatility of a comparable Delta for a SPY Covered Calls position (whose IV is currently only 17.0).
5/12/2023 Upcoming quarterly ex-dividend of $.40 per share
Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Calls Net Investment: $25,686.68
= ($67.60 - $3.39) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,353.32
= ($3.39 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on May 11th, the last business day prior to the May 12th ex-div date): +$0.00; or
(b) Dividend Income (If CF Industries stock assigned at the May 19th, 2023 expiration): $160.00
= ($.40 dividend per share x 400 shares)
(c) Capital Appreciation (If CF Industries Call options assigned early on May 11th): -$1,040.00
+($65.00 strike price - $67.60 stock price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $65.00 strike price at the May 19th options expiration): -$1,040.00
+($65.00 - $67.60) * 400 shares
1. Total Net Profit [If option exercised early on the last business day prior to the May 12th ex-dividend date)]: +$313.32
= (+$1,353.32 options income +$0.00 dividend income -$1,040.00 capital appreciation); or
2. Total Net Profit (If stock shares assigned at $65.00 strike price at the May 19th, 2023 expiration): +$473.32
= (+$1,353.32 options income +$160.00 dividend income -$1,040.00 capital appreciation)
1. Absolute Return-on-Investment (If option exercised early on May 12th): +1.2%
= +$313.32/$25,686.68
Annualized Return-on-Investment: +111.3%
= (+$313.32/$25,686.68) * (365/4 days); or
2. Absolute Return-on-Investment (If CF Industries shares assigned at $65.00 at the May 19th, 2023 options expiration date): +1.8%
= +$473.32/$25,686.68
Annualized Return-on-Investment (If shares assigned at the 5/19/2023 expiration date): +56.0%
= (+$473.32/$25,686.68) * (365/12 days)
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position. As shown below with this CF Industries Holdings Inc. position, all nine criteria were met.
