As detailed below, the result achieved was a +3.6% absolute return-on-investment (equivalent to a +118.6% annualized return-on-investment) for the 11 days holding period).
Because of the stock price volatility that usually occurs on any company's quarterly earnings reporting date, I prefer not holding the position then. But in this case I was sufficiently confident in Uber's upcoming report that I decided to establish this Uber Covered Calls position knowing that there would be an intervening Q1 earnings report prior to the options expiration date. Fortunately, Uber had a stellar report that exceeded analysts' expectations both on EPS and Revenues. In addition, their Q2 guidance of $800 to $850 million EBITDA was substantially above analysts' expectations of $749 million. The Implied Volatility of the Call options when this position was established was much higher than normal because of the uncertainty associated with the upcoming earnings report, so the annualized return-on-investment was also much higher than is normally achieved with my Covered Calls positions.
Uber Technologies Inc. (UBER) -- Covered Calls Position Assigned on the Options Expiration Date
The net debit buy/write limit order was executed as follows:
4/25/2023 Bought 500 shares of Uber Technologies Inc. stock @ $29.60 per share
4/25/2023 Sold 5 Uber May 5th, 2023 $28.50 Call options @ $2.09 per share
5/5/2023 Five UBER Call options expired in-the-money and 500 shares were sold at the $28.50 strike price.
The overall performance result (including commissions) was as follows:
Covered Calls Net Investment: $13,758.35
= ($29.60 - $2.09) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,041.65
= ($2.09 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$550.00
= ($28.50 -$29.60) * 500 shares
Total Net Profit (If assigned at expiration): +$491.65
= (+$1,041.65 options income +$0.00 dividend income -$550.00 capital appreciation)
Total Absolute Return-on-Investment: +3.6%
= +$491.65/$13,758.35
Total Equivalent Annualized-Return-on-Investment: +118.6%
= (+$491.65/$13,758.35) * (365/11 days)
