As detailed below, two potential return-on-investment results are: (1) -2.4% absolute return (equivalent to -10.2% annualized return-on-investment for the 87 days holding period) if Cigna's price is unchanged at today's $256.60 price on the May 26th, 2023 expiration date; and (2) -1.2% absolute return (equivalent to -5.1% annualized return-on-investment for the 87 days holding period) if it is in-the-money (i.e. above the $260.00 strike price) on the May 26th 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.
3/31/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
4/3/2023
Continued Cigna Covered Call position by selling one April 21st,
2023 $270.00 Call option @ $2.50 per share. The stock price was $262.30
when this transaction was made and the Delta for this Call option was 29.9.
4/24/2023
Continued Cigna Covered Call position by selling one May 12th,
2023 $265.00 Call option @ $3.52 per share. The stock price was $256.47
when this transaction was made and the Delta for this Call option was 43.2.
5/12/2023 Continued Cigna Covered Call position by executing a net credit Call spread at $3.00 per share by buying-to-close one May 12th, 2023 $265.00 Call and simultaneously selling-to-open one May 26th, 2023 $260.00 Call option. The Implied Volatility of the new Call was 21.8 and the Delta was 38.8 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: +$2,478.65
= ($11.70 + $4.10 + $2.50 + $3.52 -$.06 +$3.06) * 100 shares - $3.35 commissions
(b) Dividend Income: +$123.00
= ($1.23 dividend per share x 100 shares)
(c) Capital Appreciation (If CI stock price unchanged at $256.60 on the May 26th options expiration date): -$3,280.00
+($256.60 - $289.40) * 100 shares; or
(c) Capital Appreciation (If Cigna shares assigned at $260.00 strike price at the 5/26/2023 options expiration): -$2,940.00
+($260.00 - $289.40) * 100 shares
