Established Covered Calls Position in the iShares 20+ Year Treasury Bond ETF

Today a short-duration (9 days) in-the-money Covered Calls position was established in the iShares 20+ Year Treasury Bond ETF (ticker TLT) at the July 7th, 2023 options expiration date and at the $101.00 strike price.  Three hundred TLT shares were purchased at $101.87 per share and three July 7th, 2023 $101.00 Calls were sold at $1.18 per share. The corresponding potential time value profit is $.31 per share [$1.18 Call options premium - ($101.00 strike price - $101.87 ETF purchase price)].  The Delta was 67.5 when this position was established.  In addition to the potential time value profit of $.31 per share, there is an upcoming monthly ex-distribution on July 3rd which I estimate at $.27 per share and which is prior to the July 7th options expiration date.  

As you know, normally I prefer to establish Covered Calls using individual stocks rather than broader indices such as stock-based ETFs.  The reasons for this are described in my prior post entitled "Exploiting Our Covered Calls Investing "Edges"' (see items #2 and #3 in the article here).  This TLT ETF contains U.S. Government Treasury Bonds of 20-and-more years duration and its current 30-day yield is only 3.82%.  Many investors are satisfied with buying-and-holding T-Bonds, but we Covered Calls investors know much better return-on-investment results can be achieved with an informed and disciplined Covered Calls investing approach.  This is true not only for our usual Covered Calls positions using stocks as the underlying equity, but this TLT Covered Calls position demonstrates that it is also even true with Covered Calls with this conservative Treasury Bond ETF (i.e. TLT), whose potential annualized-return-on-investment (aroi) result of +23.1% detailed below greatly exceeds the current 3.82% yield from owning TLT shares.  While I do not intend to change from my approach of almost always establishing my Covered Calls positions using individual stocks as the underlying equity, I admit that I am finding this experiment in establishing a Covered Calls position using the TLT Bond ETF to be a stimulating learning experience.

iShares 20+ Year Treasury Bond ETF (TLT) -- New Covered Calls Position 

The buy/write transaction was as follows:
6/29/2023 Bought 300 iShares 20+ Year Treasury Bond ETF shares at $101.87.

6/29/2023 Sold 3 TLT July 7th, 2023 $101.00 Call options @ $1.18 per share.
7/3/2023 Upcoming ex-distribution estimated at $.27 per share.

The overall performance results (including commissions) if TLT remains in-the-money at options expiration would be as follows:
Covered Calls Net Investment: $30,209.01
= ($101.87 - $1.18) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$351.99
= ($1.18 * 300 shares) - $2.01 commission
(b) Distribution Income [If TLT price is in-the-money (i.e. above the $101.00 strike price) and the position is assigned (i.e. closed out) at options expiration on July 7th]: +$81.00

= $.27 distribution per share x 300 TLT shares

(c) Capital Appreciation (If TLT is above the $101.00 strike price at the July 7th, 2023 options expiration date): -$261.00

= ($101.00 strike price - $101.87 purchase price) * 300 shares

Total Net Profit [If TLT share price is in-of-the-money (i.e. above $101.00 strike price) at options expiration]: +$171.99
= (+$351.99 options income +$81.00 distribution income -$261.00 capital appreciation)

Absolute Return-on-Investment: (If shares are above the $101.00 strike price at the July 7th, 2023 options expiration) : +0.6%

= +$171.99/$30,209.01
Annualized Return-on-Investment: +23.1%
= (+$171.99/$30,209.01) * (365/9 days)

Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Covered Calls Established in Uber Technologies Inc.

This afternoon at 2:55pm, my buy/write net debit limit order was executed and 500 shares of Uber Technologies Inc.(ticker symbol UBER) stock were purchased at $42.25 and 5 July 14th, 2023 $41.00 Call options were sold at $1.91 per share -- a net debit of $40.34 per share -- so the potential time value profit if the stock is in-the-money and therefore closed out by assignment at expiration is $.66 per share [$1.91 Call options premium - ($42.25 stock purchase price - $41.00 strike price)].  This simultaneous buy/write limit order was placed early in this morning's trading session when the stock price was above $44.00 per share, so I was surprised, and pleased, that the stock price declined to the low $42s this afternoon to the point where my $40.34 net limit order price was executed.

This is a repeat of six similar Covered Calls positions in Uber during the past three months and all six were successfully assigned on their respective options expiration dates.  I remain bullish on Uber.  Like the prior six positions, today's new position was established at a moderately in-the-money strike price with an approximate probability that this position will be in-the-money and therefore assigned on the options expiration date of 67.5%.

As described previously, Uber has a bright future as the pre-eminent rideshare company in North America (58% of revenue) and also a substantial worldwide presence in over 70 countries with good ongoing growth prospects under the dynamic and visionary leadership of CEO Dara Khosrowshahi.    Uber's primary rideshare competitor in the U.S. is Lyft, but Uber dominates with about three times the ridesharing market share of Lyft, and unlike Lyft it also has a strong food delivery business (and a fledgling freight management business), so its current market capitalization is about ten times greater than Lyft's.  Uber is constantly making improvements to its ridesharing and food delivery models and has just announced it is further extending its business model by entering the North American carsharing market.

In addition to the explanation above for my bullishness on Uber, other reasons I remain confident in their potential are: (1) Uber had a stellar Q1 2023 earnings 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; (2) Gasoline is a significant cost to Uber drivers, and the spot price of WTI Oil has average in the low $70s during the current quarter versus an average of about $105 during the same quarter last year; (3) Major airlines are reporting continued substantial consumer demand above last year's level, and Uber obtains a significant portion of their rideshare revenue at airports; and (4) The current average target price of the 43 Wall Street analysts that cover Uber is $50.39 per share (+19.3% above today's purchase price). Finally, recently Evercore's Mark Mahaney identified three "value catalysts" that could propel its stock higher: (1) Uber is going to start actually generating positive GAAP earnings; (2) they'll start buying back stock; and (3) they'll finally reach the metrics needed to be included in the S&P 500.

As detailed below, a potential outcome for this Uber Technologies investment is +1.6% absolute return-on-investment for the next 16 days (equivalent to +36.9% annualized-return-on-investment) if the stock closes above the $41.00 strike price on the July 14th, 2023 options expiration date.

Uber Technologies Inc. (UBER) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
6/292023 Bought 500 shares of Uber Technologies Inc. stock @ $42.25 per share 
6/29/2023 Sold 5 Uber July 14th, 2023 $41.00 Call options @ $1.91 per share
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 33.7 when this position was established.  Also, there is no earnings report prior to the options expiration date.

A possible overall performance result (including commissions) if this position is assigned on its July 14th options expiration date is follows:
Covered Calls Net Investment: $20,173.35
= ($42.25 - $1.91) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$951.65
= ($1.91 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is above the $41.00 strike price at the July 14th expiration): -$625.00
= ($41.00 - $42.25) * 500 shares

Potential Total Net Profit (If assigned at expiration): +$326.65
= (+$951.65 options income + $0.00 dividend income - $625.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.6%
= +$326.65/$20,173.35
Potential Equivalent Annualized-Return-on-Investment: +36.9%
= (+$326.65/$20,173.35) * (365/16 days)

Established Covered Calls Positions in Bristol-Myers Squibb Co. and JPMorgan Chase & Co.

Today two Covered Calls positions were established in Bristol-Myers Squibb Co. (ticker BMY) and JPMorgan Chase & Co. (JPM) when the Covered Calls Advisor's buy/write limit orders were executed.   For Bristol-Myers Squibb Co., 300 shares were purchased at $63.75 and 3 July 21st, 2023 Call options were sold at $1.71 per share at the $62.50 strike price.   For JPMorgan Chase & Co., 300 shares were purchased at $138.28 and 3 July 14th, 2023 Call options were sold at $4.38 at the $135.00 strike price.  Given the Covered Calls Advisor's current cautious outlook, moderately in-the-money Covered Calls positions were established for both companies.  Both stocks were technically oversold on a short-term basis with RSI(2) values below 10.

Both Covered Calls positions were established using my Dividend Capture Strategy.  Bristol-Myers Squibb Co. goes ex-dividend at $.57 per share (3.6% annual dividend yield) on July 6th so the potential for capturing this dividend is included in the potential return-on-investment results detailed below.  The potential time value profit was $.46 per share = [$62.50 strike price - ($63.75 stock purchase price - $1.71 Call options price)].  As preferred, there is no intervening earnings report prior to the options expiration date.   As I also prefer, the Implied Volatility of the Bristol-Myers Calls was 16.1 which is slightly above that of VIX which is currently 14.6.  There is a 67.5% probability that the Calls will be above the $62.50 strike price at options expiration. 

Bristol-Myers' FY2022 EPS was $7.70 and it is expected to increase to $8.04 this fiscal year and they have exceeded quarterly earnings estimates in each of their last 4 quarters.  This positive trend should continue to benefit the stock price which is reflected in Wall Street analysts' current average target price at $79.70 (+25.0% above today's purchase price).  Bristol-Myers appears in both my Quantitative Value and Magic Formula stock screeners.

The second Covered Calls position is in JPMorgan Chase & Co.  The potential time value profit was $1.10 per share = [$135.00 strike price - ($138.28 stock purchase price - $4.38 Call options price)].   JPMorgan stock goes ex-dividend on July 5th at $1.00 per share (2.9% annual dividend yield), so the potential for capturing this dividend is included in the potential return-on-investment results detailed below.  Their Q2 2023 earnings report will be before market open on the July 14th, 2023 options expiration date, so because of the usual stock price volatility on the earnings reporting date, there is a strong likelihood that I will close out this position prior to July 14th.  The Implied Volatility of the Call options was 21.5 and the Delta was 70.4 which approximates the probability of the Call option would be in-the-money at market close on the July 14th options expiration date. 

As detailed below, the potential return-on-investment results for these Covered Calls positions are: 

• Bristol-Myers Squibb Co.: +0.7% absolute return (equivalent to +33.8% annualized return-on-investment for the next  8 days) if the stock is assigned early (last trading day prior to the July 6th ex-dividend date); OR (2) +1.7% absolute return (equivalent to +25.2% annualized return over the next 24 days) if the stock is assigned on its July 21st options expiration date.

• JPMorgan Chase & Co.: +0.8% absolute return (equivalent to +42.9% annualized return-on-investment for the next 7 days) if the stock is assigned early (last trading day prior to the July 5th ex-dividend date); OR (2) +1.6% absolute return (equivalent to +33.6% annualized return over the next 17 days) if the stock is assigned on its July 14th options expiration date.

1. Bristol-Myers Squibb Co. (BMY) -- New Covered Calls Position
The simultaneous buy/write transaction was:
6/28/2023 Bought 300 Bristol-Myers Squibb Co. shares @ $63.75 per share.
6/28/2023 Sold 3 BMY 7/21/2023 $62.50 Call options @ $1.71 per share.
7/6/2023 Upcoming quarterly ex-dividend of $.57 per share

Two possible overall performance results (including commissions) for this Bristol-Myers Squibb Co. Covered Calls position are as follows:
Covered Calls Net Investment: $18,614.01
= ($63.75 - $1.71) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$513.00
= ($1.71 * 300 shares)
(b) Dividend Income (If option exercised early on July 5th, 2023, the business day prior to the July 6th ex-div date): +$0.00; or
(b) Dividend Income (If BMY stock assigned at its July 21st, 2023 options expiration date): +$171.00
= ($.57 dividend per share x 300 shares)

(c) Capital Appreciation (If BMY Call options assigned early on July 5th, 2023): -$375.00
+($62.50 - $63.75) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $62.50 strike price at options expiration): -$375.00
+($62.50 - $63.75) * 300 shares

1. Total Net Profit [If option exercised on July 5th (business day prior to the July 6th ex-dividend date)]: +$138.00

= (+$513.00 options income +$0.00 dividend income -$375.00 capital appreciation); or

2. Total Net Profit (If BMY shares assigned at $62.50 at the July 21st, 2023 expiration): +$309.00

= (+$513.00 options income +$171.00 dividend income -$375.00 capital appreciation)

1. Absolute Return [If option exercised early on the business day prior to ex-dividend date]: +0.7%

= +$138.00/$18,614.01

Annualized Return (If option exercised early): +33.8%

= (+$138.00/$18,614.01) * (365/8 days); or

2. Absolute Return (If BMY shares assigned at $62.50 at the July 21st, 2023 options expiration): +1.7%

= +$309.00/$18,614.01

Annualized Return (If BMY shares assigned at $62.50 at July 21st, 2023 expiration): +25.2%

= (+$309.00/$18,614.01) * (365/24 days)

Either outcome provides a satisfactory annualized return-on-investment result for this Bristol-Myers investment.  These returns will be achieved as long as the stock is above the $62.50 strike price on the options expiration date.  However, if the stock declines below the strike price, the breakeven price of $61.47 ($63.75 -$1.71 -$.57) provides 3.6% downside protection below today's stock purchase price.



2. JPMorgan Chase & Co. (JPM) -- New Covered Calls Position

The simultaneous buy/write transaction was:
6/28/2023 Bought 300 JPMorgan Chase & Co. shares @ $138.28 

6/28/2023 Sold 3 JPM July 14th, 2023 $135.00 Call options @ $4.38 per share.
7/05/2023 Upcoming quarterly ex-dividend at $1.00 per share.

Two possible overall performance results (including commissions) for this JPM Covered Calls position are as follows:
Stock Purchase Net Investment: $40,172.01
= ($138.28 - $4.38) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,311.99
= ($4.38 * 300 shares) - $2.01 commission
(b) Dividend Income (If option exercised early on July 3rd, the last business day prior to the July 5th ex-div date): +$0.00; or
(b) Dividend Income (If JPM assigned at the January 14th, 2023 options expiration date): +$300.00
= ($1.00 dividend per share x 300 shares)

(c) Capital Appreciation (If JPM assigned early): -$984.00
+($135.00 -$138.28) * 300 shares; or
(c) Capital Appreciation (If JPM assigned at $135.00 strike price at expiration): -$984.00
+($135.00-$138.28) * 300 shares

1. Total Net Profit [If option exercised on the last business day prior to the July 5th ex-dividend date)]: +$327.99

= (+$1,311.99 options income +$0.00 dividend income -$984.00 capital appreciation); or

2. Total Net Profit (If JPM assigned at $135.00 at the July 5th, 2023 expiration): +$627.99

= (+$1,311.99 options income +$300.00 dividend income -$984.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the final business day prior to ex-dividend date): +0.8%

= +$327.99/$40,172.01

Annualized Return-on-Investment (If option exercised early): +42.6%

= (+$327.99/$40,172.01) * (365/7 days); or

2. Absolute Return-on-Investment (If JPM assigned at $135.00 at the July 14th, 2023 options expiration date): +1.6%

= +$627.99/$40,172.01

Annualized Return-on-Investment (If JPM assigned at $135.00 at the July 14th, 2023 options expiration date): +33.6%

= (+$627.99/$40,172.01) * (365/17 days)

  

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

June 23rd, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with June 23rd, 2023 weekly options expirations.  Both positions were closed out on their options expiration date yesterday with their stock prices in-the-money; so the Calls expired worthless and the stocks were sold at their respective strike prices with the following results:

1. American International Group Inc. (AIG) -- +1.3% absolute return (equivalent to +38.6% annualized return-on-investment) for the 12 days of this Dividend Capture Strategy investment.  The original blog post details when this position was established is here. 

2. Uber Technologies Inc. (UBER) -- +1.4% absolute return (equivalent to +30.6% annualized return-on-investment) for the 17 days of this investment.  The original blog post details when this position was established is here.

New positions will be established in my Covered Calls Advisor Portfolio in the upcoming week.  I welcome your questions or feedback at the email address below on any topics related to the Covered Calls investing strategy.  

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Rolled Out-and-Up The Cigna Group Covered Call Position

The Covered Calls Advisor Portfolio has a Covered Call position in The Cigna Group (ticker CI) that has a June 23rd, 2023 (i.e. today) options expiration date at the $265.00 strike price.  With less than an hour remaining in today's trading, Cigna stock was trading well above the strike price at $275.24, so with only $.03 time value remaining in the Calls, I decided to roll-out-and-up one week to the June 30th expiration at the $270.00 strike price.  

This Covered Call position was originally established on March 1st, 2023 when the stock was purchased at $289.40 per share.  It immediately began a price decline which has been accompanied by a net unrealized loss for this position. The stock price declined to a low of $240.50 (fully 16.9% below the stock purchase price); but I remained bullish on Cigna and have continued to rollout the position at each expiration date in an effort to attempt to repair this losing position back toward profitability by selling weekly and/or bi-weekly Cigna Calls.    

As detailed below, a potential return-on-investment result is -0.5% absolute return (equivalent to -1.6% annualized return-on-investment for the 122 days holding period) if Cigna's price remains in-the-money (i.e. above the $270.00 strike price) on the June 30th, 2023 options expiration date.  

The Cigna Corporation (CI) -- Covered Call Position Continued by Rolling-Out-and-Up
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 $275.00 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.
5/26/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
6/1/2023 Continued Cigna Covered Call position by selling one June 16th, 2023 $255.00 Call option @ $3.70 per share.
6/6/2023 Quarterly ex-dividend of $1.23 per share.
6/15/2023 Continued this Covered Call position by rolling-up-and-out with a net debit Call spread @ $9.30 per share.  I bought-to-close the 6/16/2023 $255.00 Call at $17.50 when its remaining time value was only $.05 since the stock price was then at $272.55 per share; and simultaneously sold-to-open the 6/23/2023 $265.00 Call at $8.20 per share.
6/23/2023 I bought-to-close the 6/23/2023 $265.00 Call at $10.27 when its remaining time value was only $.03 since the stock price was then at $275.24 per share; and simultaneously sold-to-open the 6/30/2023 $270.00 Call at $6.57 per share.  

A potential overall performance result for this ongoing Cigna Covered Call position is as follows:

Covered Call Cost Basis: $27,770.67
= ($289.40 - $11.70) * 100 shares + $.67 commissions

Net Profit Components:
(a) Options Income: +$1,546.64
= ($11.70 + $4.10 + $2.50 + $3.52 -$.06 +$3.06 +$3.70 -$17.50 +$8.20 -$10.27 +$6.57) * 100 shares - $5.36 commissions
(b) Dividend Income: +$246.00
= ($1.23 dividend per share x 100 shares) x 2 quarterly dividends
(c) Capital Appreciation (If Cigna shares assigned at $270.00 strike price at the 6/30/2023 options expiration): -$1,940.00
+($270.00 - $289.40) * 100 shares

Total Net Profit (If Cigna shares assigned at $270.00 strike price at the June 30th, 2023 expiration): -$147.36

= (+$1,546.64 options income + $246.00 dividend income - $1,940.00 capital appreciation)

Absolute Return-on-Investment (If Cigna shares assigned at $270.00 strike price on the 6/30/2023  expiration): -0.5%

= -$147.36/$27,770.67

Annualized Return-on-Investment (If Cigna stock assigned at $270.00 at the 6/30/2023 options expiration date): -1.6%

= (-$147.36/$27,770.67) * (365/122 days)

Established Covered Calls Position in Match Group Inc.

A Covered Calls position was established in Match Group Inc. (MTCH) when the Covered Calls Advisor's buy/write limit order at a net debit limit price of $38.22 was executed.  Four hundred shares were purchased at $40.76 and four July 7th, 2023 Call options were sold at $2.54 at the $39.00 strike price.  The time value was $.78 per share = [$39.00 strike price - ($40.76 stock purchase price - $2.54 Call options price)].   Given my current cautious stock market outlook, a moderately in-the-money Covered Calls position was established with a Delta of 70.8 which approximates a 70.8% probability this position will be in-the-money and therefore assigned on the July 7th, 2023 options expiration date.  As desired, there is no earnings report prior to the options expiration date.

A similar prior Covered Calls position in the Match Group was assigned last Friday and I decided to follow-up today with a similar position since I remain bullish on the company's prospects.  The Match Group is the leading online dating services company worldwide including several brands that include Tinder, Match, and Hinge.  Their stock price has plummeted by more than 40% in the past year.  Importantly, Match is profitable and their earnings per share are likely to be at an inflection point where they can begin to obtain regular quarterly revenue and profit increases based on their worldwide presence and their growth opportunities (especially in Asia but also in Europe).  Importantly, as part of their Q1 2023 earnings report, they announced a new $1.0 billion stock buyback authorization (10%+ of the current market cap) which will be implemented over the next two to three years using about half of their free cash flow resources.  The primary catalyst for my increasing optimism stems primarily from the dynamism of Match's relatively new CEO, Bernard Kim, who has been in his new position for only one year now but who demonstrated outstanding performance in his prior CEO role at Zynga.  In addition, Match meets all five of my current primary evaluation criteria for identifying worthwhile candidates for investing:

As detailed below, the potential return-on-investment results for this Match Group Inc. Covered Calls position is +2.0% absolute return (equivalent to +43.4% annualized return-on-investment for the next 17 days) if the stock is assigned on the July 7th options expiration date.

Match Group Inc. (MTCH) -- New Covered Calls Position

The buy/write transaction was:
6/21/2023 Bought 400 Match Group Inc. shares @ $40.76
6/21/2023 Sold 4 MTCH 7/7/2023 $39.00 Call options @ $2.54 per share.

A possible overall performance result (including commissions) for this Match Group Covered Calls position is as follows:
Match Group Covered Calls Net Investment: $15,290.68
= ($40.76 - $2.54) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$1,013.32
= ($2.54 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 400 shares)
(c) Capital Appreciation (If MTCH shares assigned at $39.00 strike price at expiration): -$704.00
+($39.00 - $40.76) * 400 shares

Total Net Profit (If options exercised on the July 7th, 2023 options expiration date): +$309.32

= (+$1,013.32 options income +$0.00 dividend income -$704.00 capital appreciation)

Potential Absolute Return-on-Investment (If the Match Group Inc. shares are assigned at the $39.00 strike price at the July 7th, 2023 options expiration date): +2.0%

= +$309.32/$15,290.68

Potential Annualized Return-on-Investment (If 400 Match Group shares assigned at $39.00 at the July 7th, 2023 options expiration): +43.4%

= ($309.32/$15,290.68) * (365/17 days)

New Covered Calls Established in General Motors Company and iShares China Large-Cap ETF

Today short-term Covered Calls positions at the June 30th, 2023 options expiration date were established in both General Motors Company (ticker GM) and iShares China Large-Cap ETF (ticker FXI) when the Covered Calls Advisor's buy/write limit orders were executed.  For General Motors, 500 shares were purchased at $37.15 and 5 June 30th, 2023 Call options were sold at $1.55 per share at the $36.00 strike price.   For iShares China Large-Cap ETF, 900 shares were purchased at $27.87 and 9 June 20th, 2023 Call options were sold at $.86 at the $27.35 strike price.  Given the Covered Calls Advisor's current cautious outlook, moderately in-the-money Covered Calls positions were established for both positions. 

GM's current price of $37.15 is near its low for the past 3 years and Wall Street analysts that cover GM have a current target price of $47.19 (+27.0% above today's purchase price).  I am also bullish on GM now given both: (1) its good valuation metrics (such as low p/e ratio, EV/EBIT, and price-to-book values) in comparison to their prior 5-year averages; and (2) the fact that GM is estimated to make a dramatic EPS increase this quarter to $1.63 per share versus $1.14 in the same quarter last year, and they also have exceeded analysts' EPS estimates in each of their last three quarters.    Also as I prefer, the Implied Volatility of these GM Calls was 33.5 which is well above that of VIX which is currently only 14.0.     

Regarding the iShares China Large-Cap ETF position, so far this year FXI has underperformed U.S. stock market benchmarks.  But I concur with many economists and Wall Street analysts who believe there is a good likelihood that Emerging Markets (including China's stock market) will outperform the "developed" markets (such as the U.S., Europe, and Japan) for the remainder of this year.  China's central economic policy is loosening while major developed markets like the U.S., Europe, and Japan are tightening.  Furthermore, the apparent (though slow) re-opening from China's Covid lockdown policy will further benefit their economy.  Also importantly, FXI's market valuation metrics are very attractive with a current P/E of 8.6 and a P/Book of 1.1 when compared to an S&P 500 P/E of 19.1 and P/Book of 3.9.  It seems very likely that Emerging Markets (including China specifically) have a good chance of outperforming U.S. market benchmarks for the remainder of this year.  

Fortunately, the Implied Volatility of FXI options are significantly higher than those of a common U.S. market benchmark like the S&P 500 (i.e. SPY).  For example, the 6/30/2023 $27.35 Calls I sold today had an Implied Volatility of 29.4 while at the same time the Implied Volatility of comparable SPY Calls was only 14.0 -- so FXI provides a significantly higher potential annualized-return-on-investment than that of SPY.  In addition, FXI options are very liquid (even in weekly options) so it is likely I will continue to often establish approximately bi-weekly Covered Calls in FXI in upcoming weeks.  Finally, the fact that investing in China-based companies improves the diversification of the Covered Calls Advisor Portfolio appeals to me.  In short, it serves as a counterbalance to my normal home country bias.  

As detailed below, the potential return-on-investment results for these Covered Calls positions are: 

• For General Motors Company: +1.1% absolute return (equivalent to +36.7% annualized return-on-investment for the next 11 days) if the stock is assigned on its June 30th options expiration date.

• For iShares China Large-Cap ETF: +1.3% absolute return (equivalent to +44.6% annualized return-on-investment for the next 11 days) if the stock is assigned on the June 30th, 2023 options expiration date.

1.General Motors Co. (GM) -- New Covered Calls Position

The transactions were:
06/20/2023 Bought 500 GM shares @ $37.15
06/20/2023 Sold 5 GM June 30th, 2023 $36.00 Call options @ $1.55 per share
Note: a simultaneous buy/write transaction was executed at a net debit limit order of $35.60 per share.

A possible overall performance result (including commissions) for this General Motors Covered Calls position is as follows:
GM Covered Calls Position Net Investment: $17,803.35
= ($37.15 - $1.55) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$771.65
= ($1.55 per share x 500 shares) - $3.35 commissions
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If GM assigned at $36.00 at the June 30th, 2023 options expiration): -$575.00
+($36.00 - $37.15) * 500 shares 

Potential Total Net Profit (If GM assigned at $36.00 at the June 30th, 2023 expiration date): +$196.65

= (+$771.65 options income +$0.00 dividend income - $575.00 capital appreciation)

Potential Absolute Return-on-Investment (If GM assigned at $36.00 at its June 30th, 2023 expiration): +1.1%

= +$196.65/$17,803.35

Potential Annualized Return-on-Investment: +36.7%

= (+$196.65/$17,803.35) * (365/11 days)

2. iShares China Large-Cap ETF (FXI) -- New Covered Calls Position 
The Buy/Write transaction was as follows:
6/20/2023 Bought 900 shares of iShares China Large-Cap ETF @ $27.87 per share 
6/20/2023 Sold 9 FXI June 30th, 2023 $27.35 Call options @ $.86 per share

A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
FXI Covered Calls Net Investment: $24,315.03
= ($27.87 - $.86) * 900 shares + $6.03 commission

Net Profit:
(a) Options Income: +$767.97
= ($.86 * 900 shares) - $6.03 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 900 iShares China Large-Cap ETF shares assigned at $27.35 strike price at expiration): -$441.00
+($27.35 - $27.87) * 900 shares

Potential Total Net Profit (If 900 iShares China Large-Cap ETF shares assigned at $27.35 strike price at expiration): +$326.97
= (+$767.97 options income +$0.00 dividend income -$441.00 capital appreciation)

Absolute Return-on-Investment Potential: +1.3%
= +$326.97/$24,315.03
Annualized Return-on-Investment Potential: +44.6%
= (+$326.97/$24,315.03) * (365/11 days)

Monthly Options Expiration Results through June 16th, 2023

Each month on the day after the monthly options expiration date, this summary report provides the results of all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So this post covers the period from the day after last month's May19th, 2023 options expiration through yesterday's June 16th, 2023 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio held a total of fifteen Covered Calls positions.  All fifteen positions were closed out at a profit. 

The specific results for each position are summarized as follows: 

• Eight Covered Calls positions expired in-the-money (stock price above the strike price) at yesterday's (June 16th, 2023) monthly options expiration date with the following results: 

1. Global Payments Inc. (GPN) -- +1.9% absolute return in 15 days (equivalent to a +29.4% annualized return-on-investment). 
   
2. Halliburton Company (HAL) -- +2.3% absolute return in 22 days (equivalent to a +38.6% annualized return-on-investment).
   
3. iShares China Large-Cap ETF (FXI) -- +5.4% absolute return in 134 days (equivalent to a +14.8% annualized return-on-investment). 
   
4. Match Group Inc. (MTCH) -- +2.4% absolute return in 18 days (equivalent to a +49.4% annualized return-on-investment).
5. Terex Corporation (TEX) -- +1.6% absolute return in 18 days (equivalent to a +33.4% annualized return-on-investment). 
   
6. The Walt Disney Company (DIS) -- +1.6% absolute return in 23 days (equivalent to a +25.3% annualized return-on-investment).
7. Truist Financial Corporation (TFC) -- +2.1% absolute return in 17 days (equivalent to a +44.1% annualized return-on-investment). 
   
8. Verizon Communications Inc. (VZ) -- +1.2% absolute return in 15 days (equivalent to a +29.4% annualized return-on-investment).

• Four Covered Calls positions expired in-the-money during the past month on their weekly options expiration dates and were therefore assigned at their strike prices with the following results:

1. Bank of America Corporation (BAC) -- +1.9% absolute return in 17 days (equivalent to a +40.5% annualized return-on-investment).
2. Conoco Phillips (COP) -- +1.6% absolute return in 17 days (equivalent to a +35.4% annualized return-on-investment).
3. General Motors Company (GM) -- +1.5% absolute return in 17 days (equivalent to a +32.2% annualized return-on-investment).
4. United Rentals Inc. (URI) -- +2.0% absolute return in 17 days (equivalent to a +42.6% annualized return-on-investment).

• Three Covered Calls positions were closed out by early assignment on the last business day prior to their ex-dividend dates with the following results:

1. Discover Financial Services (DFS) -- +0.9% absolute return in 8 days (equivalent to a +40.1% annualized return-on-investment). 
2. Energy Select Sector SPDR Fund (XLE) -- +0.8% absolute return in 6 days (equivalent to a +50.6% annualized return-on-investment).
3. Qualcomm Inc. (QCOM) -- +1.0% absolute return in 8 days (equivalent to a +46.2% annualized return-on-investment).  
   
   

During the past year (last 12 months) 111 of 124 positions (89.5%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit.  The Covered Calls Advisor Portfolio weighted average annualized-return-on-investment (aroi) was +19.7% during the past year and the average holding period for these 124 closed positions was 20.6 days.  In comparison, the benchmark S&P 500 returned +17.2% during the same prior one-year period.   

This Covered Calls Advisor blog is available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I also encourage you to email me at partlow@cox.net any time you would like my feedback on your comments or questions on anything related to the Covered Calls investing strategy.  Since all fifteen positions were closed out this month, I will be looking to establish many new positions in the next several days.  So, if you have any companies that you are especially bullish on right now and are also good candidates for establishing Covered Calls now, I would appreciate if you would email me with your ideas.

Best Wishes and Godspeed,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Rolled Out and Up The Cigna Group Covered Call Position

The Covered Calls Advisor Portfolio has a Covered Call position in The Cigna Group (ticker CI) that has a June 16th, 2023 (i.e. tomorrow) expiration date at the $255.00 strike price.  Today, Cigna stock was trading well above the strike price at $272.55, so with only $.05 time value remaining in the Calls, I decided to roll-out-and-up one week to the June 23rd expiration at the $265.00 strike price.  

This Covered Call position was originally established on March 1st, 2023 when the stock was purchased at $289.40 per share.  It immediately began a price decline which has been accompanied by a net unrealized loss for this position. The stock price declined to a low of $240.50 (fully 16.9% below the stock purchase price); but I remained bullish on Cigna and have continued to rollout the position at each expiration date in an effort to attempt to repair this losing position back toward profitability.    

As detailed below, a potential return-on-investment result is -1.0% absolute return (equivalent to -3.2% annualized return-on-investment for the 115 days holding period) if Cigna's price remains in-the-money (i.e. above the $265.00 strike price) on the June 23rd, 2023 options expiration date.  

The Cigna Corporation (CI) -- Covered Call Position Continued by Rolling-Out-and-Up
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.
5/26/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
6/1/2023 Continued Cigna Covered Call position by selling one June 16th, 2023 $255.00 Call option @ $3.70 per share.
6/6/2023 Quarterly ex-dividend of $1.23 per share.
6/15/2023 Continued this Covered Call position by rolling-up-and-out with a net debit Call spread @ $9.30 per share.  I bought-to-close the 6/16/2023 $255.00 Call at $17.50 when its remaining time value was only $.05 since the stock price was then at $272.55 per share; and simultaneously sold-to-open the 6/23/2023 $265.00 Call at $8.20 per share.  A potential overall performance result for this ongoing Cigna Covered Call position is as follows:

Covered Call Cost Basis: $27,770.67
= ($289.40 - $11.70) * 100 shares + $.67 commissions

Net Profit Components:
(a) Options Income: +$1,917.31
= ($11.70 + $4.10 + $2.50 + $3.52 -$.06 +$3.06 +$3.70 -$17.50 +$8.20) * 100 shares - $4.69 commissions
(b) Dividend Income: +$246.00
= ($1.23 dividend per share x 100 shares) x 2 quarterly dividends
(c) Capital Appreciation (If Cigna shares assigned at $265.00 strike price at the 6/23/2023 options expiration): -$2,440.00
+($265.00 - $289.40) * 100 shares

Total Net Profit (If Cigna shares assigned at $265.00 strike price at the June 23rd, 2023 expiration): -$276.69

= (+$1,917.31 options income + $246.00 dividend income - $2,440.00 capital appreciation)

Absolute Return-on-Investment (If Cigna shares assigned at $265.00 strike price on the 6/23/2023  expiration): -1.0%

= -$276.69/$27,770.67

Annualized Return-on-Investment (If Cigna stock assigned at $265.00 at the 6/23/2023 options expiration date): -3.2%

= (-$276.69/$27,770.67) * (365/115 days)

Covered Calls Established in Energy Select Sector SPDR Fund ETF

A Covered Calls position was established this afternoon in the Energy Select Sector SPDR Fund ETF (ticker XLE), with a June 30th, 2023 quarterly options expiration date. Three hundred shares of the Energy Select Sector SPDR Fund were purchased at $79.58 and three 6/30/2023 Call options were sold at $2.23 per share at the $78.00 strike price.  This position was established after the Federal Reserve announcement of a pause in the current 5.0% to 5.25% Federal Funds rate and at a time when the Dow had declined by 420 points during afternoon trading.  It is difficult to establish positions when the market and stock prices are declining, but often these are opportune times to buy into positions that we believe have become fundamentally undervalued (at least temporarily).  The Implied Volatility of these Call options was 20.4 when this position was transacted which, as preferred by the Covered Calls Advisor, is above that of the S&P 500 Volatility Index (i.e. VIX) which is currently at 14.0.

The time value was $.65 per share [$78.00 strike price - ($79.58 share price - $2.23 options premium)] when this net debit buy/write limit order transaction was executed.  XLE also goes ex-distribution in six days on June 20th, 2023.  The exact amount of the XLE distribution is not pre-announced, but based on prior quarterly distributions, I estimate it will be approximately $.80 per share.  

Given my current Slightly Bearish Overall Market Meter rating, the current strategy is to establish Covered Calls between 2.0% and 5.0% in-the-money.  The Delta was 67.2 when this position was established, which is a good approximation of the probability that XLE will close in-the-money (and therefore be assigned at the strike price) on the June 30th options expiration date.  This corresponds to a 2.0% [($79.58 stock purchase price - $78.00 strike price)/$78 .00 strike price] in-the-money position which is within the desired 2.0% to 5.0% in-the-money range given my current cautious market viewpoint.

As detailed below, a potential return-on-investment result is +0.8% absolute return (equivalent to +50.6% annualized return for the next 6 days) if the XLE equite is assigned early on the last day prior to the June 20th ex-distribution date; OR +1.9% absolute return (equivalent to +40.1% annualized return over the next 17 days) if the stock is assigned on the June 30th, 2023 options expiration date.

Energy Select Sector SPDR Fund ETF (XLE) -- New Covered Calls Position
The buy/write transaction today was as follows:
6/14/2023 Bought 300 Energy Select Sector SPDR Fund ETF shares @ $79.58 per share.
12/15/2022 Sold 3 XLE 6/30/2023 $78.00 Call options @ $2.23 per share.  The Delta for these Calls was 67.2 when this buy/write position was established.

12/19/2022 Upcoming quarterly ex-distribution estimated at $.80 per share.

Two possible overall performance results (including commissions) for this Energy Select Sector SPDR Fund ETF Covered Calls position are as follows:
Covered Calls Net Investment: $23,207.01
= ($79.58 - $2.23) * 300 shares + $2.01 commissions

Net Profit Components:
(a) Options Income: +$666.99
= ($2.23 * 300 shares) - $2.01 commissions
(b) Distribution Income (If option exercised on the last business day prior to the June 20th ex-distribution date): +$0.00; or
(b) Distribution Income (If XLE shares assigned at the June 30th, 2023 options expiration): +$240.00
= ($.80 estimated distribution per share x 300 shares)
(c) Capital Appreciation (If XLE shares assigned early): -$474.00
+($78.00 - $79.58) * 300 shares ;or
(c) Capital Appreciation (If shares are in-the-money and therefore assigned at the $78.00 strike price at options expiration): -$474.00
+($78.00 - $79.58) * 300 shares

1. Total Net Profit [If options exercised on June 19th (last business day prior to the June 20th ex-distribution date)]: +$192.99

= (+$666.99 options income +$0.00 distribution income - $474.00 capital appreciation); or

2. Total Net Profit (If XLE shares assigned at $78.00 strike price at the June 30th, 2023 expiration): +$432.99

= (+$666.99 options income + $240.00 distribution income - $474.00 capital appreciation)

1. Absolute Return-on-Investment [If XLE Call options exercised on final business day prior to ex-distribution date]: +0.8%

= +$192.99/$23,207.01 

Annualized Return-on-Investment (If options exercised early): +50.6%

= (+$192.99/$23,207.01) * (365/6 days); or

2. Absolute Return-on-Investment (If XLE shares assigned at $78.00 strike price on the June 30th, 2023

options expiration date): +1.9%

= +$432.99/$23,207.01

Annualized Return-on-Investment (If XLE shares assigned at $78.00 at the June 30th, 2023 expiration): +40.1%

= (+$432.99/$23,207.01) * (365/17 days)

These returns will be achieved as long as the XLE price is above the $78.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $76.55 ($79.58 -$2.23 -$.80) provides 3.8% downside protection below today's purchase price.

Established Covered Calls Position in American International Group Inc.

At 1:57pm this afternoon, my buy/write net debit limit order in American International Group Inc. (ticker AIG) for the June 23rd, 2023 expiration and at the $55.00 strike price was transacted at my net debit limit price of $54.66 per share.  Four hundred shares were purchased at $56.18 and four 6/23/2023 Call options were sold at the $55.00 strike price for $1.52 per share.  So, the potential time value profit from the Call options is $.34 per share [$55.00 strike price - ($56.18 stock purchase price - $1.52 Call options price)]. 

In addition to the potential time value profit of $.34 per share, there is an upcoming quarterly ex-dividend of $.36 per share (2.6% annual dividend yield) on June 15th (this Thursday) which is included in the potential return-on-investment calculations detailed below.  When this in-the-money Covered Calls position was established this afternoon it had a probability of assignment on the options expiration date of 71.2%. 

American International Group is a large ($41.2 billion market cap) provider of insurance products in North America and internationally. The General Insurance segment offers traditional property and commercial insurance along with a number of specialty products. The Life & Retirement segment offers variable and fixed annuities and a family of mutual finds. The company is based in New York but with operations in more than 130 countries, and it is included in the S&P 500 index.

As shown in the table below, AIG meets all five criteria I currently use for any company to be considered as a candidate for investment.

As detailed below, two potential return-on-investment results are: 

•  +0.6% absolute return (equivalent to +74.2% annualized return for the next 3 days) in the relatively unlikely event that the stock is assigned early (the last business day prior to the June 15th, 2023 ex-dividend date); OR 

• +1.3% absolute return (equivalent to +38.6% annualized return over the next 12 days) if the stock is assigned on the June 23rd, 2023 options expiration date.

These returns will be achieved as long as AIG's stock price is above the $55.00 strike price when assigned.  If the stock declines below the strike price, the breakeven price of $54.30 per share ($56.18 stock purchase price - $1.52 Call options selling price - $.36 ex-dividend amount) provides 3.3% downside breakeven protection if assigned on the options expiration date.
 

American International Group Inc. - New Covered Calls Position

The simultaneous buy/write transaction was:
6/12/2023 Bought 400 American International Group Inc. shares @ $56.18 per share
6/12/2023 Sold 4 AIG June 23rd, 2023 $55.00 Call options @ $1.52 per share.  The Implied Volatility of these Calls was 19.8 which, as preferred, is well above the VIX of 14.7.
6/15/2023 Upcoming quarterly ex-dividend at $.36 per share

Two possible overall performance results (including commissions) for this American International Group Inc. Covered Calls position are as follows:
Covered Calls Net Investment: $21,866.68
= ($56.18 - $1.52) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$605.32
= ($1.52 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early this Wednesday, June 14th, 2023 which is the last business day prior to the June 15th ex-div date): +$0.00; or
(b) Dividend Income (If AIG's shares assigned at the June 23rd, 2023 options expiration date): +$144.00
= ($.36 dividend per share x 400 shares)

(c) Capital Appreciation (If 400 AIG shares assigned early): -$472.00
+($55.00 -$56.18) * 400 shares; or
(c) Capital Appreciation (If AIG shares assigned at $55.00 strike price at options expiration): -$472.00
+($55.00 -$56.18) * 400 shares

1. Total Net Profit (If option exercised early): +$133.32

= (+$605.32 options income +$0.00 dividend income -$472.00 capital appreciation); or

2. Total Net Profit (If AIG stock assigned at $55.00 at the June 23rd, 2023 expiration): +$277.32 = (+$605.32 options income +$144.00 dividend income -$472.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the last business day prior to the 6/15/2023 ex-dividend date): +0.6%

= +$133.32/$21,866.68

Annualized Return-on-Investment (If option exercised early): +74.2%

= (+$133.32/$21,866.68) * (365/3 days); or

2. Absolute Return-on-Investment (If American International Group Inc. stock assigned at $55.00 at the June 23rd, 2023 options expiration date): +1.3%

= +$277.32/$21,866.68

Annualized Return-on-Investment (If AIG shares assigned at $55.00 at the 6/23/2023 options expiration date): +38.6%

= (+$277.32/$21,866.68) * (365/12 days)

June 9th, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with June 9th, 2023 weekly options expirations.  Fortunately, all three positions closed at options expiration yesterday with the stock prices in-the-money, so the Calls expired and the Covered Calls were closed out and the three stocks were sold at their respective strike prices with the following results:

1. Bank of America Corporation (BAC) -- +1.9% absolute return (equivalent to +40.5% annualized return-on-investment) for the 17 days of this investment.  The original blog post when this position was established is here. 

2. General Motors Company (GM) -- +1.5% absolute return (equivalent to +32.2% annualized return-on-investment) for the 17 days of this investment.  The original blog post when this position was established is here.

3. United Rentals Inc. (URI) -- +2.0% absolute return (equivalent to +42.6% annualized return-on-investment) for the 17 days of this investment.  The original blog post when this position was established is here.

As always, I welcome your feedback on any topics related to the Covered Calls investing strategy.  My email address is partlow@cox.net.

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor

Established Covered Calls Position in Global Payments Inc.

Yesterday afternoon, a short-term (one week) at-the-money Covered Calls position was established in Global Payments Inc. (ticker GPN) at the June 16th, 2023 options expiration date and at the $100.00 strike price.  Two hundred shares were purchased at $99.94 per share and two June 16th, 2023 $100.00 Calls were sold at $1.57 per share. The corresponding potential time value profit was $1.63 per share [$1.57 Call options premium + $.06 capital appreciation potential ($100.00 strike price - $99.94 stock purchase price)]. 

In addition to the potential time value profit of $1.63 per share, there is an upcoming quarterly ex-dividend prior to the June 16th options expiration date of $.25 per share (1.0% annual dividend yield) on June 14th.    The Implied Volatility of these Call options was 27.1 when this position was established.  Establishing positions in companies when the Implied Volatility of their options is greater than that of the S&P 500 Volatility Index (i.e. VIX), which is currently at 13.8, is strongly preferred by the Covered Calls Advisor.  This preference is the fifth of the twelve investing "edges" (see here) utilized that contributes to our achieving outperformance in comparison with that of the benchmark S&P 500 Index.  

Global Payments is an information technology company (in the Financials Sector).  They provide payment technology and software solutions for card, electronic, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific and they operate through three segments: Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions.  Their valuation is attractive since their FY2022 P/E was only 10.7 which is 5 turns below their prior 5-year average, and their EPS are expected to continue growing another 11.3% in FY2023.  They have beat analysts' quarterly estimates in each of the last 4 quarters and analysts' current target price of $136.84 is +36.9% above today's purchase price.  

The very high potential annualized-return-on-investments detailed below are primarily because of two factors: (1) establishing a very short-term position (see #7 in the "edges" article referenced above); and (2) choosing an at-the-money strike price (the stock purchase price closest to the strike price) provides the greatest potential time value profit when selling options.

Also important to me, there is no earnings report prior to the June 16th, 2023 options expiration date.

The probability that Global Payments stock is above the strike price on the June 16th options expiration date (in which case the Calls expire worthless and the maximum potential profit is achieved) was 49.8% when this position was established.  Just prior to establishing this position, a comparison was made to determine whether establishing a Covered Calls position or a comparable Cash-Secured Puts position would provide a better annualized roi potential.  The Covered Calls position was preferable in this case.  

Global Payments Inc. (GPN) -- New Covered Calls Position 

The buy/write transaction was as follows:
6/9/2023 Bought 200 Global Payments Inc. shares at $99.94.

6/9/2023 Sold 2 GPN June 16th, 2023 $100.00 Call options @ $1.57 per share.
6/14/2023 Upcoming ex-dividend of $.25 per share.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $19,675.34
= ($99.94 - $1.57) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$312.66
= ($1.57 * 200 shares) - $1.34 commission
(b) Dividend Income (If GPN stock price is unchanged at $99.94 on the options expiration date): +$0.00; OR
(b) Dividend Income [If GPN stock price is in-the-money (i.e. above the $100.00 strike price) and the position is assigned (i.e. closed out) at options expiration on June 16th]: +$50.00

= $.25 dividend x 200 shares

(c) Capital Appreciation (If Global Payments stock price is unchanged at $99.94 on the options expiration date): +$0.00

= ($99.94 stock price at the options expiration date - $99.94 stock purchase price) * 200 shares; OR 
(c) Capital Appreciation (If Global Payments stock is above the $100.00 strike price at the June 16th, 2023 options expiration date): +$12.00
= ($100.00 strike price - $99.94 stock purchase price) * 200 shares

1. Total Net Profit [If Global Payments stock price is unchanged at $99.94 at options expiration]: +$312.66
= (+$312.66 options income +$0.00 dividend income +$0.00 capital appreciation); OR
2. Total Net Profit [If Global Payments stock price is in-of-the-money (i.e. above $100.00 strike price) at options expiration]: +$374.66
= (+$312.66 options income +$50.00 dividend income +$12.00 capital appreciation)

1. Absolute Return-on-Investment: (If stock is unchanged at $99.94 on the options expiration date) : +1.6%

= +$312.66/$19,675.34
Annualized Return-on-Investment: +116.0%
= (+$312.66/$19,675.34) * (365/5 days); OR 

2. Absolute Return-on-Investment: (If stock is above $100.00 strike price at the June 16th, 2023 options expiration) : +1.9%
= +$374.66/$19,675.34
Annualized Return-on-Investment: +86.9%
= (+$374.66/$19,675.34) * (365/8 days)

Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Covered Calls Established in Gilead Sciences Inc.

A June 30th, 2023 Covered Calls buy/write limit order was executed this afternoon in Gilead Sciences Inc. (ticker GILD) at a net debit price of $75.51 per share.  Four hundred shares were purchased at $77.89 and four June 30th, 2023 $76.00 strike price Call options were sold at $2.38 per share.  The corresponding extrinsic value (i.e. time value) was $.51 per share [$2.38 Call options premium - ($77.89 stock purchase price - $76.00 strike price)].   There is an intervening ex-dividend prior to the options expiration date on June 14th) at $.75 per share (a 3.9% annual dividend yield) which is included in the potential return-on-investment results shown below.  

Gilead Sciences is a California-based biopharmaceutical company that researches, develops, and sells therapies for treating HIV, hepatitis B, hepatitis C, and certain cancers.  They have significant growth drivers in both HIV and oncology that will continue to combat headwinds from declining hepatitis C sales.  Gilead appeared in my Morningstar Wide Moat Outperformers stock screener and the twenty-nine analysts' that cover Gilead have a current target price of $91.38 (+17.3% above today's stock purchase price).

Some key numbers for this Gilead Sciences Covered Calls position are:
Covered Calls Net Investment: $30,201.32
= ($77.89 - $2.38) x 400 shares - $2.68 commissions 

1. If Assigned Early on the Day Prior to the Ex-Dividend Date:
Total Potential Profit: $201.32
= $.51 time value x 400 shares - $2.68 commissions
Days Until the June 14th, 2023 Ex-Dividend Date: 5
Absolute Return-on-Investment: +0.7%
= $201.32 time value profit /$30,210.32 net investment
Annualized Return-on-Investment if Assigned Early: +48.6%
= ($201.32/$30,210.32) x (365/5 days)

2. If Assigned on the June 30th, 2023 Options Expiration Date:
Dividend Income: $300.00
= $.75 per share x 400 shares
Total Potential Profit:  $501.32
= $201.32 time value profit + $300.00 dividend income
Days Until the June 30th, 2023 Options Expiration: 22
Absolute Return-on-Investment if Assigned at Expiration: +1.7%
= $501.32 total profit potential /$30,210.32 net investment
=Annualized Return-on-Investment if Assigned at Expiration: +27.5%
= ($501.32 total profit /$30,210.32) x (365/22 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

 

Covered Calls Established in Uber Technologies Inc.

This morning my buy/write net debit limit order was executed and 500 shares of Uber Technologies Inc.(ticker symbol UBER) stock were purchased at $39.50 and 5 June 23rd, 2023 $38.00 Call options were sold at $2.04 per share -- a net debit of $37.46 per share -- so the potential time value profit if the stock is in-the-money and therefore closed out by assignment at expiration is $.54 per share [$2.04 Call options premium - ($39.50 stock purchase price - $38.00 strike price)].  This limit order was placed soon after market open when the stock was $40.12 (well above the $39.50 purchase price).  I didn't expect the stock to decline that quickly, but am pleased that my limit order was executed at my net debit price.

This is a repeat of five similar Covered Calls positions in Uber during the past three months and all five were successfully assigned on their respective options expiration dates.  Like the prior five positions, today's new position was established at a moderately in-the-money strike price with an approximate probability that this position will be in-the-money and therefore assigned on the options expiration date of 71.0%.

As described previously, Uber has a bright future as the pre-eminent rideshare company in North America (58% of revenue) and also a substantial worldwide presence in over 70 countries with good ongoing growth prospects under the dynamic and visionary leadership of CEO Dara Khosrowshahi.    Uber's primary rideshare competitor in the U.S. is Lyft, but Uber dominates with about three times the ridesharing market share of Lyft, and unlike Lyft it also has a strong food delivery business (and a fledgling freight management business), so its current market capitalization is about ten times greater than Lyft's.  Uber is constantly making improvements to its ridesharing and food delivery models and has just announced it is further extending its business model by entering the North American carsharing market.

In addition to the explanation above for my bullishness on Uber, other reasons I remain confident in their potential are: (1) Uber had a stellar Q1 2023 earnings 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; (2) Gasoline is a significant cost to Uber drivers, and the spot price of WTI Oil is now in the low $70s versus in the low $90s at this time last year; (3) Major airlines are reporting continued substantial consumer demand above last year's level, and Uber obtains a significant portion of their rideshare revenue at airports; and (4) The current average target price of the 43 Wall Street analysts that cover Uber is $48.93 per share (+23.9% above today's purchase price). Finally, yesterday Evercore's Mark Mahaney identified three "value catalysts" that could propel its stock higher: (1) Uber is going to start actually generating positive GAAP earnings; (2) they'll start buying back stock; and (3) they'll finally reach the metrics needed to be included in the S&P 500.

As detailed below, a potential outcome for this Uber Technologies investment is +1.4% absolute return-on-investment for the next 17 days (equivalent to +30.6% annualized-return-on-investment) if the stock closes above the $38.00 strike price on the June 23rd, 2023 options expiration date.

Uber Technologies Inc. (UBER) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
6/7/2023 Bought 500 shares of Uber Technologies Inc. stock @ $39.50 per share 
6/7/2023 Sold 5 Uber June 23rd, 2023 $38.00 Call options @ $2.04 per share
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 34.0 when this position was established.  Also, there is no earnings report prior to the options expiration date.

A possible overall performance result (including commissions) if this position is assigned on its June 23rd expiration date is follows:
Covered Calls Net Investment: $18,733.35
= ($39.50 - $2.04) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,016.65
= ($2.04 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is above the $38.00 strike price at the June 23rd expiration): -$750.00
= ($38.00 - $39.50) * 500 shares

Potential Total Net Profit (If assigned at expiration): +$266.65
= (+$1,016.65 options income + $0.00 dividend income - $750.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.4%
= +$266.65/$18,733.35
Potential Equivalent Annualized-Return-on-Investment: +30.6%
= (+$266.65/$18,733.35) * (365/17 days)

Continuation of Covered Calls Position in iShares China Large-Cap ETF

The Covered Calls Advisor Portfolio has an ongoing Covered Calls position in iShares China Large-Cap ETF (ticker FXI) that expired out-of-the-money last Friday on its June 2nd, 2023 options expiration date.  This afternoon, when the FXI price was $28.03, my Covered Calls position was continued by rolling out to the same $29.00 strike price at the June 16th, 2023 options expiration date by selling ten Call options at $.22 per share against the 1,000 FXI shares owned.   

As detailed below, two potential return-on-investment results are: (1) +2.7% absolute return-on-investment (equivalent to +7.3% annualized return-on-investment for the 134 days holding period) if the iShares China Large-Cap ETF price is unchanged at today's $28.03 price on the June 16th, 2023 expiration date; and (2) +6.0% absolute return-on-investment (equivalent to +16.2% annualized return-on-investment for the 134 days holding period) if it is in-the-money (i.e. above the $29.00 strike price) on the June 16th, 2023 options expiration date.

iShares China Large-Cap ETF (FXI) -- Covered Calls Position Continued by Rollout

The original Buy/Write transaction was as follows:
2/3/2023 Bought 1,000 shares of iShares China Large-Cap ETF @ $31.10 per share 
2/3/2023 Sold 10 FXI Feb 17th, 2023 $30.00 Call options @ $1.52 per share
2/17/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
3/2/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten March 17th, 2023 $30.00 Call options @ $.59 per share.  The stock price was $29.50 when this transaction occurred.
3/17/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
3/23/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten April 21st, 2023 $30.00 Call options @ $.64 per share.  The stock price was $29.08 when this transaction was made.
4/21/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio
5/1/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten May 19th, 2023 $29.00 Call options @ $.47 per share.  The stock price was $28.43 when this transaction was made. 
5/19/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio.
5/22/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten June 2nd, 2023 $29.00 Call options @ $.31 per share.  The stock price was $28.44 when this transaction was made.
6/2/2023 Ten FXI Call options expired out-of-the-money and 1,000 shares remain in the Covered Calls Advisor Portfolio.
6/6/2023 Continued iShares China Large-Cap ETF Covered Calls position by selling ten June 16th, 2023 $29.00 Call options @ $.22 per share.  The stock price was $28.03 when this transaction was made.
6/7/2023 Upcoming semi-annual distribution at $.1544 per share.

Two possible overall performance results (including commissions) for this iShares China Large-Cap ETF Covered Calls position are as follows:
FXI Covered Calls Net Investment: $29,586.70
= ($31.10 - $1.52) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$3,709.92
= ($1.52 + $.59 + $.64 + $.47 + $.31 + $.22) * 1,000 shares - $40.20 commissions
(b) Semi-Annual Ex-Distribution Income: +$154.40
= $.1544 semi-annual distribution x 1,000 shares
(c) Capital Appreciation (If the iShares China Large-Cap ETF price is unchanged at today's $28.03 price on the June 16th, 2023 expiration date): -$3,070.00
+($28.03 current stock price - $31.10 stock purchase price) * 1,000 shares; OR
(c) Capital Appreciation (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 6/16/2023 options expiration date): -$2,100.00
+($29.00 options strike price - $31.10 stock purchase price) * 1,000 shares

1. Total Net Profit (If the iShares China Large-Cap ETF price is unchanged at today's $28.03 price on the June 16th, 2023 expiration date): +$794.32

= (+$3,709.92 options income +$154.40 distribution income -$3,070.00 capital appreciation); OR

2. Total Net Profit (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 6/16/2023 options expiration date): +$1,764.32

= (+$3,709.92 options income +$154.40 distribution income -$2,100.00 capital appreciation)

 

1. Absolute Return-on-Investment (If the iShares China Large-Cap ETF price is unchanged at today's $28.03 price on the 6/16/2023 expiration date): +2.7%

= +$794.32/$29,586.70

Annualized Return-on-Investment (If stock price unchanged at $29.08 at expiration): +7.3%

= (+$794.32/$29,586.70) * (365/134 days); OR

2. Absolute Return-on-Investment (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the 6/16/2023 options expiration date): +6.0%

= +$1,764.32/$29,586.70

Annualized Return-on-Investment (If iShares China Large-Cap ETF shares are assigned at the $29.00 strike price at the June 16th options expiration date): +16.2%
= (+$1,764.32/$29,586.70) * (365/134 days)

June 2nd, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with June 2nd, 2023 weekly options expirations.  All three positions were closed out on their options expiration date yesterday with their stock prices in-the-money; so the Calls expired worthless and the stocks were sold at their respective strike prices with the following results:

1. Dupont De Nemours Inc. (DD) -- +1.5% absolute return (equivalent to +46.0% annualized return-on-investment) for the 12 days of this investment.  The original blog post details when this position was established is here. 

2. Uber Technologies Inc. (UBER) -- +1.2% absolute return (equivalent to +38.8% annualized return-on-investment) for the 11 days of this investment.  The original blog post details when this position was established is here.

2. U.S. Bancorp (USB) -- +1.7% absolute return (equivalent to +39.1% annualized return-on-investment) for the 16 days of this investment.  The original blog post details when this position was established is here.

I welcome your questions or feedback at the email address below on any topics related to the Covered Calls investing strategy.  

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls in Verizon Communications Inc.

The stocks of all three major wireless providers (AT&T, Verizon, and TMobile) were down substantially at market open this morning on reports that Amazon might partner with Dish to offer wireless service to their Amazon Prime customers.  Before 10:00am this morning, CNBC reported that Amazon had confirmed to Reuters that they do not have plans to offer wireless to Amazon Prime customers "at this time".  

Verizon has announced their next ex-dividend of $.6525 on July 7th, 2023.  With this information, I decided to establish a small Covered Calls position in Verizon by purchasing 400 VZ shares at $34.49 and simultaneously selling 4 June 16th, 2023 Calls at $1.89 per share at a buy/write net debit price of $32.60 per share.  The corresponding potential time value profit was $.40 per share [$1.89 Call options premium - ($34.49 stock purchase price - $33.00 strike price)].  

I am hopeful that the Calls remain in-the-money (i.e. above the $33.00 strike price) on the options expiration date and that the maximum potential annualized-return-on-investment result of +29.4% shown below would therefore be achieved.  But if the stock declines to below the strike price, then I would still be satisfied to continue with this Covered Calls position using my Dividend Capture Strategy (see a description of the strategy here) -- that is by selling 4 July 2023 Calls against the Verizon shares owned.  The intervening ex-dividend of $.6525 on July 7th would provide a very generous 7.9% annual dividend yield at the current $33.00 strike price.

Some key numbers for this Verizon Communications Inc. Covered Calls position are:
Covered Calls Net Investment: $13,042.68
Profit if Assigned on Expiration Date: $157.32
Days Until June 16th, 2023 Options Expiration: 15
Absolute Return-on-Investment if Assigned at Expiration: +1.2%
Annualized Return-on-Investment if Assigned at Expiration: +29.4%

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Rolled Out The Cigna Group Covered Call Position

The Covered Calls Advisor Portfolio has a Covered Call position in The Cigna Group (ticker CI) that expired out-of-the-money on last Friday's options expiration date.  This morning when the stock was at $252.55, I rolled this Covered Call position down-and-out from the prior $260.00 strike price to the June 16th, 2023 $255.00 strike price at $3.70 per share.  Despite the substantial stock price decline since establishing this Cigna Covered Call position on March 1st, 2023, I remain bullish on Cigna and believe it has a good chance of reversing back to a more positive trend.  So, I have decided to continue in my attempt to repair this current losing position back closer to breakeven.  Cigna has an upcoming ex-dividend of $1.23 on June 6th, 2023 which is included in the potential return-on-investment results below since it is prior to the June 16th, 2023 options expiration date.  

As detailed below, two potential return-on-investment results are: (1) -2.1% absolute return (equivalent to - 7.2% annualized return-on-investment for the 108 days holding period) if Cigna's price is unchanged at today's $252.55 price on the June 16th, 2023 expiration date; and (2) -1.2% absolute return (equivalent to -4.2% annualized return-on-investment for the 108 days holding period) if it is in-the-money (i.e. above the $255.00 strike price) on the June 16th 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.
5/26/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
6/1/2023 Continued Cigna Covered Call position by selling one June 16th, 2023 $255.00 Call option @ $3.70 per share. 

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: +$2,847.98
= ($11.70 + $4.10 + $2.50 + $3.52 -$.06 +$3.06 +$3.70) * 100 shares - $4.02 commissions
(b) Dividend Income: +$246.00
= ($1.23 dividend per share x 100 shares) x 2 quarterly dividends
(c) Capital Appreciation (If CI stock price unchanged at $252.55 on the June 16th options expiration date): -$3,685.00
+($252.55 - $289.40) * 100 shares; or
(c) Capital Appreciation (If Cigna shares assigned at $255.00 strike price at the 6/16/2023 options expiration): -$3,440.00
+($255.00 - $289.40) * 100 shares

1. Total Net Profit [If stock price unchanged at $252.55 and Covered Call position unwound (i.e.closed out) on the 6/16/2023 options expiration date): -$591.02

= (+$2,847.98 options income +$246.00 dividend income - $3,685.00 capital appreciation); or

2. Total Net Profit (If Cigna shares assigned at $255.00 strike price at the June 16th, 2023 expiration): -$346.02

= (+$2,847.98 + $246.00 - $3,440.00)

1. Absolute Return-on-Investment [If Cigna stock price unchanged at $252.55 on the 6/16/2023 options expiration date]: -2.1%

= -$591.02/$27,770.67

Annualized Return-on-Investment (If Cigna stock price unchanged at $252.55 on the 6/16/2023 options expiration date): -7.2%

= (-$591.02/$27,770.67) * (365/108 days); or

2. Absolute Return-on-Investment (If Cigna shares assigned at $255.00 strike price on the 6/16/2023  expiration): -1.2%

= -$346.02/$27,770.67

Annualized Return-on-Investment (If Cigna stock assigned at $255.00 at the 6/16/2023 options expiration date): -4.2%

= (-$346.02/$27,770.67) * (365/108 days)