This early exercise by an owner of these Call options was surprising to me since they decided to immediately forgo the remaining $.54 time value in the Call options [$2.20 midpoint value of the Call options' $2/12/$2/28 Bid/Ask price - ($64.16 current stock price - $62.50 strike price)], and 8 days remaining until the July 14th options expiration date in order to buy the stock and therefore also capture today's $.57 ex-dividend. The last time I was surprised by an early assignment was 21 months ago. Since then, I have experienced 31 prior early assignments in the Covered Calls Advisor Portfolio where the remaining time value on the last business day prior to the ex-dividend date was sufficiently close to $0.00 that the early assignment was expected be me (and not the surprise that occurred this morning with the owner's early exercise decision).
Nevertheless, I am pleased with this outcome since the resulting +33.8% annualized return-on-investment (aroi) achieved is better than the +25.2% maximum possible aroi that might have been achieved 8 days from now if the stock remains above the $62.50 strike price on next Friday's (July 14th) options expiration date.
The transactions and detailed results for this position are as follows:
Bristol-Myers Squibb Co. (BMY) -- Covered Calls Position Closed Out by Early Assignment
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.
7/5/2023 Three Bristol-Myers Squibb Co. Calls exercised early, so these Call options immediately expired worthless and the Covered Calls position was closed out by early assignment by the selling of the 300 Bristol-Myers shares at their $62.50 strike price.
The 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 (Three Call options exercised early on July 5th, 2023, the business day prior to the July 6th ex-div date): +$0.00
(c) Capital Appreciation (BMY Call options assigned early on July 5th, 2023): -$375.00
= +($62.50 - $63.75) * 300 shares
