Early Assignment of Covered Calls Position in JPMorgan Chase & Co.

Overnight I was notified by my broker that the three JPMorgan Chase & Co. (ticker JPM) July 14th, 2023 $135.00 Call options were exercised yesterday.  JPMorgan stock has had a significant increase from its purchase price of $138.28 on June 28th to $146.61 at the market close yesterday.  During this one-week period, all 23 of the largest U.S. bank stocks (including JPMorgan which is the largest U.S. bank) passed the Federal Reserve's stress tests -- and their stock prices have benefited as a result.  

The original $1.10 time value in the Calls when the position was established had declined at yesterday's market close to $0.16 per share at the Call options Bid/Ask midpoint price, so I was not surprised that (with a $1.00 ex-dividend today and ten days remaining until the options expiration date), the owner of these JPMorgan Calls exercised their option to buy the 300 shares at the $135.00 strike price in order to capture the dividend.  

There are two reasons I am pleased for this early assignment, despite losing the opportunity to capture tomorrow's (since today is a holiday) $1.00 per share ex-dividend:
1. The +42.6% annualized-return-on-investment (aroi) achieved by early assignment is greater than the +33.6% aroi that would have been achieved 10 days from today if this position remained in-the-money and so instead would be assigned on its July 14th options expiration date; and
2. JPMorgan's Q2 2023 earnings report is before market open on July 14th (the options expiration date).  Because of the normal stock price volatility on the earnings reporting date (albeit sometimes positive but also sometimes negative), I strongly prefer not holding any company's stock on the day of their quarterly earnings report. 

The post when this JPMorgan Chase & Co. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this position was +0.8% absolute return in 7 days (equivalent to a +42.6% annualized return-on-investment).  

JPMorgan Chase & Co. (JPM) -- Covered Calls Position Closed Out by Early Assignment

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.
7/4/2023 This JPMorgan Covered Calls position was closed out by early assignment.  The owner of the JPM Calls exercised their option, so the Calls expired worthless and the 300 JPMorgan shares were sold at the $135.00 strike price.

The overall performance results (including commissions) for this JPM Covered Calls position were 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 (JPM Call options were exercised early on July 3rd, the last business day prior to the July 5th ex-div date): +$0.00

(c) Capital Appreciation (JPM shares assigned early): -$984.00
+($135.00 selling price -$138.28 purchase price) * 300 shares

Total Net Profit: +$327.99

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

Absolute Return-on-Investment: +0.8%

= +$327.99/$40,172.01

Annualized Return-on-Investment: +42.6%

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

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net