Early Assignment of Bank of America Corporation and McDonald's Corporation Covered Calls Positions

Early this morning, I was notified via email from my broker (Schwab) that my Covered Calls positions in Bank of America Corporation (ticker BAC) and McDonald's Corporation (ticker MCD) were closed out by early assignment yesterday which is the day before today's ex-dividend date for both companies.   There was very little time value remaining in the Call options for both companies, so with eight days remaining until the September 8th options expiration date for both positions, the Call owners decided to exercise their Calls early to capture today's ex-dividend.  So the Calls expired worthless and the stocks were sold at their respective strike prices with the following results:

1. Bank of America Corporation (BAC) -- I had owned 500 BAC shares and sold five September 8th, 2023 $28.00 Calls and today's ex-dividend amount is $.24 per share.  This position achieved +1.0% absolute return (equivalent to +36.0% annualized return-on-investment) for the 10 days of this investment.  

2. McDonald's Corporation (MCD) -- I had owned 100 MCD shares and sold one September 8th, 2023 $275.00 Call option and today's ex-dividend amount is $1.52 per share.  This position achieved +0.7% absolute return (equivalent to +26.9% annualized return-on-investment) for the 10 days of this investment.  

The original blog post details when both positions were established is here.

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

Best Wishes and Godspeed,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Closed Out Covered Calls Position in Archer-Daniels-Midland Company

At last Friday's options expiration, two August 28th, 2023 Covered Calls in Archer-Daniels-Midland Company (ticker ADM) expired out-of-the-money with the stock price below the $83.00 strike price, so the Calls expired and the 200 ADM shares remained in the Covered Calls Advisor Portfolio.  I now realize that I didn't perform adequate due diligence prior to establishing this position.  The current quarter's earnings per share estimate is 16% below last year's comparable quarter, and my current objective is to establish positions in companies whose current quarter earnings are expected to exceed last year's result.  So, for that reason combined with the ADM's steady stock price decline since its last earnings report, I decided to limit my loss and close out this position Monday morning when the ADM stock price was at $81.29.    

As detailed below, the return-on-investment results for this Archer-Daniels-Midland position was: -1.0% absolute return in 17 days (equivalent to a -22.0% annualized return-on-investment).  

Archer-Daniels-Midland Company (ADM) -- Covered Calls Position Closed Out by Decision

The buy/write transaction was:
8/11/2023 Bought 200 Archer-Daniels-Midland Co. shares @ $85.15
8/11/2023 Sold 2 ADM 8/25/2023 $83.00 Call options @ $2.57 per share
Note: the Implied Volatility of the Call options was 17.5 when this buy/write transaction was executed.
8/15/2023 Quarterly ex-dividend of $.45 per share
8/25/2023 Two ADM $83.00 Calls expired out-of-the-money at options expiration, so 200 ADM shares remain in the Covered Calls Advisor Portfolio. 
8/28/2023 Closed out this ADM Covered Calls position by selling 200 ADM shares at $81.29 per share.

The overall performance results (including commissions) for this Covered Calls position were as follows:
Covered Calls Net Investment: $16,517.34
= ($85.15 - $2.57) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$512.66
= ($2.57 * 200 shares) - $1.34 commission
(b) Dividend Income: $90.00
= ($.45 dividend per share x 200 shares)
(c) Capital Appreciation (200 ADM shares sold at $81.29 per share): -$772.00
+($81.29 - $85.15) * 200 shares

Total Net Profit: -$169.34

= (+$512.66 options income +$90.00 dividend income -$772.00 capital appreciation)

Absolute Return-on-Investment: -1.0%

= -$169.34/$16,517.34

Annualized Return-on-Investment: -22.0%

= (-+$169.34/$16,517.34) * (365/17 days)

Covered Calls Established in Halliburton Company

Yesterday, a Covered Calls position was established in Halliburton Company (ticker symbol HAL) when 500 HAL shares were purchased at $38.40 and five September 15th, 2023 monthly Call options were sold for $1.86 per share at the $37.00 strike price.  The net debit limit order at $36.54 was executed, so the potential time value profit was $.46 per share [$1.86 Call options premium - ($38.40 stock purchase price - $37.00 strike price)].

There is an upcoming quarterly ex-dividend of $.16 per share (annual dividend yield of 1.7%) on September 5th, so potential return-on-investment results for this position, as detailed below, include the possibility of early assignment because the ex-dividend is prior to the September 15th, 2023 options expiration date.  As preferred by the Covered Calls Advisor, the next quarterly earnings report is after the options expiration date.  A moderately in-the-money Covered Calls position was established.  Since many companies in the Energy Sector are slow-growers but also have a good dividend yield, I prefer using my Dividend Capture Strategy (see here) for my Covered Calls positions in this sector.

As detailed below, a potential return-on-investment result is +1.3% absolute return (equivalent to +57.4% annualized return for the next  8 days) if the stock is assigned early on the last business day prior to the September 5th ex-dividend date); OR +1.7% absolute return (equivalent to +34.4% annualized return over the next 18 days) if the stock is assigned on the 9/15/2023 options expiration date.


Halliburton Company (HAL) -- New Covered Calls Position

The transactions were:
8/28/2023 Bought 500 Halliburton Co. shares @ $38.40
8/28/2023 Sold 5 HAL 9/15/2023 $37.00 Call options @ $1.86
9/5/2023 Upcoming quarterly ex-dividend of $.16 per share

Two possible overall performance results (including commissions) for this Halliburton Co. Covered Calls position are as follows:
Covered Calls Cost Basis: $18,273.35
= ($38.40 - $1.86) * 500 shares + $3.35 commissions

Net Profit Components:
(a) Options Income: +$930.00
= ($1.86 * 500 shares)
(b) Dividend Income (If option exercised early on the last trading day prior to the September 5th ex-div date): +$0.00; or
(b) Dividend Income (If Halliburton shares assigned at the 9/15/2023, 2023 expiration date): +$80.00
= ($.16 dividend per share x 500 shares)
(c) Capital Appreciation (If HAL assigned early on September 5th, 2023): -$700.00
+($37.00 - $38.40) * 500 shares; or
(c) Capital Appreciation (If HAL assigned at the $37.00 strike price at the 9/15/2023 options expiration date): -$700.00
+($37.00 -$38.40) * 500 shares

1. Total Net Profit [If option exercised on September 1st (last business day prior to the Sept 5th ex-dividend date)]: +$230.00

= (+$930.00 options income +$0.00 dividend income -$700.00 capital appreciation); or

2. Total Net Profit (If Halliburton shares assigned at $37.00 strike price at its Sept 15th, 2023 expiration): +$310.00

= (+$930.00 +$80.00 dividend income -$700.00)

1. Absolute Return-on-Investment [If HAL options exercised on the last business day prior to ex-dividend date]: +1.3%

= +$230.00/$18,273.35

Annualized Return-on-Investment (If option exercised early): +57.4%

= (+$230.00/$18,273.35) * (365/8 days); or

2. Absolute Return-on-Investment (If HAL shares assigned at $37.00 at the September 15th, 2023 expiration): +1.7%

= +$310.00/$18,273.35

Annualized Return-on-Investment (If Halliburton stock assigned at $37.00 at the Sept 15th, 2023 expiration date): +34.4%

= (+$310.00/$18,273.35) * (365/18 days)

August 25th, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with August 25th, 2023 options expirations.  The position in PayPal Holdings Inc. closed in-the-money at $61.19 on yesterday's options expiration date, so the Calls expired and the shares were called away (i.e. sold) at the $59.00 strike price.  The second position in Archer-Daniels Midland Company closed out-of-the-money yesterday, so the Calls expired and the 200 Archer-Daniels-Midland shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for both positions is as follows:

1. PayPal Holdings Inc. -- +1.1% absolute return (equivalent to +28.3% annualized return-on-investment) for the 14 days of this investment.  The original post detailing this Covered Calls position is here. 

2. Archer-Daniels-Midland Company -- ADM's price closed yesterday at $80.83 which was below its $83.00 strike price, so the two 8/25/20233 Call options expired and 200 ADM shares now remain in the Covered Calls Advisor Portfolio.  Next week a decision will be made to either close out the position by selling the shares or continuing with this Covered Calls position by selling two ADM Calls against the 200 shares of stock currently owned.  The original post detailing this Covered Calls position is here.  

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Covered Calls Positions Established in Halozyme Therapeutics Inc. and Match Group Inc.

Today Covered Calls positions were established in Halozyme Therapeutics Inc. (ticker HALO) and Match Group Inc. (MTCH) when my buy/write net debit limit orders were executed.  For Halozyme, 400 shares were purchased at $42.62 and four September 15th, 2023 Call options were sold at $3.36 per share at the $40.00 strike price.  For Match Group, 400 shares were purchased at $43.31 and four September 15th, 2023 Call options were sold at $2.17 per share at the $42.50 strike price.  In-the-money strike prices were established for both positions.  The probability that the stock will be called away (i.e. assigned) at their September 15th options expiration date for Halozyme was 74.1% and for Match Group was 59.5%.  Neither company pays a dividend and they do not report quarterly earnings prior to the options expiration date.

Halozyme Therapeutics is a small-cap biotechnology company that has a range of auto-injector devices for subcutaneous and intramuscular delivery to patients.  They have license agreements in partnership with several drug companies with 6 currently approved products and 15 more in development.  When co-formulated with drugs, their products have the potential to reduce the treatment burden for patients (minutes for subcutaneous injections versus hours for IV infusions).  I researched this company when it appeared as the top-ranked Healthcare sector company in my Growth at a Reasonable Price (GARP) stock screener.  I am also impressed by the leadership quality of CEO Helen Torley.  

The rankings and filters results for Halozyme from my GARP screener on StockRover are:

Also, the eleven analysts that cover Halozyme have an average target price is $54.20 which is +27.2% above today's purchase price.

Regarding Match Group: Three similar prior Covered Calls positions in the Match Group were assigned on their options expiration dates 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.  Match is profitable and their earnings per share and revenues seem to be at an inflection point where they have begun to obtain regular quarterly revenue and profit increases based on their worldwide presence and their growth opportunities (especially in Asia but also in Europe).  The primary catalyst for my increasing optimism stems primarily from the leadership of their relatively new CEO, Bernard Kim, who has been in his new position for only slightly more than one year now but who has previously 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:

The transactions and potential results for both positions are included in the details presented below:

1. Halozyme Therapeutics Inc. (HALO) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:

8/25/2023 Bought 400 shares of Halozyme Therapeutics stock @ $42.62 per share.  
8/25/2023 Sold 4 HALO September 15th, 2023 $40.00 Call options @ $3.36 per share.
Note: the Implied Volatility of the Calls was 38.8 when this position was established.  

A possible overall performance result (including commissions) if this position is assigned on its 9/15/2023 options expiration date is follows:
Halozyme Covered Calls Net Investment: $15,706.68
= ($42.62 - $3.36) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,341.32
= ($3.36 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Halozyme stock is above the $40.00 strike price at the September 15th expiration): -$1,048.00
= ($40.00 - $42.62) * 400 shares

Potential Total Net Profit (If assigned at expiration): +$293.32
= (+$1,341.32 options income + $0.00 dividend income - $1,048.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.9%
= +$293.32/$15,706.68
Potential Equivalent Annualized-Return-on-Investment: +32.5%
= (+$293.32/$15,706.68) * (365/21 days)

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

The buy/write transaction was:
8/25/2023 Bought 400 Match Group Inc. shares @ $43.31
8/25/2023 Sold 4 MTCH 9/15/2023 $42.50 Call options @ $2.17 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: $16,458.68
= ($43.31 - $2.17) * 400 shares + $2.68 commission

Net Profit:
(a) Options Income: +$865.32
= ($2.17 * 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 $42.50 strike price at expiration): -$324.00
+($42.50 - $43.31) * 400 shares

Total Net Profit (If options exercised on the 9/15/2023 options expiration date): +$541.32

= (+$865.32 options income +$0.00 dividend income -$324.00 capital appreciation)

Potential Absolute Return-on-Investment (If the Match Group Inc. shares are assigned at the $42.50 strike price at the Sept. 15th, 2023 options expiration date): +3.3%

= +$541.32/$16,458.68

Potential Annualized Return-on-Investment (If 400 Match Group shares assigned at $42.50 at the 9/15/2023 options expiration): +57.2%

= (+$541.32/$16,458.68) * (365/21 days)

Covered Calls Established in SolarEdge Technologies Inc.

Today my buy/write net debit limit order was executed and 200 shares of SolarEdge Technologies Inc.(ticker symbol SEDG) stock were purchased at $162.21 and 2 September 15th, 2023 $155.00 Call options were sold at $12.30 per share -- a net debit of $149.91 per share -- so the potential time value profit if the stock is in-the-money and therefore closed out by assignment at expiration is $5.09 per share [$12.30 Call options premium - ($162.21 stock purchase price - $155.00 strike price)].   An in-the-money strike price was established with an approximate probability when this position was established that the stock will be in-the-money and therefore assigned on the Sept. 15th options expiration date is 66.3%.  As preferred, there is no quarterly earnings report prior to the options expiration date.

SolarEdge is an Israel-based company that designs, develops, and sells direct current optimized inverter systems for solar photovoltaic installations.  They sell their products to solar installers, engineering and construction firms, and indirectly to solar installers through distributors and electrical equipment wholesalers.  I identified this company when it appeared as the top-ranked company in my Growth stock screener, but I was impressed when I researched it further that its fundamental valuations are also attractive.  It is also highly rated by thirty-one analysts that cover it since their current average target price is $305.38 which is +88.3% above today's purchase price.

As detailed below, a potential outcome for this SolarEdge Technologies investment is +3.4% absolute return-on-investment for the next 24 days (equivalent to +51.6% annualized-return-on-investment) if the stock closes above the $155.00 strike price on the September 15th, 2023 options expiration date.

SolarEdge Technologies Inc. (SEDG) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
8/22/2023 Bought 200 shares of SolarEdge Technologies stock @ $162.21 per share.  
8/22/2023 Sold 2 SEDG September 15th, 2023 $155.00 Call options @ $12.30 per share.
Note: the Implied Volatility of the Calls was 48.1 when this position was established.  

A possible overall performance result (including commissions) if this position is assigned on its 9/15/2023 options expiration date is follows:
Covered Calls Net Investment: $29,983.34
= ($162.21 - $12.30) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,458.66
= ($12.30 * 200 shares) - $1.34 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SolarEdge stock is above the $155.00 strike price at the September 15th expiration): -$1,442.00
= ($155.00 - $162.21) * 200 shares

Potential Total Net Profit (If assigned at expiration): +$1,016.66
= (+$2,458.66 options income + $0.00 dividend income - $1,442.00 capital appreciation)

Potential Absolute Return-on-Investment: +3.4%
= +$1,016.66/$29,983.34
Potential Equivalent Annualized-Return-on-Investment: +51.6%
= (+$1,016.66/$29,983.34) * (365/24 days)

Covered Calls Established in Uber Technologies Inc.

Today my buy/write net debit limit order was executed and 500 shares of Uber Technologies Inc.(ticker symbol UBER) stock were purchased at $44.51 and 5 September 8th, 2023 $43.00 Call options were sold at $2.33 per share -- a net debit of $42.18 per share -- so the potential time value profit if the stock is in-the-money and therefore closed out by assignment at expiration is $.82 per share [$2.33 Call options premium - ($44.51 stock purchase price - $43.00 strike price)].  

This is a repeat of eight similar Covered Calls positions in Uber during the past four months and all were successfully assigned on their respective options expiration dates. Like the prior Uber positions, today's new position was established at an in-the-money strike price with an approximate probability when this position was established that the stock will be in-the-money and therefore assigned on the options expiration date of 65.9%.

As detailed below, a potential outcome for this Uber Technologies investment is +1.9% absolute return-on-investment for the next 17 days (equivalent to +41.4% annualized-return-on-investment) if the stock closes above the $43.00 strike price on the September 8th, 2023 options expiration date.

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

The net debit buy/write limit order was executed as follows:
8/22/2023 Bought 500 shares of Uber Technologies Inc. stock @ $44.51 per share.  
8/22/2023 Sold 5 Uber September 8th, 2023 $43.00 Call options @ $2.33 per share.
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 37.1 when this position was established.  

A possible overall performance result (including commissions) if this position is assigned on its 9/8/2023 options expiration date is follows:
Covered Calls Net Investment: $21,093.35
= ($44.51 - $2.33) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,161.65
= ($2.33 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is above the $43.00 strike price at the September 8th expiration): -$755.00
= ($43.00 - $44.51) * 500 shares

Potential Total Net Profit (If assigned at expiration): +$406.65
= (+$1,161.65 options income + $0.00 dividend income - $755.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.9%
= +$406.65/$21,093.35
Potential Equivalent Annualized-Return-on-Investment: +41.4%
= (+$406.65/$21,093.35) * (365/17 days)

Covered Calls Established in Alphabet Inc., Bank of America Corporation, and McDonald's Corporation

1.  Alphabet Inc. (GOOGL) -- New Covered Calls Position

The simultaneous buy/write transaction was as follows:
8/21/2023 Bought 200 shares of Alphabet Inc. stock @ $127.12 per share.  
8/21/2023 Sold 2 Alphabet Inc. September 1st, 2023 $123.00 Call options @ $5.54 per share.

Note: this was a simultaneous Buy/Write transaction.  The Implied Volatility of the Call option was 33.6 when this transaction was executed which as desired is well above the 16.9 of the S&P 500 Volatility Index (i.e. VIX). 

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $24,317.34
= ($127.12 - $5.54) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,106.66
= ($5.54 * 200 shares) - $1.34
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If Alphabet stock is above $123.00 strike price at the Sept. 1st expiration): -$824.00
= ($123.00 - $127.12) * 200 shares

Total Net Profit: +$282.66
= (+$1,106.66 options income +$0.00 dividend income - $824.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.2%
= +$282.66/$24,317.34
Potential Equivalent Annualized Return-on-Investment: +38.6%
= (+$282.66/$24,317.34) * (365/11 days)

2.  Bank of America Corporation (BAC) -- New Covered Calls Position
The buy/write transaction was as follows:

8/21/2023 Bought 500 shares of Bank of America Corporation stock @ $28.93 per share.
8/21/2023 Sold 5 BAC September 8th, 2023 $28.00 Call options @ $1.21 per share.
Note: The Implied Volatility of these Calls was 26.0 when this position was established.
8/31/2023 Upcoming ex-dividend of $.24 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $13,863.35
= ($28.93 - $1.21) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$601.65
= ($1.21 * 500 shares) - $3.35 commission
(b) Dividend Income (If BAC shares assigned on 8/30/2023, the last business day prior to the 8/31/2023 ex-dividend date): = +$0.00; or
(b) Dividend Income (If BAC shares assigned at the 9/8/2023 options expiration): +$120.00
= $.24 per share x 500 shares
(c) Capital Appreciation (If BAC shares assigned early on 8/31/2023): -$465.00
= ($28.00 - $28.93) * 500 shares; or
(c) Capital Appreciation (If shares above $28.00 strike price at the 9/8/2023 options expiration): -$465.00
= ($28.00 -$28.93) * 500 shares

1. Potential Net Profit (If Bank of America shares assigned on 8/30/2023, the day prior to the Sept. 1st ex-dividend date): +$136.65
= (+$601.65 options income +$0.00 dividend income - $465.00 capital appreciation)
2. Potential Net Profit (If BAC price is above the $28.00 strike price at the September 8th options expiration): +$256.65
= (+$601.65 options income +$120.00 dividend income - $465.00 capital appreciation)

1. Absolute Return-on-Investment (If BAC shares assigned on 8/30/2023, the day prior to the 8/31 ex-dividend date): +1.0%
= +$136.65/$13,863.35
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +36.0%
= (+$136.65/$13,863.35) * (365/10 days)

2. Absolute Return-on-Investment (If BAC price is above $28.00 strike price at the Sept. 8th options expiration): +1.9%
= +$256.65/$13,863.35
Equivalent Annualized Return (If assigned on the 9/8/2023 options expiration date): +37.5%
= (+$256.65/$13,863.35) * (365/18 days)

3.  McDonald's Corporation (MCD) -- New Covered Call Position
The buy/write transaction was as follows:

8/21/2023 Bought 100 shares of McDonald's Corporation stock @ $279.37 per share 
8/21/2023 Sold 1 MCD Sept. 8th, 2023 $275.00 Call option @ $6.39 per share
Note: The Implied Volatility of these Calls was 14.8 when this position was established.
8/31/2023 Upcoming ex-dividend of $1.52 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $27,298.67
= ($279.37 - $6.39) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$638.33
= ($6.39 * 100 shares) - $.67 commission
(b) Dividend Income (If MCD shares assigned on 8/30/2023, the last business day prior to the 8/31/2023 ex-dividend date): = +$0.00; or
(b) Dividend Income (If MCD shares assigned at the 9/8/2023 options expiration): +$152.00
= $1.52 per share x 100 shares
(c) Capital Appreciation (If MCD shares assigned early on 8/31/2023): -$437.00
= ($275.00 - $279.37) * 100 shares; or
(c) Capital Appreciation (If shares above $275.00 strike price at the Sept. 8th options expiration): -$437.00
= ($275.00 -$279.37) * 100 shares

1. Potential Net Profit (If McDonald's shares assigned on 8/30/2023, the day prior to the August 31st ex-dividend date): +$201.33
= (+$638.33 options income +$0.00 dividend income - $437.00 capital appreciation)
2. Potential Net Profit (If McDonald's stock price is above the $275.00 strike price at the September 8th options expiration): +$353.33
= (+$638.33 options income +$152.00 dividend income - $437.00 capital appreciation)

1. Absolute Return-on-Investment (If MCD shares assigned on 8/30/2023, the day prior to the August 31st ex-dividend date): +0.7%
= +$201.33/$27,298.67
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +26.9%
= (+$201.33/$27,298.67) * (365/10 days)

2. Absolute Return-on-Investment (If MCD price is above $275.00 strike price at the Sept. 8th options expiration): +1.3%
= +$353.33/$27,298.67
Equivalent Annualized Return-on-Investment (If assigned on the September 8th, 2023 options expiration date): +26.2%
= (+$353.33/$27,298.67) * (365/18 days)

Continuation of Covered Calls Positions in Delta Air Lines Inc., Honeywell International Inc., and iShares China Large-Cap ETF

Last Friday, the August 18th, 2023 Covered Calls positions in Delta Air Lines Inc., Honeywell International Inc., and iShares China Large-Cap ETF closed out-of-the-money.  So the Calls expired and shares remained in the Covered Calls Advisor Portfolio.  This morning, I decided to continue all three of these Covered Calls positions by selling Call options to roll out to future options expiration dates.  The transactions-to-date for these positions as well as potential return-on-investment results are detailed below.

1.  Delta Air Lines Inc. (DAL) -- Continuation of Covered Calls Position

The Buy/Write transaction was as follows:
7/24/2023 Bought 500 shares of Delta Air Lines Inc. @ $47.49 per share 
7/24/2023 Sold 5 DAL August 4th, 2023 $46.00 Call options @ $1.93 per share
8/4/2023 Five DAL Calls expired out-of-the-money so the 500 shares remained in the Covered Calls Advisor Portfolio.
8/7/2023 Continued this Delta Air Lines Inc. Covered Calls position by selling 5 Delta August 18th, 2023 Call options at the $45.00 strike price for $.56 per share.  The FXI share price was $44.93 when these Calls were sold and their Implied Volatility was 39.6.

8/18/2023 Five DAL Calls expired out-of-the-money so the 500 shares remained in the Covered Calls Advisor Portfolio.
8/21/2023 Continued this Delta Air Lines Inc. Covered Calls position by selling 5 Delta September 1st, 2023 Call options at the $43.00 strike price for $.49 per share.  The Delta share price was $41.80 when these Calls were sold.

A possible overall performance result (including commissions) for this Delta Air Lines Inc. Covered Calls position if the stock is in-the-money at its options expiration date is as follows:
Delta Air Lines Covered Calls Net Investment: $22,783.35
= ($47.49 - $1.93) * 500 shares + $3.35 commission

Net Profit Potential:
(a) Options Income: +$1,674.95
= ($1.93 + $.95 + $.49) * 500 shares - $10.05 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 Delta Air Lines shares assigned at $43.00 strike price at the 9/1/2023 options expiration date): -$2,245.00
+($43.00 - $47.49) * 500 shares

Potential Total Net Profit (If 500 Delta Air Lines shares assigned at the $45.00 strike price upon options expiration): -$570.05
= (+$1,674.95 options income +$0.00 dividend income -$2,245.00 capital appreciation)

Absolute Return-on-Investment Potential: -2.5%
= -$570.05/$22,783.35
Annualized Return-on-Investment Potential: -23.4%
= (-$570.05/$22,783.35) * (365/39 days)

2.  Honeywell International Inc. (HON) -- Continuation of Covered Calls Position

The buy/write transaction was:
7/31/2023 Bought 200 Honeywell shares @ $193.51
7/31/2023 Sold 2 Honeywell 8/18/2023 $190.00 Call options @ $4.99
8/10/2023 Quarterly ex-dividend of $1.03 per share

8/18/2023 Two HON Calls expired out-of-the-money so the 200 shares remained in the Covered Calls Advisor Portfolio.
8/21/2023 Continued this Honeywell Covered Calls position by selling 2 Honeywell September 15th, 2023 Call options at the $190.00 strike price for $2.30 per share.  The Honeywell share price was $186.99 when these Calls were sold.

A possible overall performance results (including commissions) for this Honeywell Covered Calls position if the stock is in-the-money at its options expiration date is as follows:
Honeywell Covered Calls Net Investment: $37,705.34
= ($193.51 - $4.99) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,455.32
= ($4.99 + $2.30) * 200 shares - $2.68 commission
(b) Dividend Income: +$206.00
= ($1.03 dividend per share x 200 shares)

(c) Capital Appreciation (If HON shares assigned at $190.00 strike price at the 9/15/2023 options expiration date): -$702.00
+($190.00 - $193.51) * 200 shares

Total Net Profit (If Honeywell shares assigned at $190.00 on the Sept. 15th, 2023 options expiration date): +$959.32

= (+$1,455.32 +$206.00 -$702.00)

Absolute Return-on-Investment (If Honeywell shares assigned at $190.00 at the 9/15/2023 options expiration date): +2.5%

= +$959.32/$37,705.34

Annualized Return-on-Investment (If HON shares assigned at $190.00 at the Sept. 15th, 2023 expiration): +20.2%

= (+$959.32/$37,705.34) * (365/46 days)

3.  iShares China Large-Cap ETF (FXI) -- Continuation of Covered Calls Position 
The Buy/Write transaction was as follows:
8/2/2023 Bought 1,000 shares of iShares China Large-Cap ETF @ $28.77 per share.  
8/2/2023 Sold 10 FXI August 18th, 2023 $27.85 Call options @ $1.37 per share.
8/18/2023 Ten FXI Calls expired out-of-the-money so the 1,000 shares remained in the Covered Calls Advisor Portfolio.
8/21/2023 Continued this iShares China Large-Cap ETF Covered Calls position by selling 10 FXI Sept 1st, 2023 Call options at the  $27.50 strike price for $.18 per share.  The FXI share price was $26.06 when these Calls were sold.

A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position if the stock is in-the-money at its options expiration date is as follows:

FXI Covered Calls Net Investment: $27,406.70
= ($28.77 - $1.37) * 1,000 shares + $6.70 commission

Net Profit Potential:
(a) Options Income: +$1,536.60
= ($1.37 + $.18) * 1,000 shares - $13.40 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 iShares China Large-Cap ETF shares assigned at $27.50 strike price at the Sept 1st options expiration date): -$1,270.00

+($27.50 - $28.77) * 1,000 shares

Potential Total Net Profit (If 1,000 iShares China Large-Cap ETF shares assigned at $27.50 strike price at the 9/1/2023 options expiration): +$266.60
= (+$1,536.60 options income +$0.00 dividend income -$1,270.00 capital appreciation)

Absolute Return-on-Investment Potential: +1.0%
= +$266.60/$27,406.70
Annualized Return-on-Investment Potential: +11.8%
= (+$266.60/$27,406.70) * (365/30 days)

Monthly Options Expiration Results through August 18th, 2023

Each month after the monthly options expiration date, this summary report provides the results on 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 July 21st, 2023 options expiration through yesterday's August 18th, 2023 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio held a total of eleven positions.  Seven positions were closed out at a profit, one position was closed out at a loss, and three positions expired out-of-the-money on yesterday's monthly options expiration date (so those shares currently remain in the Covered Calls Advisor Portfolio).   

The specific results for each position are summarized as follows: 

• Four Covered Calls positions expired in-the-money (stock price above the strike price) on their May 19th, 2023 monthly options expiration date as follows: 

1. Baker Hughes Company -- +1.4% absolute return-on-investment in 19 days (equivalent to a +27.0% annualized return-on-investment).
2. Match Group Inc. -- +1.5% absolute return-on-investment in 12 days (equivalent to a +47.1% annualized return-on-investment).
3. Microsoft Corporation -- +0.9% absolute return-on-investment in 7 days (equivalent to a +45.2% annualized return-on-investment).
4. Uber Technologies Inc. -- +1.6% absolute return-on-investment in 18 days (equivalent to a +32.5% annualized return-on-investment).

• Two Covered Calls positions expired in-the-money on their respective Weekly options expiration dates during the past month as follows:

1. DICK'S Sporting Goods Inc. -- +1.5% absolute return-on-investment in 17 days (equivalent to a +32.1% annualized return-on-investment).
2. iShares China Large-Cap ETF -- +1.9% absolute return-on-investment in 18 days (equivalent to a +38.5% annualized return-on-investment).

• One Covered Call position in Exxon Mobil Corporation was closed out by early assignment on the day prior to its quarterly ex-dividend date with a +0.8% absolute return-on-investment in 7 days (equivalent to a +40.9% annualized return-on-investment).

• One Covered Calls position in the iShares 20+ Year Treasury Bond ETF was closed out early at a loss by my decision.  The result was a -2.7% absolute return-on-investment in 17 days (equivalent to a -57.8% annualized return-on-investment).

• Three Covered Calls positions in Delta Air Lines Inc., Honeywell International Inc., and iShares China Large-Cap ETF closed out-of-the-money yesterday on their August 18th, 2023 monthly options expiration date, so the options expired and the shares now remain in the Covered Calls Advisor Portfolio.  Early next week, a decision will be made to either close out the positions by selling the shares or to continue the Covered Calls positions by selling future Call options against the shares currently held.  As always, the details of all transactions will be posted on this blog site on the same day the transactions occur.

During the past year (last 12 months) 117 of 130 positions (90.0%) 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 +21.9% during the past year and the average holding period for these 130 closed positions was 18.4 days.  In comparison, the benchmark S&P 500 returned +5.6% 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.  

Best Wishes to All,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Overall Market Meter Changes from Slightly Bearish to Neutral

Today, the Covered Calls Advisor evaluated the current values for each of the seven factors used to determine the "Overall Market Meter" rating.  The prior rating done earlier this year was Slightly Bearish and today's rating changes to Neutral.  Of the seven factors used in the analysis, they can be categorized as macroeconomic, momentum, value, and growth metrics as follows:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next two indicators), and
- growth (the last indicator).

The current Overall Market Meter average of 2.57 (see blue line at the bottom of the chart above) is near the lower end of the Neutral range (which is from 2.50 to 3.50).  My corresponding strategy is to "on-average establish Covered Call positions that are between 3.0% in-the-money and 2.0% out-of-the-money and with short-term (one month or less) durations".    

Best Regards to All,
Jeff Partlow (Covered Calls Advisor)
partlow@cox.net

Early Assignment of Covered Calls Position in Exxon Mobil Corporation

Early this morning I was notified by my broker's email that the two Exxon Mobil Corporation (ticker XOM) August 25th, 2023 $102.00 Call options were exercised yesterday.  Exxon Mobil stock has increased from its purchase price of $105.04 last Tuesday when this Covered Calls position was established to $111.01 at the market close yesterday.  The original $.80 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so I was not surprised that the owner of these Exxon Calls exercised their option to buy the 200 shares at the $102.00 strike price in order to receive today's $.91 per share ex-dividend.  I am pleased for this early assignment despite losing the opportunity to capture the $.91 ex-dividend since the +40.9% annualized-return-on-investment (aroi) achieved by early assignment is greater than the +34.1% aroi that would instead have been achieved if this position was instead assigned on its August 25th options expiration date.   

The post when this Exxon Mobil Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Exxon Mobil Covered Calls position was +0.8% absolute return in 7 days (equivalent to a +40.9% annualized return-on-investment).  

 

Exxon Mobil Corporation (XOM) -- Covered Calls Position Closed Out by Early Assignment

The simultaneous buy/write transaction was:
8/8/2023 Bought 200 Exxon Mobil shares @ $105.04
8/8/2023 Sold 2 Exxon Mobil August 25th, 2023 $102.00 Call options @ $3.84 per share
8/15/2023 Exxon Mobil Call options owner exercised their two Call options, so the Covered Calls position was closed out early. The two XOM Call options expired worthless and the 200 Exxon shares were sold at the $102.00 strike price.

The overall performance results (including commissions) for this Exxon Mobil Covered Calls position are as follows:
Covered Calls Net Investment: $20,241.34
= ($105.04 - $3.84) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$766.66
= ($3.84 * 200 shares) - $1.34 commission
(b) Dividend Income (XOM Call options exercised early on Monday, Aug. 14th, the last business day prior to the August 15th ex-div date): +$0.00

(c) Capital Appreciation: -$608.00
+($102.00 -$105.04) * 200 shares

Total Net Profit: +$158.66

= (+$766.66 options income +$0.00 dividend income -$608.00 capital appreciation)

Absolute Return-on-Investment: +0.8%

= +$158.66/$20,241.34

Annualized Return-on-Investment: +40.9%

= (+$158.66/$20,241.34) * (365/7 days)

Closed Out Covered Call Position in the iShares 20+ Year Treasury Bond ETF

The iShares 20+ Year Treasury Bond ETF (ticker TLT) price has had a substantial decline since this position was established.  The Moody's downgrade of ten U.S. banks caused an immediate increase in bond yields and since the price of bonds moves inversely with interest rates, TLT's price declined.  I was able to capture the $.275282 per share ex-distribution on August 1st, but still experienced a significant loss in this position.  The Covered Calls position expired last Friday and since I am not confident that long-term Treasury Bond yields won't continue their recent upward trend, I decided to close out this iShares 20+ Year Treasury Bond ETF Covered Calls position at a loss as detailed below.

iShares 20+ Year Treasury Bond ETF (TLT) -- Covered Calls Position Closed by Early Decision

The buy/write transaction was as follows:
7/27/2023 Bought 300 iShares 20+ Year Treasury Bond ETF shares at $100.71.

7/27/2023 Sold 3 TLT August 11th, 2023 $99.00 Call options @ $2.18 per share.
8/1/2023 Ex-distribution of $.275282 per share.

8/11/2023 TLT shares expired out-of-the-money and 300 TLT shares remain in the Covered Calls Advisor Portfolio.

8/14/2023 Sold 300 TLT shares at $95.61 to close out this Covered Calls position.

The overall performance results (including commissions) are as follows:
Covered Calls Net Investment: $29,561.01
= ($100.71 - $2.18) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$651.99
= ($2.18 * 300 shares) - $2.01 commission

(b) Distribution Income: +$82.58

= $.275282 distribution per share x 300 TLT shares

(c) Capital Appreciation: -$1,530

= ($95.61 selling price - $100.71 purchase price) * 300 shares

Total Net Profit: -$795.43

= +$651.99 options income +$82.58 distribution income -$1,530 capital appreciation

Absolute Return-on-Investment: -2.7%

= -$795.43/$29,561.01

Annualized Return-on-Investment: -57.8%

= (-$795.43/$29,561.01) * (365/17 days)

Regards and Godspeed,

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

Established Covered Calls Position in PayPal Holdings Inc.

Late in yesterday's trading session, a two-week Covered Calls position was established by buying 400 shares of PayPal Holdings Inc. (ticker symbol PYPL) stock at $61.72 and simultaneously selling 4 August 25th, 2023 $59.00 Call options at $3.36 per share -- at the buy/write net debit limit order of $58.36 per share -- so the potential time value profit is $.64 per share [$3.36 Call options premium - ($61.72 stock purchase price - $59.00 strike price)].  The approximate probability that this position will be in-the-money and therefore assigned on the options expiration date is 75.4%.  Also important is the fact that the next quarterly earnings report on November 2nd, 2023 is after the August 25th options expiration date.

PayPal Holdings Inc. is a fintech platform firm enabling both digital and mobile payments for both consumers and merchants (a two-sided model) around the world. PayPal’s broad-based objective is “to enable consumers and merchants to manage and move their money anywhere in the world, anytime, on any platform and through any device.” PayPal was spun out of eBay in July 2015 and its core product is a two-sided network where both merchants and consumers have PayPal accounts. The company’s primary source of revenue (90%+ of net revenues) is derived from charging fees for completing payment transactions, typically based on volume of activity.

Among several attractive financial fundamentals, PayPal's FY2023 estimated P/E Ratio is 12.5, which is very attractive based on their ongoing growth potential and the discounted P/E relative to both the S&P 500 and also PayPal's historical valuation.  Management's current focus on improving margins primarily through expense reductions and also substantial stock buybacks with their ample free cash flow bodes well for further potential earnings improvements.  PayPal appears in two of my stock screeners: (1) GARP (Growth at a Reasonable Price); and (2) Future 5-Year PEG Ratios.  In addition, forty-five analysts now covering PayPal have an average target price of $85.70 (a +35.6% upside potential from today's stock purchase price).    

Investor sentiment on Paypal's stock price continues to be negative (-12.8%, -37.8%, and -68.2% for the prior 3-month, 1-year, and 3-year periods respectively).  But after listening to their Q2 2023 conference call, I believe they are now likely near an inflection point -- where, as stated by their CEO: "we're clearly seeing a lot of headwinds begin to shift toward tailwinds".  PayPal is a trusted brand, and two of their notable competitive advantages are: (1) Their two-sided model provides information on both sides (both merchants and customers) of each transaction which gives PayPal a meaningful edge in combating fraud; and (2) E-commerce payment transactions growth is accelerating worldwide, and PayPal is especially attractive to merchants since PayPal customers are significantly less likely to abandon their cart.  

 

As detailed below, a potential outcome for this PayPal investment is +1.1% absolute return-on-investment for the next 14 days (equivalent to +28.3% annualized-return-on-investment) if the stock closes above the $59.00 strike price on the August 25th, 2023 options expiration date.

PayPal Holdings Inc. (PYPL) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
8/11/2023 Bought 400 shares of PayPal stock @ $61.72 per share and simultaneously Sold 4 PYPL August 25, 2023 $59.00 Call options @ $3.36 per share.

Note: The Implied Volatility of the Calls was 33.0 when this position was established.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Net Investment: $23,346.68
= ($61.72 - $3.36) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,341.32
= ($3.36 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PYPL stock is above the $59.00 strike price at the August 25th expiration): -$1,088.00
= ($59.00 -$61.72) * 400 shares

Potential Total Net Profit (If in-the-money and therefore closed out by assignment at the options expiration date): +$253.68
= (+$1,341.68 options income +$0.00 dividend income -$1,088.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.1%
= +$253.68/$23,346.68
Potential Equivalent Annualized-Return-on-Investment: +28.3%
= (+$253.68/$23,346.68) * (365/14 days)

Established Covered Calls Positions in Archer-Daniels-Midland Company and Microsoft Corporation

Early in this morning's trading session, short-term Covered Calls positions were established in Archer-Daniels-Midland Company (ticker ADM) and Microsoft Corporation (ticker MSFT) when my buy/write limit orders were executed.  My Dividend Capture Strategy (see details here) was used for both positions.   

For Archer-Daniels-Midland, two hundred shares were purchased at $85.15 and 2 August 25th, 2023 Call options were sold at $2.57 per share at the $83.00 strike price.  This strike price is 2.6% in-the-money which is consistent with my guideline of establishing Covered Calls between 2.0% and 5.0% in-the-money since my current Overall Market Meter sentiment is Slightly Bearish.  This buy/write transaction occurred at a Delta of 75.7 which approximates the probability that the Call options will be in-the-money and therefore assigned on the options expiration date.     

The potential time value profit for this ADM Covered Calls position is $.42 per share [$2.57 Call options premium - ($85.15 stock purchase price - $83.00 strike price)].  In addition to this $.42 profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.45 (annual dividend yield of 2.1%) next Tuesday (August 15th, 2023).  So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the August 15th ex-dividend is prior to the August 25th, 2023 options expiration date; and (2) the possibility that this Covered Calls position is in-the-money (and therefore assigned) on the options expiration date. The $.45 dividend is a 12.5% increase above the prior year's dividend level and is ADM's 50th consecutive year of dividend increases which signifies its entry into the Dividend Kings category which it now shares with only 45 other companies.  So, it is not surprising that ADM currently appears in my Dividend Growth stock screener -- but it is surprising that it is the only company in the Consumer Staples sector to appear in this screener.

ADM's estimated current FY2023 P/E Ratio is 11.8 which compares favorably with its prior-5-year average P/E of 13.4.  It is also notable that they have beat analysts' EPS estimates every quarter for the past 3 years.  The average target price for the twelve Wall Street analysts that cover ADM is $98.89 (+16.1% above today's purchase price). 

 
Two potential return-on-investment results are: 

•  +0.5% absolute return (equivalent to +45.7% annualized return for the next 4 days) if the stock is assigned early (on the last business day prior to the August 15th, 2023 ex-dividend date); OR 

• +1.0% absolute return (equivalent to +27.3% annualized return over the next 14 days) if the stock is assigned on the August 25th options expiration date.

These potential returns are very attractive given this is a large-cap company with relatively stable financial performance trends and a low Beta of only .64.  Details of this ADM Covered Calls position and two potential return-on-investment results are as follows:

1. Archer-Daniels-Midland Company (ADM) -- New Covered Calls Position

The buy/write transaction was:
8/11/2023 Bought 200 Archer-Daniels-Midland Co. shares @ $85.15
8/11/2023 Sold 2 ADM 8/25/2023 $83.00 Call options @ $2.57 per share
Note: the Implied Volatility of the Call options was 17.5 when this buy/write transaction was executed.
8/15/2023 Upcoming quarterly ex-dividend of $.45 per share

Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Calls Net Investment: $16,517.34
= ($85.15 - $2.57) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$512.66
= ($2.57 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on August 14th, the last business day prior to the August 15th ex-div date): +$0.00; or
(b) Dividend Income (If ADM stock assigned at the August 25th, 2023 expiration): $90.00
= ($.45 dividend per share x 200 shares)
(c) Capital Appreciation (If ADM Call options assigned early on August 14th): -$430.00
+($83.00 strike price - $85.15 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $83.00 strike price at the 8/25/2023 options expiration date): -$430.00
+($83.00 - $85.15) * 200 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Aug. 15th ex-dividend date)]: +$82.66

= (+$512.66 options income +$0.00 dividend income -$430.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $83.00 strike price at the 8/25/2023 expiration): +$172.66

= (+$512.66 options income +$90.00 dividend income -$430.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised early on August 14th): +0.5%

= +$82.66/$16,517.34

Annualized Return-on-Investment: +45.7%

= (+$82.66/$16,517.34) * (365/4 days); or

2. Absolute Return-on-Investment (If ADM shares assigned at $83.00 at the 8/25/2023 options expiration date): +1.0%

= +$172.66/$16,517.34

Annualized Return-on-Investment (If shares assigned at the 8/25/2023 expiration date): +27.3%

= (+$172.66/$16,517.34) * (365/14 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Archer-Daniels-Midland position, all nine criteria were met.

2. Microsoft Corporation (MSFT) -- New Covered Call Position

For Microsoft, one hundred shares were purchased at $319.45 and 1 August 18th, 2023 Call option was sold at $8.97 per share at the $312.50 strike price.  This short-term (i.e. one week) buy/write transaction occurred at a Delta of 72.7 which approximates the probability that the Call options will be in-the-money and therefore assigned on the options expiration date.     

My buy/write net debit limit order was entered and executed shortly thereafter at $310.48 per share with a 100 shares position.  The potential time value profit for this ADM Covered Calls position is $2.02 per share [$8.97 Call option premium - ($319.45 stock purchase price - $312.50 strike price)].  

In addition to this $2.02 profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.68 (annual dividend yield of 0.9%) next Wednesday (August 16th, 2023).  So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the August 16th ex-dividend is prior to the August 18th, 2023 options expiration date; and (2) the possibility that this Covered Call position is in-the-money (and therefore assigned) on the August 18th options expiration date.     

Two potential return-on-investment results are: 

•  +0.6% absolute return (equivalent to +47.3% annualized return for the next 5 days) if the stock is assigned early (on the last business day prior to the August 16th, 2023 ex-dividend date); OR 

• +0.9% absolute return (equivalent to +45.2% annualized return over the next 7 days) if the stock is assigned on the August 18th options expiration date.

The transactions were:

8/11/2023 Bought 100 Microsoft Corporation shares @ $319.45
8/11/2023 Sold 1 MSFT 8/18/2023 $312.50 Call option @ $8.97 per share
Note: The Call option Implied Volatility was 25.1 when this transaction was executed.
8/16/2023 Upcoming quarterly ex-dividend of $.68 per share

Two possible overall performance results (including commissions) for this Microsoft Corporation Covered Calls position are as follows:
Covered Call Net Investment: $31,048.67
= ($319.45 - $8.97) * 100 shares + $.67 commissions

Net Profit Components:
(a) Option Income: +$896.33
= ($8.97 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on the business day prior to the 8/16/2023 ex-div date): +$0.00; or
(b) Dividend Income (If MSFT shares assigned at the 8/18/2023 options expiration date): +$68.00
= ($.68 dividend per share x 100 shares)
(c) Capital Appreciation (If MSFT shares assigned early on 8/15/2023): -$695.00
+($312.50 - $319.45) * 100 shares; or
(c) Capital Appreciation (If shares assigned at the $312.50 strike price at the 8/18/2023 options expiration date): -$695.00
+($312.50 -$319.45) * 100 shares

1. Total Net Profit [If option exercised on the last business day prior to the Aug. 16th ex-dividend date)]: +$201.33

= (+$896.33 option income + $0.00 dividend income - $695.00 capital appreciation); or

2. Total Net Profit (If MSFT shares assigned at $312.50 strike price at its Aug. 18th, 2023 expiration date): +$269.33

= (+$896.33 option income +$68.00 dividend income -$695.00 capital appreciation)

1. Absolute Return-on-Investment [If MSFT option is exercised on the business day prior to the ex-dividend date]: +0.6%

= +$201.33/$31,048.67

Annualized Return-on-Investment (If option exercised early): +47.3%

= (+$201.33/$31,048.67) * (365/5 days); or

2. Absolute Return (If MSFT shares assigned at $312.50 at the August 18th, 2023 expiration): +0.9%

= +$269.33/$31,048.67

Annualized Return (If MSFT stock assigned at $312.50 at the 8/18/2023 expiration): +45.2%

= (+$269.33/$31,048.67) * (365/7 days)

Either outcome would provide an excellent return-on-investment result.  These returns will be achieved as long as the stock is above the $312.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $309.80 ($319.45 -$8.97 -$.68) provides 3.0% downside protection below today's stock purchase price.

The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a dividend capture strategy.  The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved.  As shown in the table below, all nine criteria are achieved for this Microsoft Corporation Covered Calls position.

Established Covered Calls Position in Exxon Mobil Corporation

Early in this morning's trading, I entered a Covered Calls simultaneous buy/write net debit limit order in Exxon Mobil Corporation (ticker XOM) for the August 25th, 2023 expiration and at the $102.00 strike price and at a net debit limit price of $101.20 per share.  Soon thereafter my order was executed and 200 shares were purchased at $105.04 and two 8/25/2023 Call options were sold at the $102.00 strike price for $3.84 per share.  So, the potential time value profit from the Call options is $.80 per share [$102.00 strike price - ($105.04 stock purchase price - $3.84 Call options price)], and the Implied Volatility of these Call options was 22.4 when this transaction was executed.  

In addition to the potential time value profit of $.80 per share, there is an upcoming quarterly ex-dividend of $.91 per share (3.6% annual dividend yield) on August 15th which is included in the potential return-on-investment calculations detailed below.  When this in-the-money Covered Calls position was established this morning it had a probability of assignment on the options expiration date of 71.8%. 

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

•  +0.8% absolute return (equivalent to +40.9% annualized return for the next 7 days) if the stock is assigned early (the last business day prior to the August 15th, 2023 ex-dividend date); OR 

• +1.7% absolute return (equivalent to +34.1% annualized return over the next 18 days) if the stock is assigned on the August 25th, 2023 options expiration date.

These returns will be achieved as long as Exxon Mobil's stock price is above the $102.00 strike price when assigned.  If the stock declines below the strike price, the breakeven price of $100.29 per share ($105.04 stock purchase price - $3.84 Call options selling price - $.91 ex-dividend amount) provides a 4.5% downside breakeven protection if assigned on the options expiration date.
 

Exxon Mobil Corporation (XOM) -- New Covered Calls Position

If the stock price increases to the point where the current time value (i.e. extrinsic value) of $.80 remaining in the short Call options decays substantially (down to approximately $.15 or less) before market close on Monday, August 14th, 2023 (the last business day prior to the 8/15/2023 ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 200 Exxon Mobil shares away to capture the dividend payment.  As detailed in the Dividend Capture spreadsheet below, early assignment would be a desirable outcome since its +40.9% annualized-return-on-investment (aroi) exceeds the +34.1% aroi that would be achieved if the assignment occurred instead on the August 25th options expiration date.

The simultaneous buy/write transaction was:
8/8/2023 Bought 200 Exxon Mobil shares @ $105.04
8/8/2023 Sold 2 Exxon Mobil August 25th, 2023 $102.00 Call options @ $3.84 per share
8/15/2023 Upcoming Exxon quarterly ex-dividend at $.91 per share

Two possible overall performance results (including commissions) for this Exxon Mobil Covered Calls position are as follows:
Covered Calls Net Investment: $20,241.34
= ($105.04 - $3.84) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$766.66
= ($3.84 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on Monday, Aug. 14th, the last business day prior to the August 15th ex-div date): +$0.00; or
(b) Dividend Income (If Exxon Mobil's shares assigned at the August 25th, 2023 options expiration date): +$182.00
= ($.91 dividend per share x 200 shares)

(c) Capital Appreciation (If Exxon Mobil's stock assigned early): -$608.00
+($102.00 -$105.04) * 200 shares; or
(c) Capital Appreciation (If Exxon Mobil shares assigned at $102.00 strike price at options expiration): -$608.00
+($102.00 -$105.04) * 200 shares

1. Total Net Profit (If option exercised early): +$158.66

= (+$766.66 options income +$0.00 dividend income -$608.00 capital appreciation); or

2. Total Net Profit (If Exxon Mobil stock assigned at $102.00 at the 8/25/2023 expiration): +$340.66

= (+$766.66 options income +$182.00 dividend income -$608.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the last business day prior to the 8/15/2023 ex-dividend date): +0.8%

= +$158.66/$20,241.34

Annualized Return-on-Investment (If option exercised early): +40.9%

= (+$158.66/$20,241.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Exxon Mobil stock assigned at $102.00 at the August 25th options expiration date): +1.7%

= +$340.66/$20,241.34

Annualized Return-on-Investment (If Exxon Mobil shares assigned at $102.00 at the 8/25/2023 options expiration date): +34.1%

= (+$340.66/$20,241.34) *(365/18 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved for this Exxon Mobil Corp. position.

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 $40.86 was executed.  Five hundred shares were purchased at $43.07 and five August 18th, 2023 Call options were sold at $2.21 at the $41.50 strike price.  The time value was $.64 per share = [$41.50 strike price - ($43.07 stock purchase price - $2.21 Call options price)].   Given my current cautious stock market outlook, a moderately in-the-money Covered Calls position was established with a Delta of 70.3 which approximates a 70.3% probability this position will be in-the-money and therefore assigned on the August 18th, 2023 options expiration date.  As desired, there is no earnings report prior to the options expiration date.

Two similar prior Covered Calls position in the Match Group were assigned on their options expiration dates 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.  Match is profitable and their earnings per share and revenues seem to be at an inflection point where they have begun to obtain regular quarterly revenue and profit increases based on their worldwide presence and their growth opportunities (especially in Asia but also in Europe).  The primary catalyst for my increasing optimism stems primarily from the dynamic leadership of their relatively new CEO, Bernard Kim, who has been in his new position for only slightly more than one year now but who has previously 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 +1.5% absolute return (equivalent to +47.1% annualized return-on-investment for the next 12 days) if the stock is assigned on the August 18th, 2023 options expiration date.

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

The buy/write transaction was:
8/7/2023 Bought 500 Match Group Inc. shares @ $43.07
8/7/2023 Sold 5 MTCH 8/18/2023 $41.50 Call options @ $2.21 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: $20,433.35
= ($43.07 - $2.21) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$1,101.65
= ($2.21 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 500 shares)
(c) Capital Appreciation (If MTCH shares assigned at $41.50 strike price at expiration): -$785.00
+($41.50 - $43.07) * 500 shares

Total Net Profit (If options exercised on the 8/18/2023 options expiration date): +$316.65

= (+$1,101.65 options income +$0.00 dividend income -$785.00 capital appreciation)

Potential Absolute Return-on-Investment (If the Match Group Inc. shares are assigned at the $41.50 strike price at the August 18th, 2023 options expiration date): +1.5%

= +$316.65/$20,433.35

Potential Annualized Return-on-Investment (If 500 Match Group shares assigned at $41.50 at the 8/18/2023 options expiration): +47.1%

= (+$316.65/$20,433.35) * (365/12 days)

Continuation of Covered Calls Position in Delta Air Lines Inc.

Last Friday, the August 4th, 2023 $46.00 Covered Calls position in Delta Air Lines Inc. (ticker DAL) closed out-of-the-money, so the Calls expired and 500 DAL shares remained in the Covered Calls Advisor Portfolio.  This morning, the Covered Calls position was continued by rolling out to the August 18th, 2023 $45.00 strike price at $.95 per share when Delta's price was $44.93.  

As detailed below, a potential return-on-investment result is +0.8% absolute return-on-investment (equivalent to +12.1% annualized return-on-investment for the 25 days holding period) if the stock price is in-the-money (i.e. above the $45.00 strike price) and therefore assigned on the August 18th, 2023 options expiration date.  

Delta Air Lines Inc. (DAL) -- Covered Calls Position Continued

The Buy/Write transaction was as follows:
7/24/2023 Bought 500 shares of Delta Air Lines Inc. @ $47.49 per share 
7/24/2023 Sold 5 DAL August 4th, 2023 $46.00 Call options @ $1.93 per share
8/4/2023 Five DAL Calls expired out-of-the-money so the 500 shares remained in the Covered Calls Advisor Portfolio.
8/7/2023 Continued this Delta Air Lines Inc. Covered Calls position by selling 5 Delta August 18th, 2023 Call options at the $45.00 strike price for $.56 per share.  The FXI share price was $44.93 when these Calls were sold and their Implied Volatility was 39.6.

A possible overall performance result (including commissions) for this Delta Air Lines Inc. Covered Calls position is as follows:
Delta Air Lines Covered Calls Net Investment: $22,783.35
= ($47.49 - $1.93) * 500 shares + $3.35 commission

Net Profit Potential:
(a) Options Income: +$1,433.30
= ($1.93 + $.95) * 500 shares - $6.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 Delta Air Lines shares assigned at $45.00 strike price at the 8/18/2023 options expiration date): -$1,245.00
+($45.00 - $47.49) * 500 shares

Potential Total Net Profit (If 500 Delta Air Lines shares assigned at the $45.00 strike price upon options expiration): +$188.30
= (+$1,433.30 options income +$0.00 dividend income -$1,245.00 capital appreciation)

Absolute Return-on-Investment Potential: +0.8%
= +$188.30/$22,783.35
Annualized Return-on-Investment Potential: +12.1%
= (+$188.30/$22,783.35) * (365/25 days)

August 4th, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with August 4th, 2023 options expirations.  Two positions (DICK'S Sporting Goods Inc. and iShares China Large-Cap ETF) closed in-the-money so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  The third position in Delta Air Lines Inc. (DAL) closed out-of-the-money so the Calls expired and the 500 Delta Air Lines shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for each of these three positions is as follows:

1. DICK'S Sporting Goods Inc. -- +1.5% absolute return (equivalent to +32.1% annualized return-on-investment) for the 17 days of this investment.  This Covered Call position was assigned at the $130.00 strike price on its 8/4/2023 options expiration date since DICK'S stock closed in-the-money at $144.95 per share.  The original post detailing the history of this Covered Call position is here. 

2. iShares China Large-Cap ETF (FXI) -- +1.9% absolute return (equivalent to +38.5% annualized return-on-investment) for the 18 days of this investment.  This Covered Calls position was assigned at the $27.00 strike price on its 8/4/2023 options expiration date since FXI closed in-the-money yesterday at $29.13 per share.  The original post detailing this Covered Calls position is here.  

3. Delta Air Lines Inc. (DAL) -- Delta's price closed yesterday at $44.59 which was below its $46.00 strike price, so the five 8/4/20233 Delta Air Lines Call options expired and 500 DAL shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either close out the position by selling the shares or continuing with this Covered Calls position by selling five DAL Calls against the 500 Delta shares currently owned.  

I welcome your feedback, at my email address shown below with any of your questions or topics related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net