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 PositionThe 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)
