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)
