An October 6th, 2023 Covered Calls buy/write limit order was executed this morning in U.S. Bancorp (ticker USB) at a net debit price of $33.58 per share. Five hundred shares were purchased at $35.23 and five October 6th, 2023 $34.00 strike price Call options were sold at $1.65 per share. The corresponding extrinsic value (i.e. time value) was $.42 per share [$1.65 Call options premium - ($35.23 stock purchase price - $34.00 strike price)]. There is an intervening ex-dividend prior to the options expiration date on September 28th at $.48 per share (a 5.7% annual dividend yield) which is included in the potential return-on-investment results shown below.
Some key numbers for this U.S. Bancorp Covered Calls position are:
Covered Calls Net Investment: $16,793.35
= ($35.23 - $1.65) x 500 shares + $3.35 commissions
1. If Assigned Early on the Day Prior to the Ex-Dividend Date:
Total Potential Profit: $206.65
= $.42 time value x 500 shares - $3.35 commissions
Days Until the Sept. 28th, 2023 Ex-Dividend Date: 13
Absolute Return-on-Investment: +1.2%
= $206.65 time value profit /$16,793.35 net investment
Annualized Return-on-Investment if Assigned Early: +34.5%
= ($206.65/$16,793.35) x (365/13 days)
2. If Assigned on the October 6th, 2023 Options Expiration Date:
Dividend Income: $240.00
= $.48 per share x 500 shares
Total Potential Profit: $446.65
= $206.65 time value profit + $240.00 dividend income
Days Until the October 6th, 2023 Options Expiration: 21
Absolute Return-on-Investment if Assigned at Expiration: +2.7%
= $446.65 total profit potential /$16,793.35 net investment
=Annualized Return-on-Investment if Assigned at Expiration: +46.2%
= ($446.65 total profit /$16,793.35) x (365/21 days)
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net
