Covered Calls Position Established in Oracle Corporation

Early in this morning's trading session, a Covered Calls position was established in Oracle Corporation (ticker ORCL) when my buy/write limit order was executed.  My Dividend Capture Strategy (see details here) was used for this position.   

Two hundred shares were purchased at $105.50 and 2 October 20th, 2023 Call options were sold at $4.56 per share at the $102.00 strike price.  This buy/write transaction occurred at a Delta of 72.5 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 Oracle Covered Calls position is $1.06 per share [$4.56 Call options premium - ($105.50 stock purchase price - $102.00 strike price)].  In addition to this $.1.06 profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.40 (annual dividend yield of 1.5%) on October 11th, 2023.  So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the October 11th ex-dividend is prior to the October 20th, 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 $.40 dividend is a 25.0% increase above the prior year's dividend level.

As shown in the detailed chart below, Oracle meets all 13 filters of my StockRover Overall stock screener and the average Target Price of the analysts that cover Oracle is $129.24 which is +22.5% above today's $105.50 stock purchase price. 

Two potential return-on-investment results are: 

•  +1.0% absolute return (equivalent to +47.6% annualized return for the next 8 days) if the stock is assigned early (on the last business day prior to the October 11th, 2023 ex-dividend date); OR 

• +1.4% absolute return (equivalent to +30.9% annualized return over the next 17 days) if the stock is assigned on the October 20th options expiration date.

These potential returns are very attractive given this is a large-cap company with relatively stable financial performance trends and a Beta (3-year) of .88.  Details of this Oracle Corp. Covered Calls position and two potential return-on-investment results are as follows:

Oracle Corporation (ORCL) -- New Covered Calls Position

The buy/write transaction was:
10/3/2023 Bought 200 Oracle Corporation shares @ $105.50
10/3/2023 Sold 2 ORCL 10/20/2023 $102.00 Call options @ $4.56 per share
Note: the Implied Volatility of the Call options was 26.2 when this buy/write transaction was executed.
10/11/2023 Upcoming quarterly ex-dividend of $.40 per share

Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Calls Net Investment: $20,189.34
= ($105.50 - $4.56) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$910.66
= ($4.56 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on October 10th, the last business day prior to the October 11th ex-div date): +$0.00; or
(b) Dividend Income (If ORCL stock assigned at the October 20th, 2023 expiration): $80.00
= ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If ORCL Call options assigned early on October 11th): -$700.00
+($102.00 strike price - $105.50 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $102.00 strike price at the 10/20/2023 options expiration date): -$700.00
+($102.00 - $105.50) * 200 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Oct. 11th ex-dividend date)]: +$210.66

= (+$910.66 options income +$0.00 dividend income -$700.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $102.00 strike price at the 10/20/2023 expiration): +$290.66

= (+$910.66 options income +$80.00 dividend income -$700.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised early on Oct. 11th): +1.0%

= +$210.66/$20,189.34

Potential Annualized Return-on-Investment: +47.6%

= (+$210.66/$20,189.34) * (365/8 days); or

2. Absolute Return-on-Investment (If ORCL shares assigned at $102.00 at the 10/20/2023 options expiration date): +1.4%

= +$290.66/$20,189.34

Potential Annualized Return-on-Investment (If shares assigned at the 10/20/2023 options expiration date): +30.9%

= (+$290.66/$20,189.34) * (365/17 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 Oracle Corp. position, all nine criteria were met.