Established Covered Calls in Las Vegas Sands Corporation

Today, a buy/write limit order was entered in Las Vegas Sands Corporation (ticker LVS) to buy 400 shares and simultaneously sell 4 Call options at the November 17th, 2023 expiration and at the $45.00 strike price. The net debit limit price for my order was $44.28 and this order was executed at 2:51pm when 400 shares were purchased at $47.20 and 4 November 17th, 2023 Call options were sold for $2.92 per share. Therefore a maximum potential time value profit of $.72 per share = [$2.92 options premium - ($47.20 stock price - $45.00 strike price)] is available for this position.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy since Las Vegas Sands has an upcoming quarterly ex-dividend of $.20 per share on Monday, November 6th which is prior to the November 17th options expiration date.  This is equivalent to an absolute annual dividend yield of 1.7% and an equivalent annualized dividend yield of 7.4% = [($.20/$47.20) x (365/21 days to expiration)].  This dividend is included in the detailed return-on-investment calculations below.  Either an early assignment on Friday, November 3rd (the last trading day prior to the ex-dividend date) or on the November 17th options expiration date would be desirable to the Covered Calls Advisor given the potential annualized return on investments for either outcome.  Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on January 24th, 2024 is after the 11/17/2023 options expiration date.

As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  Even if the Las Vegas Sands stock price declines somewhat during the next 21 days until the options expiration date, if the stock closes above the $45.00 strike price, then a very satisfactory annualized-return-on-investment of +35.8% will be achieved.  The Delta for these Call options was 71.7 when this position was established which approximates the probability of 71.7% that the position will be in-the-money at market close on the options expiration date.  Analysts' average target price is $66.05 (+39.9% above today's stock purchase price).  

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

•  +1.6% absolute return (equivalent to +58.8% annualized return-on-investment for the next 10 days) if the stock is assigned early (on the last business day prior to the November 6th ex-dividend date); or  
  

• +2.1% absolute return (equivalent to +35.8% annualized return-on-investment over the next 21 days) if the stock is assigned on the November 17th, 2023 options expiration date.

Las Vegas Sands Corporation (LVS) -- New Covered Calls Position
The buy/write transaction was:
10/27/2023 Bought 400 Las Vegas Sands shares @ $47.20
10/27/2023 Sold 4 LVS 11/17/2023 $45.00 Call options @ $2.92 per share.
Note: Implied Volatility (IV) of the Call options was at 35.4 when this position was transacted which, as preferred, is above the current VIX of 21.4.   
11/6/2023 Upcoming quarterly ex-dividend of $.20 per share

Two possible overall performance results (including commissions) for this Las Vegas Sands Corp. Covered Calls position are as follows:
Covered Calls Net Investment: $17,714.68
= ($47.20 - $2.92) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,165.32
= ($2.92 * 400 shares) - $2.68 commission
(b) Dividend Income (If LVS Call options exercised early on Nov. 3rd, 2023, the last business day prior to the Nov. 6th ex-div date): +$0.00; or
(b) Dividend Income (If LVS stock assigned at the November 17th, 2023 options expiration): +$80.00
= ($.20 dividend per share x 400 shares)

(c) Capital Appreciation (If Las Vegas Sand's Call options assigned early on Nov. 6th): -$880.00

+($45.00 - $47.20) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $45.00 strike price at the 11/17 options expiration): -$880.00
+($45.00 - $47.20) * 400 shares

1. Total Net Profit [If option exercised early (business day prior to the Nov. 6th ex-dividend date)]: +$285.32

= (+$1,165.32 options income +$0.00 dividend income -$880.00 capital appreciation); or

2. Total Net Profit (If LVS's shares assigned at $45.00 at the November 17th, 2023 expiration): +$365.32

= (+$1,165.32 +$80.00 -$880.00)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.6%

= +$285.32/$17,714.68

Potential Annualized Return (If option exercised early): +58.8%

= (+$285.32/$17,714.68) * (365/10 days); or

2. Potential Absolute Return-on-Investment (If LVS's shares assigned on November 17th options expiration date): +2.1%

= +$365.32/$17,714.68

Potential Annualized Return (If Las Vegas Sand's shares assigned at $45.00 at the Nov. 17th, 2023 expiration): +35.8%

= (+365.32/$17,714.68) * (365/21 days)

Either outcome provides an attractive return-on-investment result for this Las Vegas Sands investment.  These returns will be achieved as long as the stock is above the $45.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $44.08 ($47.20 -$2.92 -$.20) provides 6.6% downside protection below today's stock purchase price.

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 Las Vegas Sands Corporation Covered Calls position.