Established Covered Calls Position in CVS Health Corporation

This afternoon I established a short-term Covered Calls net debit limit order in CVS Health Corporation (ticker CVS) for 300 shares of the October 27th, 2023 $70.00s at $69.59 per share. The order was executed this afternoon at 2:55pm ET when the stock price had declined to $70.91 and the 3 Calls were sold for $1.32 per share. The $69.59 net debit had a $.41 per share time value when this order was transacted.  The Delta was 67.0 when this Covered Calls position was established, which approximates the probability of 67.0% that the Call options will be in-the-money on the options expiration date. 

CVS goes ex-dividend tomorrow at $.605 per share (3.4% annualized dividend yield) and an owner of these Calls is unlikely to exercise their option today given the substantial time value that existed this afternoon when this Covered Calls position was established.  As preferred, CVS' next quarterly earnings report on November 1st, 2023 is after the October 27th options expiration date.
  
CVS is rated, on average, as Outperform by the 25 Wall Street analysts that cover it and their average target price is $90.16 (+27.1% above today's purchase price).  CVS' valuation is attractive with its current fiscal year estimated P/E Ratio is only 8.3.   

As detailed below, a potential return-on-investment result is +1.4% absolute return-on-investment (equivalent to +58.8% annualized return-on-investment over the next 9 days) if the stock is assigned on the October 28th, 2023 options expiration date.

CVS Health Corp. (CVS) -- New Covered Calls Position

The buy/write transaction was:
10/18/2023 Bought 300 CVS shares @ $70.91
10/18/2023 Sold 3 CVS 10/28/2023 $70.00 Call options @ $1.32
10/19/2023 Upcoming quarterly ex-dividend of $.605 per share

A possible overall performance result (including commissions) for this CVS Health Covered Calls position is as follows:
CVS Covered Calls Net Investment: $20,879.01
= ($70.91 - $1.32) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$393.99
= ($1.32 * 300 shares) - $2.01 commission
(b) Dividend Income (If CVS stock assigned at the Oct. 28th, 2023 options expiration date): +$181.50
= ($.605 dividend per share x 300 shares)

(c) Capital Appreciation (If shares assigned at $70.00 strike price at the 10/28/2023 options expiration): -$273.00
= +($70.00 - $70.91) * 300 shares

Potential Total Net Profit (If CVS shares assigned at $70.00 at the Oct. 28th, 2023 options expiration date): +$302.49

= (+$393.99 options income +$181.50 dividend income -$273.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.4%

= +$302.49/$20,879.01

Potential Annualized Return-on-Investment: +58.8%

= (+$302.49/$20,879.01) * (365/9 days)