The time value was $.36 per share [$90.00 strike price - ($91.80 share price - $2.16 options premium)] when this net debit buy/write limit order transaction was executed. Philip Morris goes ex-dividiend a week from today on December 20th, 2023 at $1.30 per share (a 5.7% annualized dividend yield).
Philip Morris is the only company in the Consumer Staples sector that met all 12 filters in my "Basic Filters" stock screener. Also, analysts' average target price is $109.47 (+19.2% above today's stock purchase price).
As detailed below, a potential return-on-investment result is +0.4% absolute return-on-investment (equivalent to a +20.6% annualized return for the next 7 days) if the stock is assigned early on the last day prior to the December 20th ex-dividend date; OR +1.8% absolute return (equivalent to +29.3% annualized return over the next 23 days) if the stock is instead assigned on the January 5th, 2024 options expiration date.
Philip Morris International (PM) -- New Covered Calls Position
The simultaneous buy/write transaction today was as follows:
12/13/2023 Bought 300 Philip Morris International shares @ $91.80 per share.
12/13/2023 Sold 3 Philip Morris 1/5/2024 $90.00 Call options @ $2.16 per share.
As detailed below, a potential return-on-investment result is +0.4% absolute return-on-investment (equivalent to a +20.6% annualized return for the next 7 days) if the stock is assigned early on the last day prior to the December 20th ex-dividend date; OR +1.8% absolute return (equivalent to +29.3% annualized return over the next 23 days) if the stock is instead assigned on the January 5th, 2024 options expiration date.
Philip Morris International (PM) -- New Covered Calls Position
12/13/2023 Bought 300 Philip Morris International shares @ $91.80 per share.
12/13/2023 Sold 3 Philip Morris 1/5/2024 $90.00 Call options @ $2.16 per share.
12/20/2023 Upcoming quarterly PM ex-dividend of $1.30 per share.
Two possible overall performance results (including commissions) for this Philip Morris International Covered Calls position are as follows:
Covered Calls Net Investment: $26,889.99
= ($91.80 - $2.16) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$645.99
= ($2.16 * 300 shares) - $2.01 commissions
(b) Dividend Income (If option exercised on the last business day prior to the Dec. 20th ex-dividend date): +$0.00; or
(b) Dividend Income (If PM shares assigned at the Jan. 5th, 2024 options expiration): +$390.00
= ($1.30 per share x 300 shares)
(c) Capital Appreciation (If Philip Morris shares assigned early): -$540.00
+($90.00 - $91.80) * 300 shares ;or
(c) Capital Appreciation (If shares are in-the-money and therefore assigned at the $90.00 strike price at options expiration): -$540.00
+($90.00 - $91.80) * 300 shares
These returns will be achieved as long as the Philip Morris price is above the $90.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $88.34 ($91.80 -$2.16 -$1.30) provides 3.8% downside protection below today's purchase price.
Two possible overall performance results (including commissions) for this Philip Morris International Covered Calls position are as follows:
Covered Calls Net Investment: $26,889.99
= ($91.80 - $2.16) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$645.99
= ($2.16 * 300 shares) - $2.01 commissions
(b) Dividend Income (If option exercised on the last business day prior to the Dec. 20th ex-dividend date): +$0.00; or
(b) Dividend Income (If PM shares assigned at the Jan. 5th, 2024 options expiration): +$390.00
= ($1.30 per share x 300 shares)
(c) Capital Appreciation (If Philip Morris shares assigned early): -$540.00
+($90.00 - $91.80) * 300 shares ;or
(c) Capital Appreciation (If shares are in-the-money and therefore assigned at the $90.00 strike price at options expiration): -$540.00
+($90.00 - $91.80) * 300 shares
1. Total Net Profit [If options exercised on Dec. 19th (last business day prior to the Dec. 20th ex-dividend date)]: +$105.99
= (+$645.99 options income +$0.00 dividend income - $540.00 capital appreciation); or
2. Total Net Profit (If PM shares assigned at $90.00 strike price at the Jan. 5th, 2024 expiration): +$495.99
= (+$645.99 options income + $390.00 dividend income - $540.00 capital appreciation)
1. Absolute Return-on-Investment [If PM Call options exercised on final business day prior to the 12/20/2023 ex-dividend date]: +0.4%
= +$105.99/$26,889.99
Annualized Return-on-Investment (If options exercised early): +20.6%
= (+$105.99/$26,889.99) * (365/7 days); or
2. Absolute Return-on-Investment (If Philip Morris shares assigned at the $90.00 strike price on the January 5th, 2024 options expiration date): +1.8%
= +$495.99/$26,889.99
Annualized Return-on-Investment (If PM shares assigned at $90.00 at the Jan. 5th, 2024 expiration): +29.3%
= (+$495.99/$26,889.99) * (365/23 days)
These returns will be achieved as long as the Philip Morris price is above the $90.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $88.34 ($91.80 -$2.16 -$1.30) provides 3.8% downside protection below today's purchase price.
