Covered Calls Position Established in Oracle Corporation

Today 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.   

Three hundred shares were purchased at $106.26 and 3 January 19th, 2024 Call options were sold at $3.72 per share at the $103.00 strike price.  This buy/write transaction occurred at a Delta of 69.0 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 $1.05 per share [$3.72 Call options premium - ($105.67 stock purchase price - $103.00 strike price)].  In addition to this $1.05 per share profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.40 (annual dividend yield of 1.5%) on January 10th, 2024.  So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the January 10th ex-dividend is prior to the January 19th, 2024 options expiration date; and (2) the possibility that this Covered Calls position is in-the-money (and therefore assigned) on the options expiration date.  

As shown in the stock screener chart below, Oracle meets all 14 filters of my stock screener for the Info Tech and Comm Services Sectors and the average Target Price of the analysts that cover Oracle is +20.2% above today's $105.67 stock purchase price. 

Two potential return-on-investment results are: 

•  +1.0% absolute return (equivalent to +31.1% annualized return for the next 12 days) if the stock is assigned early (on the last business day prior to the January 10th, 2024 ex-dividend date); OR 

• +1.4% absolute return (equivalent to +24.6% annualized return over the next 21 days) if the stock is assigned on the January 19th options expiration date.

These potential returns are attractive given this is a large-cap company with relatively stable financial performance trends and a Beta (3-year) of .90.  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:
12/29/2023 Bought 300 Oracle Corporation shares @ $105.67.
12/29/2023 Sold 3 ORCL 1/19/2024 $103.00 Call options @ $3.72 per share.
Note: the Implied Volatility of the Call options was 20.8 when this buy/write transaction was executed.
1/10/2024 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: $30,587.01
= ($105.67 - $3.72) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,113.99
= ($3.72 * 300 shares) - $2.01 commission
(b) Dividend Income (If option exercised early on January 9th, the last business day prior to the January 10th ex-div date): +$0.00; or
(b) Dividend Income (If ORCL stock assigned at the January 19th, 2024 expiration date): $120.00
= ($.40 dividend per share x 300 shares)
(c) Capital Appreciation (If ORCL Call options assigned early on January 10th): -$801.00
+($103.00 strike price - $105.67 stock price) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $103.00 strike price at the 1/19/2024 options expiration date): -$801.00
+($103.00 - $105.67) * 300 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Jan. 10th ex-dividend date)]: +$312.99

= (+$1,113.99 options income +$0.00 dividend income -$801.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $103.00 strike price at the 1/19/2024 expiration): +$432.99

= (+$1,113.99 options income +$120.00 dividend income -$801.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised early on January 10th): +1.0%

= +$312.99/$30,587.01

Potential Annualized Return-on-Investment: +31.1%

= (+$312.99/$30,587.01) * (365/12 days); or

2. Absolute Return-on-Investment (If ORCL shares assigned at $103.00 at the 1/19/2024 options expiration date): +1.4%

= +$432.99/$30,587.01

Potential Annualized Return-on-Investment (If shares assigned at the 10/20/2023 options expiration date): +24.6%

= (+$432.99/$30,587.01) * (365/21 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 Corporation position, all nine criteria were met.