Deere goes ex-dividend at $1.47 (a 1.5% annualized dividend yield) on December 28th, 2023. This dividend is included in the potential return-on-investment results detailed below. Also, as preferred, there is no earnings report prior to the options expiration date and analysts' current stock target price is $423.00 per share (+10.4% above today's stock purchase price).
As detailed below, two potential return-on-investment results for this Deere & Company Covered Call position are: (a) +1.2% absolute return-on-investment (equivalent to +33.0% annualized return-on-investment for the next 13 days) if the stock is assigned early [i.e. on Dec. 27th which is the last trading day prior to the Dec. 28th ex-dividend date]; OR (b) +1.6% absolute return-on-investment (equivalent to +27.3% annualized return-on-investment over the next 21 days) if the stock is assigned on the January 5th, 2024 options expiration date.
Deere & Company (DE) -- New Covered Call Position
The simultaneous buy/write transaction was as follows:
12/15/2023 Bought 100 shares of John Deere & Co. stock @ $383.21 per share.
12/15/2023 Sold 1 Deere & Co. January 5th, 2024 $375.00 Call option @ $12.57 per share.
12/28/2023 Upcoming ex-dividend at $1.47 per share.
The overall performance results (including commissions) would be as follows:
Covered Call Net Investment: $37,064.67
= ($383.21 - $12.57) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$1,256.33
= ($12.57 * 100 shares) - $.67 commission
(b) Dividend Income (If Deere stock assigned on the Dec. 28th ex-dividend date): $0.00
(b) Dividend Income (If Deere stock assigned on the Jan. 5th, 2024 options expiration date): +$147.00
= $1.47 dividends per share x 100 shares
(c) Capital Appreciation (If Deere & Co. stock assigned on the Dec. 28th ex-dividend date): -$821.00
= ($375.00 strike price - $383.21 stock purchase price) * 100 shares
(c) Capital Appreciation (If John Deere stock is above $375.00 strike price and therefore assigned at the Jan. 5th, 2024 options expiration date): -$821.00
= ($375.00 - $383.21) * 100 shares
1. Potential Net Profit (If Deere shares assigned on 12/27/2023, the day prior to the Dec. 28th ex-dividend date): +$435.33
= (+$1,256.33 options income +$0.00 dividend income - $821.00 capital appreciation)
2. Potential Net Profit (If stock price is above $375.00 strike price at the Jan. 5th, 2024 options expiration date): +$582.33
= (+$1,256.33 options income +$147.00 dividend income - $821.00 capital appreciation)
1. Absolute Return-on-Investment (If Deere shares assigned on 12/27/2023, the day prior to the 12/28/2023 ex-dividend date): +1.2%
= +$435.33/$37,064.67
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +33.0%
= (+$435.33/$37,064.67) * (365/13 days)
2. Absolute Return-on-Investment (If John Deere stock price is above $375.00 strike price and therefore assigned at the January 5th, 2024 options expiration date): +1.6%
= +$582.33/$37,064.67
Equivalent Annualized Return-on-Investment (If assigned on the 1/5/2024 options expiration date): +27.3%
= (+$582.33/$37,064.67) * (365/21 days)
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 Deere & Company Covered Call position.
