Walmart goes ex-dividend at $.57 next Friday (12/8/2023) which is equivalent to a 1.5% annualized dividend yield at today's stock purchase price. This dividend is included in the potential return-on-investment results shown below. This Covered Calls position uses my Dividend Capture Strategy, which is my preferred strategy for companies in low growth Sectors (such as this Walmart position which is in the Consumer Staples Sector). Also, as preferred, there is no earnings report prior to the options expiration date and analysts' current stock target price is $179.74 per share (+17.0% above today's purchase price).
As detailed below, two potential return-on-investment results for this Walmart Covered Calls position are: (a) +0.8% absolute return (equivalent to +41.1% annualized return for the next 7 days) if the stock is assigned early [i.e. on December 7th which is the last trading day prior to the Dec. 8th ex-dividend date]; OR (b) +1.2% absolute return (equivalent to +30.4% annualized return over the next 14 days) if the stock is assigned on the December 15th, 2023 options expiration date.
Walmart Inc. (WMT) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
12/1/2023 Bought 200 shares of Walmart Inc. stock @ $153.61 per share
12/1/2023 Sold 2 Walmart December 15th, 2023 $152.50 Call options @ $2.31 per share
12/8/2023 Upcoming ex-dividend at $.57 per share
The overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $30,261.34
= ($153.61 - $2.31) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$460.66
= ($2.31 * 200 shares) - $1.34 commission
(b) Dividend Income (If Walmart stock assigned on the Dec. 8th ex-dividend date): $0.00
(b) Dividend Income (If Walmart stock assigned on the Dec. 15th options expiration date): +$114.00
= $.57 dividend per share x 200 shares
(c) Capital Appreciation (If Walmart stock assigned on the Dec. 8th ex-dividend date): -$222.00
= ($152.50 - $153.61) * 200 shares
(c) Capital Appreciation (If Walmart's stock price is above $152.50 strike price and therefore assigned at the Dec. 15th expiration): -$222.00
= ($152.50 - $153.61) * 200 shares
1. Potential Net Profit (If Walmart shares assigned on 12/7/2023, the day prior to the Dec. 8th ex-dividend date): +$238.66
= (+$460.66 options income +$0.00 dividend income - $222.00 capital appreciation)
2. Potential Net Profit (If Walmart price is above $152.50 strike price at the Dec. 15th options expiration): +$352.66
= (+$460.66 options income +$114.00 dividend income - $222.00 capital appreciation)
1. Absolute Return-on-Investment (If WMT shares assigned on 12/7/2023, the day prior to the 12/8/2023 ex-dividend date): +0.8%
= +$238.66/$30,261.34
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +41.1%
= (+$238.66/$30,261.34) * (365/7 days)
2. Absolute Return-on-Investment (If Walmart stock price is above $152.50 strike price and therefore assigned at the Dec. 15th options expiration): +1.2%
= +$352.66/$30,261.34
Equivalent Annualized Return-on-Investment (If assigned on the 12/15/2023 options expiration date): +30.4%
= (+$352.66/$30,261.34) * (365/14 days)
