Established Covered Calls Position in Target Corporation

A buy/write limit order in Target Corporation (ticker TGT) was executed at the Covered Calls Advisor's net debit price of $141.90 per share.  Two hundred shares were purchased at $154.41 and two November 29th, 2024 weekly Call options were sold for $12.51 at the $145.00 strike price, a time value of $3.10 = [$12.51 options premium - ($154.41 stock price - $145.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Target has an upcoming quarterly ex-dividend of $1.12 per share (a 2.9% annual dividend yield) that goes ex-dividend on November 20th, 2024 which is prior to the November 29th options expiration date.  Importantly, they also announce their Q3 2025 earnings on November 20th.  I normally avoid holding Covered Calls positions during a company's earnings report, but given the very attractive Implied Volatility of 52.7 (and the accompanying high annualized return-on-investment potential) for this particular Call option, I feel the inflated volatility provided a reasonable risk/reward set-up.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the November 29th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment upon assignment for either outcome.

As detailed below, two potential return-on-investment results are: 

•  +2.2% absolute return (equivalent to +132.6% annualized return-on-investment for the next 6 days) in the relatively unlikely event that the stock price moves substantially higher and is assigned early (business day prior to the November 20th ex-dividend date); OR 

• +3.0% absolute return (equivalent to +72.2% annualized return-on-investment over the next 15 days) if the stock is assigned on the November 29th options expiration date.

Target Corporation (TGT) -- New Covered Calls Position
The simultaneous buy/write transaction was:
11/14/2024 Bought 200 Target Corp. shares @ $154.41.
11/14/2024 Sold 2 Target 11/29/2024 $145.00 Call options @ $12.51 per share.
Note: The Implied Volatility of the Call options was 52.7 when this position was transacted.
11/20/2024 Upcoming quarterly ex-dividend of $1.12 per share.

Two possible overall performance results (including commissions) for this Target Corporation Covered Calls position are as follows:
Covered Calls Cost Basis: $28,381.34
= ($154.41 - $12.51) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,500.66
= ($12.51 * 200 shares) - $1.34 commission
(b) Dividend Income (If options exercised early on Nov. 19th, the business day prior to the Nov. 20th, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Target's stock assigned on the Nov. 29th, 2024 options expiration): +$224.00
= ($1.12 dividend per share x 200 shares)

(c) Capital Appreciation (If TGT Call options assigned early on Nov. 19th): -$1,882.00
+($145.00 strike price - $154.41 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $145.00 strike price at options expiration): -$1,882.00
+($145.00 - $154.41) * 200 shares

1. Total Net Profit (If options exercised early): +$618.66

= (+$2,500.66 options income +$0.00 dividend income -$1,882.00 capital appreciation); or

2. Total Net Profit (If Target shares assigned at $145.00 at the Nov. 29th, 2024 expiration): +$842.66

= (+$2,500.66 +$224.00 -$1,882.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 20th ex-dividend date]: +2.2%

= +$618.66/$28,381.34

Annualized Return-on-Investment (If option exercised early): +132.6%

= (+$618.66/$28,381.34) * (365/6 days); or

2. Absolute Return-on-Investment (If Target shares assigned on the Nov. 29th, 2024 options expiration date): +3.0%

= +$842.66/$28,381.34

Annualized Return-on-Investment (If Target shares assigned at $145.00 at the Nov. 29th, 2024 expiration): +72.2%

= (+$842.66/$28,381.34) * (365/15 days)

Either outcome provides an exceptional return-on-investment result for this Target Corp. Covered Calls investment.  These returns will be achieved as long as the stock is above the $145.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $140.78 = ($154.41 stock price - $12.51 Call options price - $1.12 dividend) provides a substantial 8.8% downside protection below today's stock purchase price.

Established Covered Calls in Discover Financial Services

Today with less than an hour before the market close, a Covered Calls position was established in Discover Financial Services (ticker DFS) with a November 29th, 2024 options expiration date. Two hundred shares of Discover were purchased at $174.90 and two Call options were sold at $10.36 per share at the $167.50 strike price.  The potential time value profit was $2.96 per share [$167.50 strike price - ($174.90 share price - $10.36 Call options premium)] when this buy/write net debit limit order transaction was executed.  

Discover also has an upcoming ex-dividend date on November 21st (8 days from today) at $.70 per share (1.6% annual dividend yield), so this is included in the potential return-on-investment results detailed below.  This in-the-money Covered Calls position is consistent with my preference (with upcoming ex-dividends prior to the options expiration date) to use my Dividend Capture Strategy.  With this strategy it is possible to achieve an attractive annualized return-on-investment result if either the position is assigned on the options expiration date or if it is assigned early (normally on the day prior to the ex-dividend date).  Also, because of the volatility immediately after quarterly earnings reports are released, it is preferred that there be no quarterly earnings report prior to the options expiration date, and this is true for this Discover Financial position since the next earnings report is not until January 15th, 2025.  The approximate probability of assignment on the options expiration date was 69.1% when this position was established.

Discover's business is in digital banking (including the Discover brand credit cards) and payment services.  Capital One has made a bid to acquire Discover which helps to explain Discover's recent bullish price action, but resolution of this potential merger will likely take several months to work its way through regulatory channels.  

Two potential return-on-investment results are as follows: (a) +1.8% absolute return-on-investment (equivalent to +81.9% annualized roi) for 8 days if this Covered Calls position is assigned early on November 20th, 2024 (the last business day prior to the Nov. 21st ex-dividend date); OR  (b) +2.2% absolute return-on-investment (equivalent to +50.6% annualized roi) for 16 days if this Covered Calls position is in-the-money on the November 29th, 2024 weekly options expiration date.

Discover Financial Services (DFS) -- New Covered Calls Position Established
The simultaneous buy/write transaction was as follows:
11/13/2024 Bought 200 shares of Discover Financial Services @ $174.90 per share; and 
11/13/2024 Sold 2 DFS Nov. 29th, 2024 $167.50 Call options @ $10.36 per share.  The Implied Volatility of these Calls was 32.7 when this position was established.
11/21/2024 Upcoming ex-dividend of $.70 per share
 
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $32,909.34
= ($174.90 - $10.36) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,070.66
= ($10.36 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on the last business day prior to the ex-div date): +$0.00; or
(b) Dividend Income (If DFS shares assigned at the Nov. 29th, 2024 expiration): +$140.00
= ($.70 dividend per share x 200 shares)
(c) Capital Appreciation (If Discover shares assigned early): -$1,480.00
+($167.50 strike price - $174.90 stock purchase cost) * 200 shares; or
(c) Capital Appreciation (If DFS shares assigned at $167.50 strike price at options expiration): -$1,480.00
+($167.50 - $174.90) * 200 shares

1. Total Net Profit [If option exercised on Nov. 20th, 2024 (the last business day prior to the November 21st ex-dividend date)]: +$590.66

= (+$2,070.66 options income +$0.00 dividend income -$1,480.00 capital appreciation); or

2. Total Net Profit (If Discover Financial shares assigned at $167.50 strike price at the November 29th, 2024 options expiration): +$730.66

= (+$2,070.66 +$140.00 -$1,480.00)

1. Absolute Return-on-Investment (If DFS options exercised early on the last business day prior to the ex-dividend date): +1.8%

= +$590.66/$32,909.34

Annualized Return-on-Investment (If DFS Call options exercised early on Nov 21st, 2024): +81.9%

= (+$590.66/$32,909.34) * (365/8 days); or

2. Absolute Return-on-Investment (If DFS shares assigned at $167.50 at the Nov. 21st, 2024 options expiration date): +2.2%

= +$730.66/$32,909.34

Annualized Return-on-Investment (If DFS stock assigned at $167.50 at the Nov. 21st, 2024 options expiration date): +50.6%

= (+$730.66/$32,909.34) * (365/16 days)

Either outcome would provide a very good return-on-investment result.  These returns will be achieved as long as the stock is above the $167.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $163.84 ($174.90 - $10.36 - $.70) provides 6.3% downside protection below today's purchase price.

Established Covered Calls in Marathon Petroleum Corporation

This morning a Covered Calls position was established in the Marathon Petroleum Corporation (ticker symbol MPC) at a net debit buy/write limit order of $148.46.  Two hundred shares were purchased at $154.87 and two November 29th, 2024 Call options were sold at $6.41 per share at the $150.00 strike price.  This buy/write transaction occurred when there was a 71.6% probability that the stock would be in-the-money and therefore assigned at the $150.00 strike price on the options expiration date.  The potential time value profit is $1.54 per share [$6.41 Call options premium - ($154.87 stock purchase price - $150.00 strike price)].  

In addition to this $1.54 per share time value profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.91 (annual dividend yield of 2.4%) on November 20th, 2024.  The $.91 dividend represents a 10.3% increase above the quarterly dividend level during the same quarter last year.  

Marathon Petroleum Corp.'s Q3 2024 earnings report eight days ago included both a substantial revenue and an earnings per share beat compared with analysts' estimates.  The stock has continued to react positively to this news during the past week.  The 19 analysts that cover Marathon Petroleum Corp. on average have a 'Buy' rating and an average Target Price of $172.00 (+11.1% above today's purchase price).     

Marathon is among the largest of U.S.-based refiners (along with Valero and Phillips 66).  Marathon has refining and marketing along with midstream operations located in the Gulf of Mexico, the Mid-Continent, and the West Coast.

 
As detailed below, two potential return-on-investment results are: 

•  +1.0% absolute return (equivalent to +53.9% annualized return-on-investment for the next 7 days) if the stock is assigned early (on the last business day prior to the November 20th, 2024 ex-dividend date); OR 

• +1.6% absolute return (equivalent to +37.6% annualized return-on-investment over the next 16 days) if the stock is assigned on the November 29th options expiration date.

Marathon Petroleum Corp. (MPC) -- New Covered Call Position

The buy/write transaction was:
11/13/2024 Bought 200 Marathon Petroleum Corp. shares @ $154.87
11/13/2024 Sold 2 MPC 11/29/2024 $150.00 Call options @ $6.41 per share
Note: the Implied Volatility of the Call options was 22.8 when this buy/write transaction was executed.  As preferred, this exceeds the Implied Volatility of the S&P 500 (i.e. SPY) which is currently 14.6.
11/20/2024 Upcoming quarterly ex-dividend of $.91 per share

Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Call Net Investment: $29,693.34
= ($154.87 - $6.41) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,280.66
= ($6.41 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on Nov. 19th, the last business day prior to the November 20th ex-div date): +$0.00; or
(b) Dividend Income (If MPC stock assigned at the Nov. 29th, 2024 expiration): $182.00
= ($.91 dividend per share x 200 shares)
(c) Capital Appreciation (If Marathon Petroleum Call option is assigned early on Nov. 19th): -$974.00
+($150.00 strike price - $154.87 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $150.00 strike price at the Nov. 29th options expiration): -$974.00
+($150.00 - $154.87) * 200 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Nov. 20th ex-dividend date)]: +$306.66

= (+$1,280.66 options income +$0.00 dividend income -$974.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $150.00 strike price at the Nov. 29th, 2024 expiration): +$488.66

= (+$1,280.66 options income +$182.00 dividend income -$974.00 capital appreciation)

1. Absolute Return-on-Investment (If the Call option is exercised early on Nov. 20th): +1.0%

= +$306.66/$29,693.34

Annualized Return-on-Investment: +53.9%

= (+$306.66/$29,693.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Marathon Petroleum Corp. shares assigned at $150.00 on the Nov. 29th, 2024 options expiration date): +1.6%

= +$488.66/$29,693.34

Annualized Return-on-Investment (If MPC shares assigned at the 11/29/2024 expiration date): +37.6%

= (+$488.66/$29,693.34) * (365/16 days)

Either outcome provides a very attractive return-on-investment result for this Marathon Petroleum investment.  These returns will be achieved as long as the stock is above the $150.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $147.55 ($154.87 - $6.41 - $.91) provides a 4.7% downside protection below today's purchase price.

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 Marathon Petroleum Corp. position, all nine criteria were met.

Established Covered Calls Position in Wheaton Precious Metals Corp.

A buy/write limit order in Wheaton Precious Metals Corp. (ticker WPM) was executed at the Covered Calls Advisor's net debit price of $57.12 per share.  Five hundred shares were purchased at $59.74 and five November 29th, 2024 weekly Call options were sold for $2.62 at the $58.00 strike price, a time value of $.88 = [$2.62 options premium - ($59.74 stock price - $58.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Wheaton Precious Metals has an upcoming quarterly ex-dividend of $.155 per share that goes ex-dividend on November 21st, 2024 which is prior to the November 29th options expiration date. This is equivalent to an absolute annual dividend yield of 1.0% (at the current $59.74 stock price).  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the November 21st ex-dividend date or on the November 29th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment result for either outcome.

Wheaton Precious Metals appeared today in my newly created 'Ratings Versus Peers' stock screener.  It also has Refinitiv's highest possible average score of 10, and the 13 analysts covering the company have a mean target price of $71.70 (+20.0% above today's purchase price). 

The Covered Calls Advisor's current Overall Market Meter outlook remains Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its November 29th, 2024 expiration date was 67.2% when this position was established.     

As detailed below, two potential return-on-investment results are: 

•  +1.5% absolute return (equivalent to +62.0% annualized return-on-investment for the next 9 days) if the stock is assigned early (business day prior to the November 21st ex-dividend date); OR 

• +1.8% absolute return (equivalent to +38.6% annualized return-on-investment over the next 17 days) if the stock is assigned on the November 29th options expiration date.

Wheaton Precious Metals Corp. (WPM) -- New Covered Calls Position
The simultaneous buy/write transaction was:
11/12/2024 Bought 500 Wheaton Precious Metals Corp. shares @ $59.74.
11/12/2024 Sold 5 WPM 11/29/2024 $58.00 Call options @ $2.62 per share.
Note: The Implied Volatility of the Call options was 27.7 when this position was transacted.
11/21/2024 Upcoming quarterly ex-dividend of $.155 per share.

Two possible overall performance results (including commissions) for this Wheaton Precious Metals Covered Calls position are as follows:
Covered Calls Cost Basis: $28,563.35
= ($59.74 - $2.62) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,306.65
= ($2.62 * 500 shares) - $3.35 commission
(b) Dividend Income (If options exercised early on Nov. 20th, the business day prior to the Nov. 21st, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Wheaton Precious Metals stock assigned on the Nov. 29th, 2024 options expiration): +$77.50
= ($.155 dividend per share x 500 shares)

(c) Capital Appreciation (If WPM Call options assigned early on Nov. 21st): -$870.00
+($58.00 strike price - $59.74 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $58.00 strike price at options expiration): -$870.00
+($58.00 - $59.74) * 500 shares

1. Total Net Profit (If options exercised early): +$436.65

= (+$1,306.65 options income +$0.00 dividend income -$870.00 capital appreciation); or

2. Total Net Profit (If WPM shares assigned at the $58.00 strike price at the Nov. 21st, 2024 expiration): +$514.15

= (+$1,306.65 +$77.50 -$870.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 21st ex-dividend date]: +1.5%

= +$436.65/$28,563.35

Annualized Return-on-Investment (If option exercised early): +62.0%

= (+$436.65/$28,563.35) * (365/9 days); or

2. Absolute Return-on-Investment (If Wheaton Precious Metals shares assigned on the Nov. 29th, 2024 options expiration date): +1.8%

= +$514.15/$28,563.35

Annualized Return-on-Investment (If WPM shares assigned at $58.00 at the Nov. 29th, 2024 expiration): +38.6%

= (+$514.15/$28,563.35) * (365/17 days)

Either outcome provides a satisfactory return-on-investment result for this WPM Covered Calls investment.  These returns will be achieved as long as the stock is above the $58.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $56.965 = ($59.74 stock price - $2.62 Call options price - $.155 dividend) provides 4.6% downside protection below today's stock purchase price.

Early Assignment of Covered Calls Position in Citigroup Inc.

My five Citigroup Inc. November 8th, 2024 Call options were exercised on Friday 11/01/2024.  Because Citi's stock price increased from $62.67 when this position was established to $63.71 at yesterday's market close, the original $.53 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so (with seven days remaining until the November 8th options expiration date), the owner of these Calls exercised their option to buy the 500 shares at the $60.00 strike price in order to receive Monday's $.56 per share ex-dividend. 

The post when this Citigroup Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Citigroup Covered Calls position was +0.9% absolute return-on-investment in 8 days (equivalent to a +40.1% annualized return-on-investment).

Citigroup Inc. (C) -- Covered Calls Position Closed by Early Assignment

The simultaneous buy/write transaction was:
10/24/2024 Bought 500 Citigroup Inc. shares @ $62.67.
10/24/2024 Sold 5 C 11/08/2024 $60.00 Call options @ $3.20 per share.
Note: The Implied Volatility of the Call options was 27.9 when this position was transacted.
10/01/2024 Five C 11/08/2024 $60.00 Calls exercised early, so the Calls expired and the 500 Citigroup shares were sold at the $60.00 strike price.

The overall performance results (including commissions) for this Citigroup Inc. Covered Calls position were as follows:
Covered Calls Cost Basis: $29,738.35
= ($62.67 - $3.20) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,596.65
= ($3.20 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (Citi Call options assigned early on October 31st): -$1,335.00
+($60.00 strike price - $62.67 stock purchase price) * 500 shares

Total Net Profit: +$261.65

= (+$1,596.65 options income +$0.00 dividend income -$1,335.00 capital appreciation)

Absolute Return-on-Investment: +0.9%

= +$261.65/$29,738.35

Annualized Return-on-Investment: +40.1%

= (+$261.65/$29,738.35) * (365/8 days)

This transaction means that I currently have no remaining Covered Calls positions in my Covered Calls Advisor Portfolio.  All available cash is in the Schwab Value Advantage Money Fund (SWVXX) whose current 7-day yield is 4.68%.  I will resume with new Covered Calls positions after Tuesday's election.  

Established Covered Calls Position in Citigroup Inc.

A buy/write limit order in Citigroup Inc. (ticker C) was executed at the Covered Calls Advisor's net debit price of $59.47 per share.  Five hundred shares were purchased at $62.67 and five November 8th, 2024 weekly Call options were sold for $3.20 at the $60.00 strike price, a time value of $.53 = [$3.20 options premium - ($62.67 stock price - $60.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Citigroup announced (after market close yesterday) its next upcoming quarterly ex-dividend of $.56 per share (an increase from the previous rate of $.53) that goes ex-dividend on November 1st, 2024 which is prior to the November 8th options expiration date. This is equivalent to an absolute annual dividend yield of 3.6% (at the current $62.67 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 21.7% = [($.56/$62.67) x (365/15 days-to-expiration)] for the 15 days duration of this position.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the November 8th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment upon assignment for either outcome.

Citigroup has beat analysts' earnings-per-share estimates in each of their past 4 quarters and they project fiscal year 2025 eps to be +23.2% above this year.  In addition, Citi's price-to-tangible-book-value of .65 is less than half that of all its mega-bank peers.  The 22 analysts following Citi have a buy rating on the stock and an average target price of $73.20 (+16.8% above today's purchase price). 

As detailed on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  The Covered Calls Advisor's current Overall Market Meter outlook remains Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its November 8th, 2024 expiration date was 76.3% when this position was established.     

As detailed below, two potential return-on-investment results are: 

•  +0.9% absolute return (equivalent to +40.1% annualized return-on-investment for the next 8 days) if the stock is assigned early (business day prior to the November 1st ex-dividend date); OR 

• +1.8% absolute return (equivalent to +44.3% annualized return-on-investment over the next 15 days) if the stock is assigned on the November 8th options expiration date.

Citigroup Inc. (C) -- New Covered Calls Position
The simultaneous buy/write transaction was:
10/24/2024 Bought 500 Citigroup Inc. shares @ $62.67.
10/24/2024 Sold 5 C 11/08/2024 $60.00 Call options @ $3.20 per share.
Note: The Implied Volatility of the Call options was 27.9 when this position was transacted.
11/01/2024 Upcoming quarterly ex-dividend of $.56 per share.

Two possible overall performance results (including commissions) for this Citigroup Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $29,738.35
= ($62.67 - $3.20) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,596.65
= ($3.20 * 500 shares) - $3.35 commission
(b) Dividend Income (If options exercised early on Oct. 31st, the business day prior to the Nov. 1st, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Citigroup stock assigned on the Nov. 8th, 2024 options expiration): +$280.00
= ($.56 dividend per share x 500 shares)

(c) Capital Appreciation (If Citi Call options assigned early on October 31st): -$1,335.00
+($60.00 strike price - $62.67 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $60.00 strike price at options expiration): -$1,335.00
+($60.00 - $62.67) * 500 shares

1. Total Net Profit (If options exercised early): +$261.65

= (+$1,596.65 options income +$0.00 dividend income -$1,335.00 capital appreciation); or

2. Total Net Profit (If Citi shares assigned at $60.00 at the Nov. 1st, 2024 expiration): +$541.65

= (+$1,596.65 +$280.00 -$1,335.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 1st ex-dividend date]: +0.9%

= +$261.65/$29,738.35

Annualized Return-on-Investment (If option exercised early): +40.1%

= (+$261.65/$29,738.35) * (365/8 days); or

2. Absolute Return-on-Investment (If Citi shares assigned on the Nov. 8th, 2024 options expiration date): +1.8%

= +$541.65/$29,738.35

Annualized Return-on-Investment (If Citi shares assigned at $60.00 at the Nov. 1st, 2024 expiration): +44.3%

= (+$541.65/$29,738.35) * (365/15 days)

Either outcome provides a satisfactory return-on-investment result for this Citigroup Covered Calls investment.  These returns will be achieved as long as the stock is above the $175.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $172.24 = ($182.19 stock price - $9.45 Call options price - $.50 dividend) provides 5.5% downside protection below today's stock purchase price.

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 in the chart below, all nine criteria are achieved for this Citigroup Covered Calls position.

Early Assignment of Covered Calls Position in Dell Technologies Inc.

I was notified by Schwab early this morning that the three Dell Technologies Inc. November 1st, 2024 Call options were exercised yesterday.  Because the Dell stock price increased from $118.56 when this position was established to $125.66 at yesterday's market close, the original $2.20 time value in the Calls when the position was established had declined on yesterday's market close to $0.86.  So, with ten days remaining until the November 1st options expiration date, the owner of these Calls exercised their option to buy the 300 shares at the $110.00 strike price in order to receive today's $.445 per share ex-dividend. 

I was surprised that the owner of the Calls exercised their option in this instance since they decided to immediately forego $.86 time value profit potential (which I am pleased to have received as an immediate profit addition to my return-on-investment result for this position). I am also pleased with the +49.5% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +35.7% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 1st, 2024 options expiration date.   

The post when this Dell Technologies Inc. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Dell Covered Calls position was +2.0% absolute return in 15 days (equivalent to a +49.5% annualized return-on-investment).

Dell Technologies Inc. (DELL) -- Covered Calls Position Closed Out by Early Assignment
The simultaneous buy/write transaction was:
10/7/2024 Bought 300 Dell Technologies Inc. shares @ $118.56.
10/7/2024 Sold 3 DELL 11/01/2024 $110.00 Call options @ $10.76 per share.
Note: the Implied Volatility of the Call options was 43.2 when this position was established.
10/22/2024 Three Dell Technologies Calls were exercised on the day prior to their October 22nd, 2024 ex-dividend date, so the Calls expired and the 300 Dell shares were sold at the $110.00 strike price.

Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $32,342.01
= ($118.56 - $10.76) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$3,225.99
= ($10.76 * 300 shares) - $2.01 commission
(b) Dividend Income (Dell options exercised early on Oct. 21st, the business day prior to the Oct. 22nd, 2024 ex-div date): +$0.00

(c) Capital Appreciation (Dell Call options assigned early on October 22nd): -$2,568.00
+($110.00 - $118.56) * 300 shares

Total Net Profit: +$657.99

= (+$3,225.99 options income +$0.00 dividend income -$2,568.00 capital appreciation)

Absolute Return-on-Investment: +2.0%

= +$657.99/$32,342.01

Annualized Return-on-Investment: +49.5%

= (+$657.99/$32,342.01) * (365/15 days)

Monthly Options Expiration Results through October 18th, 2024

Each month after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So, this post covers the period from the day after last month's September 20th, 2024 options expiration through yesterday's October 18th, 2024 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio closed a total of seven positions.  All seven positions closed in-the-money and were assigned at their respective strike prices.  The specific results for each closed position are summarized as follows:

• Five Covered Calls positions closed in-the-money yesterday on their monthly options expiration date as follows:
1. U.S. Bancorp -- +2.0% absolute return-on-investment in 24 days (equivalent to a +30.1% annualized return-on-investment).
2. Medtronic PLC -- +1.9% absolute return-on-investment in 28 days (equivalent to a +24.3% annualized return-on-investment).
3. Global Payments Inc. -- +1.8% absolute return-on-investment in 24 days (equivalent to a +27.1% annualized return-on-investment).
4. General Dynamics Inc. -- +1.0% absolute return-on-investment in 10 days (equivalent to a +38.1% annualized return-on-investment).  
5. Lennar Corporation -- +1.6% absolute return-on-investment in 22 days (equivalent to a +26.4% annualized return-on-investment).

• Two Covered Calls positions closed in-the-money during the past month on their weekly options expiration date as follows:
1. Comcast Corporation -- +1.3% absolute return-on-investment in 15 days (equivalent to a +31.3% annualized return-on-investment).
2. Schlumberger (SLB) -- +1.4% absolute return-on-investment in 45 days (equivalent to a +11.3% annualized return-on-investment).

This Covered Calls Advisor blog is available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I encourage you to email me at partlow@cox.net any time you would like my feedback on anything related to Covered Calls.

 

Jeff Partlow

Covered Calls Advisor
partlow@cox.net

Closed Out Covered Calls Position in Oracle Corporation

I decided to unwind (i.e. close out) my Covered Calls position in Oracle Corporation (ticker ORCL) with 10 minutes remaining in the trading day yesterday (Friday, 10/11/2024).  The position was established on September 24th and the stock price had increased from its $165.29 purchase price to $176.03 shortly before market close yesterday (Friday).  In addition, its $.40 ex-dividend occurred on the prior day (Thursday) so this dividend capture is included in the return-on-investment calculations detailed below.  

The original $1.71 time value in the Call options had declined to only $.20, so with one week remaining until the October 18th options expiration date, I decided to unwind the position.  The +25.7% annualized return-on-investment (aroi) achieved was greater than the +20.2% aroi that would be achieved if the position would instead have closed in-the-money and therefore be assigned at next Friday's options expiration date. 

Oracle Corporation (ORCL) -- Covered Calls Position Closed Out Early

The buy/write transaction was:
9/24/2024 Bought 200 Oracle Corporation shares @ $165.29
9/24/2024 Sold 2 ORCL 10/18/2024 $160.00 Call options @ $7.00 per share.  The Implied Volatility of these Calls was 19.7 when this position was established.
10/10/2024 Quarterly ex-dividend of $.40 per share.
10/11/2024 Unwound this Oracle Covered Calls position by simultaneously buying-to-close the two 10/18/2024 $160.00 Call options at $16.23 per share and selling the 200 Oracle shares at $176.03, for a net credit of $159.80 (only $.20 remaining time value).

The overall performance results (including commissions) are as follows:
Covered Calls Net Investment: $31,659.34
= ($165.29 - $7.00) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: -$1,848.68
= ($7.00 - $16.23) * 200 shares) - $2.68 commissions
(b) Dividend Income: +$80.00
= $.40 per share x 200 shares
(c) Capital Appreciation (Oracle shares sold at $176.03 per share): +$2,148.00
= ($176.03 stock selling price -$165.29 stock purchase price) * 200 shares

Net Profit: +$379.32
= (-$1,848.68 options income +$80.00 dividend income + $2,148.00 capital appreciation)

Absolute Return-on-Investment: +1.2%
= +$379.32/$31,659.34
Equivalent Annualized Return-on-Investment: +25.7%
= (+$379.32/$31,659.34) * (365/17 days)

Established Covered Call Position in General Dynamics Corporation

Shortly after this morning's market open, my buy/write limit order in General Dynamics Corporation (ticker GD) was executed at the net debit price of $290.88 per share. One hundred shares were purchased at $296.53 and one October 18th, 2024 Call option was sold for $5.65 at the $292.50 strike price, a time value of $1.62 per share = [$5.65 options premium - ($296.53 stock price - $292.50 strike price)]. 

General Dynamics has an upcoming quarterly ex-dividend of $1.42 per share that goes ex-dividend this Friday (October 11th, 2024) which is prior to the October 18th, 2024 monthly options expiration date. This is equivalent to an absolute annual dividend yield of 1.9% (at the current $296.53 stock price).  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the October 18th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive annualized return-on-investment upon assignment for either outcome.  The probability that this position will be in-the-money and therefore assigned on its Oct. 18th option expiration date was 69.2% when this position was established and as preferred, the next quarterly earnings report on Oct. 23rd is after the Oct. 18th options expiration date.

As shown in my StockRover Overall stock screener results in the table below, General Dynamics meets all sixteen filters, and it is currently the only Industrial sector stock that meets all sixteen filters: 

As detailed below, two potential return-on-investment results are: 

•  +0.6% absolute return (equivalent to +67.5% annualized return-on-investment for the next 3 days) if the stock is assigned early (business day prior to the October 11th ex-dividend date); OR 

• +1.0% absolute return (equivalent to +38.1% annualized return over the next 10 days) if the stock is assigned on the October 18th options expiration date.

General Dynamics Corporation (GD) -- New Covered Call Position
The simultaneous buy/write transaction was:
10/8/2024 Bought 100 General Dynamics Corporation shares @ $296.53.
10/8/2024 Sold 1 GD 10/18/2024 $292.50 Call option @ $5.65 per share.
Note: the Implied Volatility of the Call option was 14.3 when this position was established.
10/11/2024 Upcoming quarterly ex-dividend of $1.42 per share.

Two possible overall performance results (including commissions) for this General Dynamics Corporation Covered Call position are as follows:
Covered Call Cost Basis: $29,088.67
= ($296.53 - $5.65) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$564.33
= ($5.65 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on Oct. 10th, the business day prior to the Oct. 11th, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If GD stock assigned on the Oct. 18th, 2024 options expiration): +$142.00
= ($1.42 dividend per share x 100 shares)

(c) Capital Appreciation (If General Dynamic Call option is assigned early on October 11th): -$403.00
+($292.50 strike price - $296.53 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $292.50 strike price at option expiration): -$403.00
+($292.50 - $296.53) * 100 shares

1. Total Net Profit (If option exercised early): +$161.33

= (+$564.33 option income +$0.00 dividend income -$403.00 capital appreciation); or

2. Total Net Profit (If GD shares assigned at $292.50 at the Oct. 18th, 2024 expiration): +$303.33

= (+$564.33 option income +$142.00 dividend income -$403.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 11th ex-dividend date]: +0.6%

= +$161.33/$29,088.67

Annualized Return-on-Investment (If option exercised early): +67.5%

= (+$161.33/$29,088.67) * (365/3 days); or

2. Absolute Return-on-Investment (If General Dynamics shares assigned on the Oct. 18th, 2024 options expiration date): +1.0%

= +$303.33/$29,088.67

Annualized Return-on-Investment (If shares assigned at $292.50 at the 10/18/2024 expiration date): +38.1%

= (+$303.33/$29,088.67) * (365/10 days)

Either outcome provides an attractive return-on-investment result for this General Dynamics Covered Call investment.  These returns will be achieved as long as the stock is above the $292.50 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $289.46 = ($296.53 stock price - $5.65 Call option price - $1.42 dividend) provides 2.4% downside protection below today's stock purchase price.

Established Covered Calls Position in Dell Technologies Inc.

A buy/write limit order in Dell Technologies Inc. (ticker DELL) was executed at the Covered Calls Advisor's net debit price of $107.80 per share. Three hundred shares were purchased at $118.56 and three November 1st, 2024 Call options were sold for $10.76 at the $110.00 strike price, a time value of $2.20 = [$10.76 options premium - ($118.56 stock price - $110.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here).  Dell has an upcoming quarterly ex-dividend of $.445 per share that goes ex-dividend on October 22nd, 2024 which is prior to the November 1st options expiration date. This is equivalent to an absolute annual dividend yield of 1.5% (at the current $118.56 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 5.5% = [($.445/$118.56) x (365/25 days-to-expiration)] for the 25 days duration of this position.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the November 1st, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive annualized return-on-investment upon assignment for either outcome.

As detailed on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  The Covered Calls Advisor's current Overall Market Meter outlook is Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its November 1st, 2024 expiration date was 72.6% when this position was established this afternoon.  There are 19 analysts covering Dell and their average target price is $147.74 (+24.6% above today's purchase price).

As shown in my Quantitative Value (Value+Quality) stock screener results below, Dell meets all twenty-one filters: 

As detailed below, two potential return-on-investment results are: 

•  +2.0% absolute return (equivalent to +49.5% annualized return-on-investment for the next 15 days) if the stock is assigned early (business day prior to the October 22nd ex-dividend date); OR 

• +2.4% absolute return (equivalent to +35.7% annualized return over the next 25 days) if the stock is assigned on the November 1st options expiration date.

Dell Technologies Inc. (DELL) -- New Covered Calls Position
The simultaneous buy/write transaction was:
10/7/2024 Bought 300 Dell Technologies Inc. shares @ $118.56.
10/7/2024 Sold 3 DELL 11/01/2024 $110.00 Call options @ $10.76 per share.
Note: the Implied Volatility of the Call options was 43.2 when this position was established.
10/22/2024 Upcoming quarterly ex-dividend of $.445 per share.

Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $32,342.01
= ($118.56 - $10.76) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$3,225.99
= ($10.76 * 300 shares) - $2.01 commission
(b) Dividend Income (If options exercised early on Oct. 21st, the business day prior to the Oct. 22nd, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Dell stock assigned on the Nov. 1st, 2024 options expiration): +$133.50
= ($.445 dividend per share x 300 shares)

(c) Capital Appreciation (If DELL Call options assigned early on October 22nd): -$2,568.00
+($110.00 - $118.56) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $110.00 strike price at options expiration): -$2,568.00
+($110.00 - $118.56) * 300 shares

1. Total Net Profit (If options exercised early): +$657.99

= (+$3,225.99 options income +$0.00 dividend income -$2,568.00 capital appreciation); or

2. Total Net Profit (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +$791.49

= (+$3,225.99 +$133.50 -$2,568.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 22nd ex-dividend date]: +2.0%

= +$657.99/$32,342.01

Annualized Return-on-Investment (If option exercised early): +49.5%

= (+$657.99/$32,342.01) * (365/15 days); or

2. Absolute Return-on-Investment (If Dell shares assigned on the Nov. 1st, 2024 options expiration date): +2.4%

= +$791.49/$32,342.01

Annualized Return-on-Investment (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +35.7%

= (+$791.49/$32,342.01) * (365/25 days)

Either outcome provides an attractive return-on-investment result for this Dell Technologies Covered Calls investment.  These returns will be achieved as long as the stock is above the $110.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $107.355 = ($118.56 stock price - $10.76 Call options price - $.445 dividend) provides 9.5% downside protection below today's stock purchase price.

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 in the chart below, all nine criteria are achieved for this Dell Technologies Covered Calls position.

October 4th, 2024 Option Expiration Results

The Covered Calls Advisor Portfolio had one Covered Calls position in Schlumberger (SLB) at the October 4th, 2024 weekly options expiration date and at the $42.00 strike price.  The position closed well in-the-money yesterday at $45.55 per share, so the Call option expired and the 800 SLB shares were sold at their $42.00 strike price with the following results:

SLB -- +1.4% absolute return (equivalent to +11.3% annualized return-on-investment) for the 45 days of this Covered Calls investment.  The most recent blog post history for this position is here. 

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Early Assignment of Covered Calls Position in Comcast Corporation

I was notified by Schwab early this morning that the five Oshkosh Corporation October 11th, 2024 Call options were exercised yesterday.  Because the Oshkosh stock price increased from $39.24 when this position was established to $41.70 at yesterday's market close, the original $.49 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so (with nine days remaining until the October 11th options expiration date), the owner of these Calls exercised their option to buy the 500 shares at the $38.00 strike price in order to receive today's $.31 per share ex-dividend. 

The post when this Comcast Corporation Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Oshkosh Covered Calls position was +1.3% absolute return in 15 days (equivalent to a +31.3% annualized return-on-investment).

Comcast Corporation (CMCSA) -- Covered Calls Position Closed by Early Assignment

The buy/write transaction was as follows:
09/17/2024 Bought 500 shares of Comcast Corporation @ $39.24 per share 
09/17/2024 Sold 5 Comcast October 11th, 2024 $38.00 Call options @ $1.73 per share.  The Implied Volatility of these Call options was 22.8 when this transaction was executed.
10/02/2024 Five CMCSA 10/11/2024 $38.00 Calls exercised early, so the Calls expired and the 500 CMCSA shares were sold at the $38.00 strike price.

The overall performance results (including commissions) was as follows:
Covered Calls Cost Basis: $18,758.35
= ($39.24 - $1.73) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$861.65
= ($1.73 * 500 shares) - $3.35 commission
(b) Dividend Income (Comcast shares assigned early on the day prior to the 10/2/2024 ex-dividend date): +$0.00
(c) Capital Appreciation: -$620.00
= ($38.00 strike price - $39.24 original stock purchase price) * 500 shares

Total Net Profit: +$241.65
= (+$861.65 options income +$0.00 dividend income -$620.00 capital appreciation)

Absolute Return-on-Investment: +1.3%
= +$241.65/$18,758.35
Equivalent Annualized Return-on-Investment: +31.3%
= (+$241.65/$18,758.35) * (365/15 days)

Established Covered Calls Position in Lennar Corporation

A buy/write limit order in Lennar Corp. (ticker LEN) was executed at the Covered Calls Advisor's net debit price of $172.74 per share. Two hundred shares were purchased at $182.19 and two October 18th, 2024 Call options were sold for $9.45 at the $175.00 strike price, a time value of $2.26 = [$9.45 options premium - ($182.19 stock price - $175.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Lennar has an upcoming quarterly ex-dividend of $.50 per share that goes ex-dividend on October 9th, 2024 which is prior to the October 18th options expiration date. This is equivalent to an absolute annual dividend yield of 1.1% (at the current $182.19 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 4.6% = [($.50/$182.19) x (365/22 days-to-expiration)] for the 22 days duration of this position.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the October 18th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the satisfactory annualized return-on-investment upon assignment for either outcome.

As detailed on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  The Covered Calls Advisor's current Overall Market Meter outlook remains Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its October 18th, 2024 expiration date was 72.3% when this position was established early this afternoon.     

As detailed below, two potential return-on-investment results are: 

•  +1.3% absolute return (equivalent to +36.6% annualized return-on-investment for the next 13 days) if the stock is assigned early (business day prior to the October 9th ex-dividend date); OR 

• +1.6% absolute return (equivalent to +26.4% annualized return over the next 22 days) if the stock is assigned on the October 18th options expiration date.

Lennar Corp. (LEN) -- New Covered Calls Position
The simultaneous buy/write transaction was:
9/26/2024 Bought 200 Lennar Corp. shares @ $182.19.
9/26/2024 Sold 2 LEN 10/18/2024 $175.00 Call options @ $9.45 per share.
Note: the Implied Volatility of the Call options was 26.0 when this position was transacted.
10/9/2024 Upcoming quarterly ex-dividend of $.50 per share.

Two possible overall performance results (including commissions) for this Lennar Corp. Covered Calls position are as follows:
Covered Calls Cost Basis: $34,549.34
= ($182.19 - $9.45) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,888.66
= ($9.45 * 200 shares) - $1.34 commission
(b) Dividend Income (If options exercised early on Oct. 8th, the business day prior to the Oct. 9th, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Lennar stock assigned on the Oct. 18th, 2024 options expiration): +$100.00
= ($.50 dividend per share x 200 shares)

(c) Capital Appreciation (If LEN Call options assigned early on October 9th): -$1,438.00
+($175.00 - $182.19) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $175.00 strike price at options expiration): -$1,438.00
+($175.00 - $182.19) * 200 shares

1. Total Net Profit (If options exercised early): +$450.66

= (+$1,888.66 options income +$0.00 dividend income -$1,438.00 capital appreciation); or

2. Total Net Profit (If LEN shares assigned at $175.00 at the Oct. 18th, 2024 expiration): +$550.66

= (+$1,888.66 +$100.00 -$1,438.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 9th ex-dividend date]: +1.3%

= +$450.66/$34,549.34

Annualized Return-on-Investment (If option exercised early): +36.6%

= (+$450.66/$34,549.34) * (365/13 days); or

2. Absolute Return-on-Investment (If Lennar shares assigned on the Oct. 18th, 2024 options expiration date): +1.6%

= +$550.66/$34,549.34

Annualized Return-on-Investment (If LEN shares assigned at $175.00 at the Oct. 18th, 2024 expiration): +26.4%

= (+$550.66/$34,549.34) * (365/22 days)

Either outcome provides a satisfactory return-on-investment result for this Lennar Covered Calls investment.  These returns will be achieved as long as the stock is above the $175.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $172.24 = ($182.19 stock price - $9.45 Call options price - $.50 dividend) provides 5.5% downside protection below today's stock purchase price.

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 in the chart below, eight criteria are achieved for this Lennar Corp. Covered Calls position.

Covered Calls Position Established in Global Payments Inc.

Today a Covered Calls position was established in Global Payments Inc. (ticker GPN) at the October 18th, 2024 options expiration date and at the $100.00 strike price.  Three hundred shares were purchased at $104.00 per share and three Oct. 18th, 2024 $100.00 Calls were sold at $5.76 per share. The corresponding potential time value profit was $1.76 per share [$5.76 Call options premium + ($100.00 strike price - $104.00 stock purchase price)].  The Implied Volatility of these Call options was 29.4 when this position was established.  Establishing positions in companies when the Implied Volatility of their options is greater than that of the S&P 500 Volatility Index (which is currently at 15.5), is strongly preferred by the Covered Calls Advisor.  This preference is the fifth of the twelve Covered Calls investing "edges" (see here).  Since quarterly earnings reports increase volatility, it is also important to me that there is no earnings report prior to the next earnings report, which is true in this instance since Global Payments' next report is scheduled for October 31st, 2024.  

Global Payments is an information technology company (in the Financial Sector).  They provide payment technology and software solutions for card, electronic, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific and they operate through three segments: Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions.

As shown in my GARP (Growth at a Reasonable Price) stock screener results below, Global Payments meets all nineteen filters. 

Global Payments Inc. (GPN) -- New Covered Calls Position 

The buy/write transaction was as follows:
9/24/2024 Bought 300 Global Payments Inc. shares at $104.00.

9/24/2024 Sold 3 GPN October 18th, 2024 $100.00 Call options @ $5.76 per share.

A possible overall performance result (including commissions) would be as follows:
Covered Calls Net Investment: $29,474.01
= ($104.00 - $5.76) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,725.99
= ($5.76 * 300 shares) - $2.01 commission
(b) Dividend Income (If Global Payments stock is above the $100.00 strike price at the October 18th, 2024 options expiration date): +$0.00

(c) Capital Appreciation (If Global Payments stock is above the $100.00 strike price at the Oct. 18th, 2024 options expiration date): -$1,200.00

= ($100.00 strike price - $104.00 stock purchase price) * 300 shares

Total Net Profit [If Global Payments stock price is in-of-the-money (i.e. above $100.00 strike price) at options expiration]: +$525.99

= (+$1,725.99 options income +$0.00 dividend income -$1,200.00 capital appreciation)

Potential Absolute Return-on-Investment: (If stock is above $100.00 strike price at the 10/18/2024 options expiration date): +1.8%

= +$525.99/$29,474.01
Potential Annualized Return-on-Investment: +27.1%
= (+$525.99/$29,474.01) * (365/24 days)

Established Covered Call Positions in Oracle Corporation and U.S. Bancorp

Today Covered Calls were established in Oracle Corporation (ticker symbol ORCL) and U.S. Bancorp (ticker USB) when the Covered Calls Advisor's buy/write limit orders were executed.  For Oracle, 200 shares were purchased at $165.29 and 2 October 18th, 2024 Call options were sold at $7.00 at the $160.00 strike price.   For U.S. Bancorp, 500 shares were purchased at $45.35 and 5 October 18th, 2024 Call options were sold at $2.21 at the $43.50 strike price.  There is a quarterly earnings report on Oct. 16th (i.e. prior to the options expiration date), so I will watch this U.S. Bancorp position closely prior to the earnings for a possible early close out since I prefer not to hold existing positions through earnings since earnings often cause volatile stock price movements then.   

Given the Covered Calls Advisor's current "Neutral" Overall Market Meter outlook, moderately in-the-money Covered Calls positions were established.  The probability that the stock will be in-the-money on the options expiration dates was 74.0% for the Oracle position and 76.7% for the U.S. Bancorp position.  Both positions have an intervening ex-dividend date, so the potential results detailed below includes the possibility of early exercise since the ex-dividends are prior to their respective options expiration dates.

1.  Oracle Corporation (ORCL) -- New Covered Calls Position

The buy/write transaction was:
9/24/2024 Bought 200 Oracle Corporation shares @ $165.29
9/24/2024 Sold 2 ORCL 10/18/2024 $160.00 Call options @ $7.00 per share.  The Implied Volatility of these Calls was 19.7 when this position was established.
10/10/2024 Upcoming quarterly ex-dividend of $.40 per share.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $31,659.34
= ($165.29 - $7.00) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,398.66
= ($7.00 * 200 shares) - $1.34 commission
(b) Dividend Income (If Oracle shares assigned on the business day prior to the October 10th ex-dividend date): = +$0.00; or
(b) Dividend Income (If Oracle shares assigned at the 10/18/2024 options expiration date): +$80.00
= $.40 per share x 200 shares
(c) Capital Appreciation (If Oracle shares assigned early): -$1,058.00
= ($160.00 strike price -$165.29 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If ORCL shares assigned with stock above the $160.00 strike price at the October 18th, 2024 options expiration date): -$1,058.00
= ($160.00 -$165.29) * 200 shares

1. Potential Net Profit (If Oracle shares assigned on 10/9/2024, the day prior to the Oct. 10th ex-dividend date): +$340.66
= (+$1,398.66 options income +$0.00 dividend income - $1,058.00 capital appreciation)
2. Potential Net Profit (If Oracle price is above $160.00 strike price at the Oct. 18th options expiration): +$420.66
= (+$1,398.66 options income +$80.00 dividend income - $1,058.00 capital appreciation)

1. Absolute Return-on-Investment (If Oracle shares assigned early on 10/9/2024, the day prior to the ex-dividend date): +1.1%
= +$340.66/$31,659.34
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +24.5%
= (+$340.66/$31,659.34) * (365/16 days)

2. Absolute Return-on-Investment (If Oracle price is above the $160.00 strike price at the Oct. 18th options expiration date): +1.3%
= +$420.66/$31,659.34
Equivalent Annualized Return-on-Investment (If assigned on the 10/18/2024 options expiration date): +20.2%
= (+$420.66/$31,659.34) * (365/24 days)

2.  U.S. Bancorp (USB) -- New Covered Calls Position
The buy/write transaction was:
9/24/2024 Bought 500 U.S. Bancorp shares @ $45.35.
9/24/2024 Sold 5 USB 10/18/2024 $43.50 Call options @ $2.21 per share.
Note: Implied Volatility (IV) of the Call options was at 21.9 when this position was transacted which, as I prefer, is above the current VIX of 15.7.   
9/30/2024 Upcoming quarterly ex-dividend of $.50 per share. 

Two possible overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Covered Calls Net Investment: $21,573.35
= ($45.35 - $2.21) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,101.65
= ($2.21 * 500 shares) - $3.35 commission
(b) Dividend Income (If U.S. Bancorp Call options exercised early this Friday which is the last business day prior to next Monday's Sept. 30th ex-div date): +$0.00; or
(b) Dividend Income (If U.S. Bancorp stock assigned at the October 18th, 2024 options expiration): +$250.00
= ($.50 dividends per share x 500 shares)

(c) Capital Appreciation (If U.S. Bancorp's Call options assigned early on Sept 27th): -$925.00

+($43.50 strike price - $45.35 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $43.50 strike price at the 10/18/2024 options expiration): -$925.00
+($43.50 - $45.35) * 500 shares

1. Total Net Profit [If option exercised early (business day prior to the Sept. 30th ex-dividend date)]: +$176.65

= (+$1,101.65 options income +$0.00 dividend income -$925.00 capital appreciation); or

2. Total Net Profit (If 500 U.S. Bancorp shares assigned at the $43.50 strike price at the October 18th, 2024 expiration): +$426.65

= (+$1,101.65 options income +$250.00 dividend income -$925.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 9/30/2024 ex-dividend date]: +0.9%

= +$176.65/$21,573.35

Potential Annualized Return-on-Investment (If option exercised early): +52.6%

= (+$176.65/$21,573.35) * (365/6 days); or

2. Potential Absolute Return-on-Investment (If U.S. Bancorp's shares assigned on the Oct. 18th options expiration date): +2.0%

= +$426.65/$21,573.35

Potential Annualized Return-on-Investment (If 500 U.S. Bancorp shares assigned at $43.50 at the October 18th, 2024 expiration): +30.1%

= (+$426.65/$21,573.35) * (365/24 days)

Monthly Options Expiration Results through September 20th, 2024

Each month after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So, this post covers the period from the day after last month's August 16th, 2024 options expiration through yesterday's September 20th, 2024 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio closed a total of five positions.  All five positions closed in-the-money and were assigned at their respective strike prices.

The specific results for each closed position are summarized as follows:

• Four Covered Calls positions closed in-the-money yesterday on their monthly options expiration date as follows:

1. Global Payments Inc. -- +1.5% absolute return-on-investment in 23 days (equivalent to a +24.5% annualized return-on-investment).
2. Merck & Co. Inc. -- +2.1% absolute return-on-investment in 15 days (equivalent to a +32.1% annualized return-on-investment).
3. Taiwan Semiconductor ADR -- +3.6% absolute return-on-investment in 29 days (equivalent to a +45.0% annualized return-on-investment).
4. Yum China Holdings Inc. -- +3.3% absolute return-on-investment in 35 days (equivalent to a +34.8% annualized return-on-investment).

• One Covered Calls position closed in-the-money on its weekly options expiration date as follows:  Nvidia Corporation -- +2.1% absolute return-on-investment in 9 days (equivalent to a +84.5% annualized return-on-investment).

This Covered Calls Advisor blog is available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I encourage you to email me at partlow@cox.net any time you would like my feedback on your Covered Call position ideas or your questions on anything related to the Covered Calls investing strategy.

 

Jeff Partlow

Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in Medtronic PLC

Today a Covered Calls position was established in Medtronic PLC (ticker symbol MDT) when the Covered Calls Advisor's buy/write limit order was executed -- 400 shares were purchased at $88.77 and 4 October 18th, 2024 Call options were sold at $2.19 at the $87.50 strike price.   Given the Covered Calls Advisor's current "Neutral" Overall Market Meter outlook, a slightly in-the-money Covered Calls position was established -- the probability of being in-the-money on the options expiration date was 66.5% when this position was established. In addition, there is an upcoming ex-dividend of $.70 per share next Friday on September 27th which provides an annual dividend yield of 3.2% at today's stock purchase price.  Potential results for this Covered Calls position, as detailed below, includes the possibility of early exercise since the ex-dividend is prior to the October 18th options expiration date.

As detailed below, two potential return-on-investment results are: 

•  +1.1% absolute return (equivalent to +55.0% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the September 27th ex-dividend date); OR 

• +1.9% absolute return (equivalent to +24.3% annualized return over the next 28 days) if the stock is assigned on the October 18th, 2024 options expiration date. 
  

Medtronic PLC (MDT) -- New Covered Calls Position
The buy/write transaction was:
9/20/2024 Bought 400 Medtronic PLC shares @ $88.77
9/20/2024 Sold 4 MDT 10/18/2024 $87.50 Call options @ $2.19
Note 1: the Implied Volatility of the Calls was 13.5 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.92 per share = [$2.19 Call options premium - ($88.77 stock price - $87.50 strike price)]
9/27/2024 Upcoming quarterly ex-dividend of $.70 per share

Two possible overall performance results (including commissions) for this Medtronic Covered Calls position are as follows:
Covered Calls Net Investment: $34,634.68
= ($88.77 - $2.19) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$873.32
= ($2.19 * 400 shares) - $2.68 commission
(b) Dividend Income (If option exercised early on Sept. 26th, the business day prior to the Sept. 27th ex-div date): +$0.00; or
(b) Dividend Income (If Medtronic stock assigned at the October 18th, 2024 options expiration date): +$280.00
= ($.70 dividend per share x 400 shares)

(c) Capital Appreciation (If Medtronic Call options assigned early on Sept. 27th): -$508.00
+($87.50 - $88.77) * 400 shares; or
(c) Capital Appreciation (If MDT shares assigned at $87.50 strike price at options expiration): -$508.00
+($87.50 - $88.77) * 400 shares

1. Total Net Profit (If option exercised early): +$365.32

= (+$873.32 options income +$0.00 dividend income -$508.00 capital appreciation); or

2. Total Net Profit (If Medtronic shares assigned at $87.50 strike price at the Oct. 18th, 2024 options expiration date): +$645.32

= (+$873.32 options income +$280.00 dividend income -$508.00 capital appreciation)

1. Absolute Return-on-Investment (If four MDT Call options exercised early on September 27th): +1.1%

= +$365.32/$34,634.68

Annualized Return-on-Investment (If options assigned early): +55.0%

= (+$365.32/$34,634.68) * (365/7 days); or

2. Absolute Return-on-Investment (If Medtronic shares assigned at $87.50 at the October 18th options expiration): +1.9%

= +$645.32/$34,634.68

Annualized Return-on-Investment (If MDT shares assigned at $87.50 at the Oct. 18th, 2024 options expiration): +24.3%
= (+$645.32/$34,634.68) * (365/28 days)

Either outcome provides a satisfactory return-on-investment result for this Medtronic investment.  These returns will be achieved as long as the stock is above the $87.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $85.88 ($88.77 -$2.19 -$.70) provides 3.3% downside protection below today's stock purchase price.

Covered Calls Position Established in Comcast Corporation

Today, a Covered Calls position was established in Comcast Corporation (ticker CMCSA) with the purchase of 500 shares at $39.24 per share and five October 11th, 2024 weekly Call options were sold for $1.73 per share at the $38.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 10/11/2024 options expiration date of 70.6%.  

Comcast goes ex-dividend at $.31 per share (3.2% dividend yield at the current stock price) on October 2nd which is prior to the October 11th options expiration date -- so this dividend is included in the potential return-on-investment results shown below.  As I prefer, the next quarterly earnings report on October 24th is after the October 11th options expiration date. 

As shown in my "Stock Rover Overall" stock screener results below, Comcast meets all sixteen filters:

Two potential return-on-investment results are: (a) +1.3% absolute return-on-investment (equivalent to +31.3% annualized return-on-investment for the next 15 days) if the stock is assigned early on October 1st (the last trading day prior to the October 2nd, 2024 ex-dividend date); OR (b) +2.1% absolute return-on-investment (equivalent to +32.2% annualized return-on-investment over the next 24 days) if the stock is assigned on the October 11th options expiration date. 

Comcast Corporation (CMCSA) -- New Covered Calls Position

The buy/write transaction was as follows:
09/17/2024 Bought 500 shares of Comcast Corporation @ $39.24 per share 
09/17/2024 Sold 5 Comcast October 11th, 2024 $38.00 Call options @ $1.73 per share.  The Implied Volatility of these Call options was 22.8 when this transaction was executed.
10/02/2024 Upcoming ex-dividend of $.31 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $18,758.35
= ($39.24 - $1.73) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$861.65
= ($1.73 * 500 shares) - $3.35 commission
(b) Dividend Income (If Comcast shares assigned on day prior to ex-dividend date): +$0.00; or
(b) Dividend Income (If Comcast shares assigned on the October 11th options expiration date): +$155.00
= $.31 per share x 500 shares
(c) Capital Appreciation (If early assignment occurs on Oct. 2nd, 2024): -$620.00
= ($38.00 - $39.24) * 500 shares; or
(c) Capital Appreciation (If Comcast is above $38.00 strike price at the Oct. 11th, 2024 options expiration date): -$620.00
= ($38.00 - $39.24) * 500 shares

1. Total Net Profit (If Comcast shares assigned on last business day prior to the 10/2/2024 ex-dividend date): +$241.65
= (+$861.65 options income +$0.00 dividend income -$620.00 capital appreciation); or
2. Total Net Profit (If Comcast shares assigned on the October 11th options expiration date): +$396.65
= (+$861.65 options income +$155.00 dividend income -$620.00 capital appreciation)

1. Absolute Return-on-Investment (If Comcast shares assigned on last business day prior to the ex-dividend date): +1.3%
= +$241.65/$18,758.35
Equivalent Annualized Return-on-Investment: +31.3%
= (+$241.65/$18,758.35) * (365/15 days); or

2. Absolute Return-on-Investment (If Comcast shares assigned on the October 11th options expiration date): +2.1%
= +$396.65/$18,758.35
Equivalent Annualized Return-on-Investment: +32.2%
= (+$396.65/$18,758.35) * (365/24 days)