Update on Three Covered Calls that Expired Out-of-the-Money Last Friday

The Covered Calls Advisor Portfolio had three Covered Call positions where the expiration date of the Calls was last Friday (December 13th).  The three positions were in Bank of America Corporation, Fedex Corporation, and Schlumberger (SLB), and all three Calls expired out-of-the-money with the stock prices below their respective strike prices.  This morning, my decisions regarding the stock of each company was as follows: 

(1) Bank of America -- the stock closed last Friday at $45.67 which was below the $46.50 strike price.  I have not made a decision yet on how to proceed with the 200 BAC shares in this position but will do so sometime this week and will make a post updating my actions on the same day the transaction occurs.  

(2) Fedex Corporation -- the stock closed at $283.42 which was well below the $290.00 strike price.  A significant factor in the decline was the research report of Morgan Stanley in which they stated that they were seeing "continued volume/price/mix headwinds exacerbated by rolloff of USPS revenues, compressed peak season, and slowing DRIVE gains."  In addition, Fedex's next quarterly report is this Thursday and since my preference is to avoid holding positions through earnings reports, I decided to sell the 100 shares this morning when the stock was at $284.95.  Detailed results for this position are provided below.  

(3) Schlumberger Ltd. (SLB) -- the stock closed last Friday at $40.22 which was below the $42.00 strike price.  This morning I decided to continue this Covered Calls position for another two weeks by selling four Dec. 27th $41.50 Calls for $.50 per share when the stock was at $40.72.  Potential results for this position are detailed below.

     

Fedex Corporation (FDX) -- Closed Out Covered Call Position 

The buy/write transaction was:
12/2/2024 Bought 100 Fedex shares @ $296.04.
12/2/2024 Sold 1 FDX 12/13/2024 $290.00 Call option @ $7.94 per share.
Note: Implied Volatility (IV) of the Call options was at 14.7 when this position was transacted which, as I prefer, is above the current VIX of 13.4.   
12/9/2024 Quarterly ex-dividend of $1.38 per share. 

12/13/2024 FDX Call option expired out-of-the-money and the 100 FDX shares remain in the Covered Calls Advisor Portfolio.

12/16/2024 Sold 100 FDX shares at $284.95 per share.

The overall performance results (including commissions) for this Fedex Corp. Covered Calls position were as follows:
Covered Calls Net Investment: $28,810.67
= ($296.04 - $7.94) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$793.33
= ($7.94 * 100 shares) - $.67 commission
(b) Dividend Income: +$138.00
= ($1.38 dividends per share x 100 shares)

(c) Capital Appreciation (Fedex shares sold at $284.95): -$1,109.00

+($284.95 stock sales price - $296.04 stock purchase price) * 100 shares

Total Net Loss: -$327.33

= (+$793.33 options income +$138.00 dividend income - $1,109.00 capital appreciation)

Absolute Return-on-Investment: -0.6%

= -$177.67/$28,810.67

Annualized Return-on-Investment: -16.1%

= (-$177.67/$28,810.67) * (365/14 days)

Schlumberger Ltd. (SLB) -- Rollout of Covered Calls Position

The buy/write transaction was:
12/2/2024 Bought 400 SLB shares @ $43.22.
12/2/2024 Sold 4 USB 12/13/2024 $42.00 Call options @ $1.48 per share.
12/4/2024 Quarterly ex-dividend of $.275 per share. 

12/13/2024 Four SLB Call options expired out-of-the-money so the 400 SLB shares remain in the Covered Calls Advisor Portfolio.

12/16/2024 Continued this SLB Covered Calls position by selling 4 SLB December 27th, 2024 $41.50 Calls at $.50 per share when SLB's stock price was $40.72 per share.

Two possible overall performance results (including commissions) for this SLB Covered Calls position are as follows:
Covered Calls Net Investment: $16,698.68
= ($43.22 - $1.48) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$786.64
= ($1.48 + $.50) x 400 shares - $5.36 commissions
(b) Dividend Income: +$110.00
= ($.275 dividends per share x 400 shares)

(c) Capital Appreciation (If SLB's stock price unchanged at $40.72 on the December 27th options expiration date): -$1,000.00

+($40.72 static stock price - $43.22 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $41.50 strike price on the 12/27/2024 options expiration): -$688.00
+($41.50 strike price - $43.22 SLB stock purchase price) * 400 shares

1. Total Net Profit (If stock price unchanged at $40.72 on the 12/27/2024 options expiration date): -$103.36

= (+$786.64 options income +$110.00 dividend income - $1,000.00 capital appreciation); or

2. Total Net Profit (If 400 SLB shares assigned at the $41.50 strike price at the Dec. 27th, 2024 expiration): +$208.64

= (+$786.64 options income + $110.00 dividend income - $688.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If stock price unchanged at $40.72 on the 12/27/2024 options expiration date): -0.6%

= -$103.36/$16,698.68

Potential Annualized Return-on-Investment (If option exercised early): -9.0%

= (-$103.36/$16,698.68) * (365/25 days); or

2. Potential Absolute Return-on-Investment (If SLB's shares assigned on the Dec. 13th options expiration date): +1.2%

= +$211.32/$16,698.68

Potential Annualized Return-on-Investment (If 400 SLB shares assigned at the $41.50 strike price at the Dec. 27th, 2024 expiration): +18.2%

= (+$208.64/$16,698.68) * (365/25 days)

Early Assignment of Covered Call Position in DICK'S Sporting Goods Inc.

I was notified by Schwab early this morning that the one DICK'S Sporting Goods Inc. December 20th, 2024 Call option was exercised early yesterday.  Because DICK'S stock price increased from $211.26 when this position was established to $218.86 at yesterday's market close, the original $2.84 time value in the Call when the position was established had declined on yesterday's market close to $0.84.  So, with 7 days remaining until the December 20th options expiration date, the owner of these Calls exercised their option to buy the 100 shares at the $202.50 strike price in order to receive today's $1.10 per share ex-dividend. 

I was surprised that the owner of the Call exercised their option in this instance since they decided to immediately forego $.84 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 +45.6% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +38.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its December 20th, 2024 options expiration date.   

The post when this DICK'S Sporting Goods Inc. Covered Call position was originally established is here.  As detailed below, the return-on-investment result for this Covered Calls position was +1.2% absolute return in 10 days (equivalent to a +45.6% annualized return-on-investment).

DICK'S Sporting Goods Inc. (DKS) -- Covered Call Position Closed Out by Early Assignment
The simultaneous buy/write transaction was:
12/3/2024 Bought 100 DICK'S Sporting Goods Inc. shares @ $211.26.
12/3/2024 Sold 1 DICK'S 12/20/2024 $202.50 Call option @ $11.60 per share.
12/12/2024 One DICK'S Sporting Goods Calls was exercised on the day prior to its December 13th, 2024 ex-dividend date, so the Call expired and the 100 Dell shares were sold at the $202.50 strike price.   

The overall performance results (including commissions) for this DICK'S Sporting Goods Inc. Covered Call position is as follows:
Covered Call Net Investment: $19,966.67
= ($211.26 - $11.60) * 100 shares + $.67 commission

Net Profit:
(a) Option Income: +$1,159.33
= ($11.60 * 100 shares) - $.67 commission
(b) Dividend Income: (DICK'S stock assigned early on the day prior to the Dec. 13th option expiration date) = +$0.00

(c) Capital Appreciation: -$910.00
+($202.50 strike price - $211.26 stock purchase price) * 100 shares

Total Net Profit: +$249.33

= (+$1,159.33 option income +$0.00 dividend income - $910.00 capital appreciation)

Absolute Return-on-Investment: +1.2%

= +$249.33/$19,966.67

Annualized Return-on-Investment: +45.6%

= (+$249.33/$19,966.67) * (365/10 days)

Covered Calls Established in Global Payments Inc.

In this afternoon's trading session, a short-term Covered Calls position was established in Global Payments Inc. (ticker GPN) with the purchase of 300 shares at $117.74 per share and three December 20th, 2024 Call options were sold for $3.72 per share at the $115.00 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 12/20/2024 options expiration date was 71.3%.  

In addition to the $.98 potential time value decay profit at assignment for this position, Global Payments also goes ex-dividend this Friday (12/13/2024) at $.25 per share (0.8% dividend yield) which is prior to the December 20th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on February 13th, 2025 is after the Dec. 20th, 2024 options expiration date.

As detailed below, a potential return-on-investment result is:  +1.1% absolute return (equivalent to +35.6% annualized return-on-investment over the next 11 days) if the stock is assigned on the December 20th, 2024 options expiration date.

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

The Buy/Write transaction was as follows:
12/9/2024 Bought 300 shares of Global Payments Inc. shares @ $117.74 per share.  
12/9/2024 Sold 3 GPN December 20th, 2024 $115.00 Call options @ $3.72 per share.  The Implied Volatility of these Call options was 21.5 today when this transaction was executed. 

A possible overall performance result (including commissions) if this stock is in-the-money (and therefore the stock is assigned (i.e. sold) at the $115.00 strike price) on the Dec. 20th options expiration date is as follows:

Covered Calls Net Investment: $34,208.01
= ($117.74 - $3.72) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,113.99
= ($3.72 * 300 shares) - $2.01 commission
(b) Dividend Income (If assigned on the 12/20/2024 options expiration date): +$75.00
= $.25 x 300 shares
(c) Capital Appreciation (If 300 Global Payments shares assigned at the $115.00 strike price): -$822.00
+($115.00 strike price - $117.74 stock purchase price) * 300 shares

Total Net Profit Potential (If 300 GPN shares assigned at the $115.00 strike price at the options expiration date): +$366.99
= (+$1,113.99 options income + $75.00 dividend income - $822.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.1%
= +$366.99/$34,208.01
Potential Annualized Return-on-Investment (if GPN shares assigned on their 12/20/2024 options expiration date): +35.6%
= (+$366.99/$34,208.01) * (365/11 days)

December 6th, 2024 Weekly Options Expiration Results

One of the nice features of the Covered Calls investing strategy is that I can easily calculate the potential return-on-investment (roi) results if the stock price were to close on the options expiration date at any possible price.  For example, I always make this calculation for the circumstance if the stock were to be in-the-money (i.e. above the Call option's strike price) on its options expiration date.  For any option chain that I am considering, this calculation provides me with the maximum potential return-on-investment result for any Covered Calls position I am contemplating establishing, and it does this in advance (i.e. before) I enter the trade. Using Schwab's Think or Swim platform I also look at the real-time probability that any particular Call option chain I'm evaluating will be assigned (i.e. close in-the-money) on its options expiration date.  Knowing both the risk (probability %) and reward (return-on-investment) for any specific Covered Calls position prior to making a Covered Calls investment is invaluable for making decisions that are consistent with my personal risk tolerance profile.      

The Covered Calls Advisor Portfolio had two Covered Calls positions with December 6th, 2024 weekly options expirations.  Both positions closed on their options expiration date yesterday with their stock prices in-the-money, so the Calls expired with no remaining value and the Covered Calls were closed out with the stocks sold at their respective strike prices; and their maximum potential return-on-investment results were achieved on their options expiration dates.  A summary of the return-on-investment results for each position is as follows:

1. Netease Inc. ADR (NTES) -- +1.5% absolute return-on-investment (equivalent to +50.4% annualized return-on-investment) for the 11 days of this investment.  This NTES position had a $83.00 strike price and it closed at $91.29 yesterday.  The blog post showing the details of this position on the day the position was originally established is here. 

2. Nvidia Corporation (NVDA) -- +2.5% absolute return-on-investment (equivalent to +61.0% annualized return-on-investment) for the 15 days of this investment.  This Nvidia position had a $140.00 strike price and it closed at $142.44 yesterday.  The blog post showing the details of this position on the day the position was originally established is here.

As always, I welcome your comments or questions at the email address shown below on any topics related to the Covered Calls investing strategy. 

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls in Merck & Co. Inc.

Today, a Covered Calls position was established in Merck & Co. Inc. (ticker MRK) with the purchase of 200 shares at $103.02 per share and two December 27th, 2024 weekly Call options were sold for $2.90 per share at the $101.00 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 12/27/2024 options expiration date was 70.3%.  In addition to the $.88 potential time value decay profit at assignment for this position, Merck also goes ex-dividend at $.81 per share (3.1% dividend yield) on December 16th which is prior to the December 27th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on February 4th, 2025 is after the Dec. 27th options expiration date.

Of the 41 stocks that met all 22 criteria in my Quantitative Value (Value+Quality) stock screener, Merck ranked #1 with the highest total score.  The scores for each factor are shown in the image below.  You might notice there that the "Price to Consensus Target" is +29.0%.  Also, Merck appeared in two additional of my stock screeners, namely the StockRover Overall stock screener and the (Next Year EPS Growth > P/E Ratio and Future 5-Yr. PEG <1.2) screener.  

Two potential return-on-investment results are: (a) +0.9% absolute return-on-investment (equivalent to +32.1% annualized return-on-investment for the next 10 days) if the stock is assigned early on December 13th (the last trading day prior to the December 16th, 2024 ex-dividend date); OR (b) +1.7% absolute return (equivalent to +29.3% annualized return over the next 21 days) if the stock is assigned on the December 27th, 2024 options expiration date. 

Merck & Co. Inc. (MRK) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
12/6/2024 Bought 200 shares of Merck & Co. stock @ $103.02 per share.  
12/6/2024 Sold 2 MRK December 27th, 2024 $101.00 Call options @ $2.90 per share.
12/16/2024 Upcoming ex-dividend of $.81 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $20,025.34
= ($103.02 - $2.90) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$580.00
= ($2.90 * 200 shares)
(b) Dividend Income (If Merck shares assigned on 12/13/2024, the business day prior to the 12/16/2024 ex-dividend date): = +$0.00; or
(b) Dividend Income (If Merck shares assigned at the 12/27/2024 options expiration): +$162.00
= $.81 per share x 200 shares
(c) Capital Appreciation (If MRK shares assigned early on 12/16/2024): -$404.00
= ($101.00 strike price - $103.02 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If MRK shares assigned with stock above the $101.00 strike price at the Dec. 27th options expiration date): -$404.00
= ($101.00 -$103.02) * 200 shares

1. Potential Net Profit (If Merck shares assigned on the Dec. 16th ex-dividend date): +$176.00
= (+$580.00 options income +$0.00 dividend income - $404.00 capital appreciation)
2. Potential Net Profit (If MRK price is above $101.00 strike price at the Dec 27th options expiration): +$338.00
= (+$580.00 options income +$162.00 dividend income - $404.00 capital appreciation)

1. Absolute Return-on-Investment (If Merck shares assigned early on the Dec. 16th, 2024 ex-dividend date): +0.9%
= +$176.00/$20,025.34
Equivalent Annualized Return-on-Investment (If assigned early): +32.1%
= (+$176.00/$20,025.34) * (365/10 days)

2. Absolute Return-on-Investment (If Merck price is above the $101.00 strike price at the December 27th options expiration): +1.7%
= +$338.00/$20,025.34
Equivalent Annualized Return-on-Investment (If assigned on the 12/27/2024 options expiration date): +29.3%
= (+$338.00/$20,025.34) * (365/21 days)

Covered Calls Position Established in Uber Technologies Inc.

This morning my buy/write net debit limit order was executed and 300 shares of Uber Technologies Inc.(ticker symbol UBER) stock were purchased at $65.68 and 3 December 20th, 2024 $64.00 Call options were sold at $2.92 per share -- a net debit of $62.76 per share.  So the potential time value profit if the stock is in-the-money and therefore closed out by assignment on the options expiration date is $1.24 per share [$2.92 Call options premium - ($65.68 stock purchase price - $64.00 strike price)]. The probability that the stock will be in-the-money and therefore assigned on its options expiration date was 64.5% when this order was transacted.  

As detailed below, a potential outcome for this Uber Technologies investment is +1.9% absolute return-on-investment for the next 14 days (equivalent to +49.0% annualized-return-on-investment) if the stock closes above the $64.00 strike price on the December 20th, 2024 options expiration date.

Uber Technologies Inc. (UBER) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
12/6/2024 Bought 300 shares of Uber Technologies Inc. stock @ $65.68 per share.  
12/6/2024 Sold 3 Uber December 20th, 2024 $64.00 Call options @ $2.92 per share.
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 34.9 when this position was established which, as preferred, is well above the current VIX of 12.9.  

A possible overall performance result (including commissions) if this position is assigned on its 12/20/2024 options expiration date is follows:
Covered Calls Net Investment: $19,706.01
= ($65.68 - $2.92) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$873.99
= ($2.92 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is above the $64.00 strike price at the 12/20/2024 options expiration date): -$504.00
= ($64.00 - $65.68) * 300 shares

Potential Total Net Profit (If assigned at expiration): +$369.99
= (+$873.99 options income + $0.00 dividend income - $504.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.9%
= +$369.99/$19,706.01
Potential Equivalent Annualized-Return-on-Investment: +49.0%
= (+$369.99/$19,706.01) * (365/14 days)

Established Covered Call Position in DICK'S Sporting Goods Inc.

A Covered Call position was established in DICK'S Sporting Goods Inc. (ticker DKS) when the Covered Calls Advisor's buy/write limit order at a net debit limit price of $199.66 was executed.  One hundred shares were purchased at $211.26 and one December 20th, 2024 Call option was sold at $11.60 at the $202.50 strike price.  The potential time value profit is $2.84 per share = [$202.50 strike price - ($211.26 stock purchase price - $11.60 Call options price)].   A moderately in-the-money Covered Calls position was established and the probability that the position will be assigned on the options expiration date was 71.1% when this position was established.  As is my preference, there is no earnings report prior to the options expiration date.

DICK'S goes ex-dividend exactly one week prior to the options expiration date on December 13th at $1.10 per share (a 2.1% annual dividend yield).  As detailed at the bottom of this post, this Covered Call meets all nine criteria of my Dividend Capture Strategy (see here).

DICK'S also meets all five of my current primary evaluation criteria for identifying worthwhile candidates for investing:

In addition, DICK'S passed all the criteria in the 'Ratings versus Peers' stock screener, which is shown here:

 

As detailed below, two potential return-on-investment results for this DICK'S Sporting Goods Inc. Covered Call position is: (1) +1.2% absolute return (equivalent to +45.6% annualized return-on-investment for the next 10 days) if the stock is assigned early on the day prior to its December 13th ex-dividend date; OR (2) +1.8% absolute return (equivalent to +38.6% annualized return-on-investment for the next 17 days) if DICK'S stock is assigned on the December 20th options expiration date. 

DICK'S Sporting Goods Inc. (DKS) -- New Covered Call Position

The buy/write transaction was:
12/3/2024 Bought 100 DICK'S Sporting Goods shares @ $211.26
12/3/2024 Sold 1 DKS 12/20/2024 $202.50 Call option @ $11.60 per share.  The implied volatility of this DKS Call option was 31.8 when this Covered Call transaction was executed.

Two possible overall performance results (including commissions) for this DICK'S Sporting Goods Covered Call position is as follows:
Covered Calls Net Investment: $19,966.67
= ($211.26 - $11.60) * 100 shares + $.67 commission

Net Profit:
(a) Options Income: +$1,159.33
= ($11.60 * 100 shares) - $.67 commission
(b) Dividend Income: (If stock assigned early on the day prior to the Dec. 13th option expiration date) = +$0.00; OR
(b) Dividend Income: (If stock assigned on the Dec. 20th option expiration date) = +$110.00

= $1.10 per share x 100 shares
(c) Capital Appreciation (If DICK'S shares assigned early on the day prior to the Dec. 13th ex-dividend date): -$910.00
+($202.50 strike price - $211.26 stock purchase price) * 100 shares; OR

(c) Capital Appreciation (If DICK'S shares assigned on the 12/13/2024 options expiration date): -$910.00
= +($202.50 - $211.26) * 100 shares

1. Total Net Profit (If options exercised early): +$249.33

= (+$1,159.33 options income +$0.00 dividend income - $910.00 capital appreciation)

2. Total Net Profit (If options exercised on the December 13th, 2024 options expiration date): +$359.33

= (+$1,159.33 options income +$110.00 dividend income - $910.00 capital appreciation)

1. Potential Absolute Return-on-Investment (If the DICK'S Sporting Goods shares are assigned early on the day prior to the 12/13/2024 options expiration date): +1.2%

= +$249.33/$19,966.67

Potential Annualized Return-on-Investment (If 100 DICK'S shares assigned at the $202.50 strike price on the Dec. 13th, 2024 options expiration date): +45.6%

= (+$249.33/$19,966.67) * (365/17 days)

2. Potential Absolute Return-on-Investment (If the DICK'S Sporting Goods shares are assigned at the $202.50 strike price at the 9/13/2024 options expiration date): +1.8%

= +$359.33/$19,966.67

Potential Annualized Return-on-Investment (If 200 DICK'S shares assigned at the $130.00 strike price on the August 4th, 2023 options expiration date): +38.6%

= (+$359.33/$19,966.67) * (365/17 days)

Dividend Capture Strategy chart for DICK'S Covered Call Position (meets all 9 criteria):

Established Covered Calls Position in the iShares 20+ Year Treasury Bond ETF

Today a short-term in-the-money Covered Calls position was established in the iShares 20+ Year Treasury Bond ETF (ticker TLT) at the December 27th, 2024 weekly options expiration date and at the $91.00 strike price.  Two hundred TLT shares were purchased at $92.60 per share and two 12/27/2024 $91.00 Calls were sold at $2.20 per share.  The corresponding potential time value profit is $.60 per share [$2.20 Call options premium - ($91.00 strike price - $92.60 ETF purchase price)].  The probability that these Calls will be in-the-money on the options expiration date was 72.4% when this position was established.  In addition to the potential time value profit of $.60 per share, there is an upcoming ex-distribution estimated to occur on December 19th which at approximately $.31 per share and which is prior to the December 27th options expiration date.  This is a repeat of a TLT Covered Calls position that was closed out on November 29th for an annualized return-on-investment achieved of +18.2%.  

Many investors are satisfied with buying-and-holding T-Bonds, but we Covered Calls investors know we can do better than the 4.46% yield currently available buying 20-year T Bonds.  As detailed below, two potential return-on-investment results are: (a) +0.7% absolute return (equivalent to +16.0% annualized return-on-investment for the next 15 days) if TLT is assigned early on the day prior to the Dec. 19th, 2024 ex-distribution date; or (b) +1.0% absolute return (equivalent to +15.9% annualized return-on-investment for the next 23 days) if it is in-the-money and therefore assigned at market close on the December 27th, 2024 options expiration date.  

iShares 20+ Year Treasury Bond ETF (TLT) -- New Covered Calls Position 

The simultaneous buy/write transaction was as follows:
12/4/2024 Bought 200 iShares 20+ Year Treasury Bond ETF shares at $92.60.

12/4/2024 Sold 2 TLT December 27th, 2024 $91.00 Call options @ $2.20 per share.
12/19/2024 Estimated ex-distribution of $.31 per share.

The overall performance results (including commissions) if TLT remains in-the-money at options expiration would be as follows:
Covered Calls Net Investment: $18,081.34
= ($92.60 - $2.20) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$438.66
= ($2.20 * 200 shares) - $1.34 commission

(b) Distribution Income [If TLT is assigned early on the last business day prior to the December 19th ex-distribution date: +$0.00
(b) Distribution Income [If TLT price is in-the-money (i.e. above the $91.00 strike price) and the position is assigned (i.e. closed out) at options expiration on Dec. 27th]: +$62.00

= $.31 distribution per share x 200 TLT shares

(c) Capital Appreciation (If TLT is assigned at the $91.00 strike price either early or on the 12/27/2024 options expiration date): -$320.00

= ($91.00 strike price - $92.60 purchase price) * 200 shares

Total Net Profit:

1.  If TLT shares are assigned early on the day prior to the ex-distribution date: +$118.66
     = (+$438.66 options income +$0.00 distribution income - $320.00 capital appreciation)

2.  If TLT share price is in-the-money (i.e. above the $91.00 strike price) at options expiration: +$180.66
= (+$438.66 options income + $62.00 distribution income - $320.00 capital appreciation)

Potential Absolute Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +0.7%

    = +$118.66/$18,081.34

2. If TLT shares are above the $91.00 strike price at the Dec. 27th, 2024 options expiration): +1.0%

    = +$180.66/$18,081.34

Potential Annualized Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +16.0% 

    = (+$118.66/$18,081.34) * (365/15 days)

2. If TLT shares are above the $91.00 strike price at the Dec. 27th, 2024 options expiration): +15.9%

    = (+$180.66/$18,081.34) * (365/23 days)

Three Short-Term Covered Calls Positions Established Using Dividend Capture Strategy -- Bank of America, Fedex, and Schlumberger

This morning Covered Calls were established in Bank of America Corp. (ticker BAC), Fedex Corporation (FDX), and SLB (formerly known as Schlumberger Ltd.). Short-term positions were selected for each position at the December 13th, 2024 weekly options expiration date. This strike price was preferable since the potential annualized return-on-investment in each case is higher for this 11-day duration than for the monthly 12/20/2024 monthly options expiration date. Also, in each case before establishing these positions, I had established a net buy/write limit price slightly below the midpoint of the buy/write price that existed when I entered my limit order. In each case, my limit price was executed within several minutes after I entered the orders. 

For Bank of America, 200 shares were purchased at $47.44 and 2 Dec. 13th, 2024 Call options were sold at $1.18 at the $46.50 strike price. For Fedex Corp., 100 shares were purchased at $296.04 and 1 December 13th, 2024 Call option was sold at $7.94 at the $290.00 strike price. For SLB, 400 shares were purchased at $43.22 and 4 Dec. 13th, 2024 Call options were sold at $1.48 at the $42.00 strike price. 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 75.0% for the Bank of America position, 72.9% for the Fedex, and 77.3% for the SLB position. 

All three positions have an intervening ex-dividend date prior to Dec. 13th, so the potential results detailed below includes the possibility of early exercise since the ex-dividends are prior to their respective options expiration dates. A positive fundamental factor is that analysts currently estimate that the earnings per share for each of these 3 companies is expected to increase over the next 12 months. Also of importance, none of the companies have a quarterly earnings report prior to their 12/13/2024 options expiration date.

Potential results for each position are detailed below.

1.  Bank of America Corporation (BAC) --

New Covered Calls Position

The buy/write transaction was:
12/2/2024 Bought 200 Bank of America Corp. shares @ $47.44
12/2/2024 Sold 2 BAC 12/13/2024 $46.50 Call options @ $1.18 per share.  The Implied Volatility of these Calls was 15.8 when this position was established.
12/6/2024 Upcoming quarterly ex-dividend of $.26 per share.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $9,253.34
= ($47.44 - $1.18) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$234.66
= ($1.18 * 200 shares) - $1.34 commission
(b) Dividend Income (If Bank of America shares assigned on the business day prior to the Dec. 6th ex-dividend date): = +$0.00; or
(b) Dividend Income (If BAC shares assigned at the 12/13/2024 options expiration date): +$52.00
= $.26 per share x 200 shares
(c) Capital Appreciation (If BAC shares assigned early): -$188.00
= ($46.50 strike price - $47.44 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If BAC shares assigned with stock above the $46.50 strike price at the December 13th, 2024 options expiration date): -$188.00
= ($46.50 -$46.44) * 200 shares

1. Potential Net Profit (If Bank of America shares assigned on 12/5/2024, the day prior to the Dec. 6th ex-dividend date): +$46.66
= (+$234.66 options income +$0.00 dividend income - $188.00 capital appreciation)
2. Potential Net Profit (If BAC price is above $46.50 strike price at the Dec. 13th options expiration): +$98.66
= (+$234.66 options income +$52.00 dividend income - $188.00 capital appreciation)

1. Absolute Return-on-Investment (If BofA shares assigned early on 12/5/2024, the day prior to the ex-dividend date): +0.5%
= +$46.66/$9,253.34
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +46.0%
= (+$46.66/$9,253.34) * (365/4 days)

2. Absolute Return-on-Investment (If BAC price is above the $46.50 strike price at the Dec. 13th options expiration date): +1.1%
= +$98.66/$9,253.34
Equivalent Annualized Return-on-Investment (If assigned on the 12/13/2024 options expiration date): +35.4%
= (+$98.66/$9,253.34) * (365/11 days)

2.  Fedex Corporation (FDX) -- New Covered Call Position

The buy/write transaction was:
12/2/2024 Bought 100 Fedex shares @ $296.04.
12/2/2024 Sold 1 FDX 12/13/2024 $290.00 Call option @ $7.94 per share.
Note: Implied Volatility (IV) of the Call options was at 14.7 when this position was transacted which, as I prefer, is above the current VIX of 13.4.   
12/9/2024 Upcoming quarterly ex-dividend of $1.38 per share. 

Two possible overall performance results (including commissions) for this Fedex Corp. Covered Calls position are as follows:
Covered Calls Net Investment: $28,810.67
= ($296.04 - $7.94) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$793.33
= ($7.94 * 100 shares) - $.67 commission
(b) Dividend Income (If Fedex Call option is exercised early this Friday which is the last business day prior to next Monday's Dec. 9th ex-div date): +$0.00; or
(b) Dividend Income (If Fedex stock assigned at the Dec. 13th, 2024 options expiration): +$138.00
= ($1.38 dividends per share x 100 shares)

(c) Capital Appreciation (If Fedex's Call option is assigned early on Dec. 6th): -$604.00

+($290.00 strike price - $296.04 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $290.00 strike price at the 12/13/2024 options expiration): -$604.00
+($290.00 - $296.04) * 100 shares

1. Total Net Profit (If option exercised early): +$189.33

= (+$793.33 options income +$0.00 dividend income - $604.00 capital appreciation); or

2. Total Net Profit (If 100 Fedex shares assigned at the $290.00 strike price at the Dec. 13th, 2024 expiration): +$327.33

= (+$793.33 options income +$138.00 dividend income - $604.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 12/9/2024 ex-dividend date]: +0.7%

= +$189.33/$28,810.67

Potential Annualized Return-on-Investment (If option exercised early): +34.3%

= (+$189.33/$28,810.67) * (365/7 days); or

2. Potential Absolute Return-on-Investment (If Fedex's shares assigned on the Dec. 13th options expiration date): +1.1%

= +$327.33/$28,810.67

Potential Annualized Return-on-Investment (If 100 Fedex shares assigned at $290.00 at the Dec. 13th, 2024 expiration): +37.7%

= (+$327.33/$28,810.67) * (365/11 days)

3.  Schlumberger Ltd. (SLB) -- New Covered Calls Position

The buy/write transaction was:
12/2/2024 Bought 400 SLB shares @ $43.22.
12/2/2024 Sold 4 USB 12/13/2024 $42.00 Call options @ $1.48 per share.
12/4/2024 Upcoming quarterly ex-dividend of $.275 per share. 

Two possible overall performance results (including commissions) for this SLB Covered Calls position are as follows:
Covered Calls Net Investment: $16,698.68
= ($43.22 - $1.48) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$589.32
= ($1.48 * 400 shares) - $2.68 commission
(b) Dividend Income (In the unlikely event that the SLB Call options exercised early on the last business day prior to this Wednesday's Dec. 4th ex-div date): +$0.00; or
(b) Dividend Income (If SLB stock assigned at the Dec. 13th, 2024 options expiration): +$110.00
= ($.275 dividends per share x 400 shares)

(c) Capital Appreciation (If SLB's Call options assigned early on Dec. 4th): -$488.00

+($42.00 strike price - $43.22 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $42.00 strike price at the 12/13/2024 options expiration): -$488.00
+($42.00 - $43.22) * 400 shares

1. Total Net Profit [If option exercised early (business day prior to the Dec. 4th ex-dividend date)]: +$101.32

= (+$589.32 options income +$0.00 dividend income - $488.00 capital appreciation); or

2. Total Net Profit (If 400 SLB shares assigned at the $42.00 strike price at the Dec. 13th, 2024 expiration): +$211.32

= (+$589.32 options income + $110.00 dividend income - $488.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 12/4/2024 ex-dividend date]: +0.6%

= +$101.32/$16,698.68

Potential Annualized Return-on-Investment (If option exercised early): +110.7%

= (+$101.32/$16,698.68) * (365/2 days); or

2. Potential Absolute Return-on-Investment (If SLB's shares assigned on the Dec. 13th options expiration date): +1.3%

= +$211.32/$16,698.68

Potential Annualized Return-on-Investment (If 400 SLB shares assigned at $42.00 at the December 13th, 2024 expiration): +42.0%

= (+$211.32/$16,698.68) * (365/11 days)

Covered Calls Positions Closed Out for Discover Financial Services and iShares 20+ Year Treasury Bond ETF

1. The Covered Calls Advisor Portfolio had a Covered Calls position in Discover Financial Services (DFS) at the November 29th, 2024 weekly options expiration date and at the $167.50 strike price.  The position closed well in-the-money yesterday at $182.43 per share, so the Call options expired and the 200 DFS shares were sold at their $167.50 strike price with the following results: +2.2% absolute return (equivalent to +50.6% annualized return-on-investment) for the 16 days of this Covered Calls investment.  The blog post history when this position was established is here.

2.  I was notified early this morning by Schwab that the three Call options in my iShares 20+ Year Treasury Bond ETF (ticker TLT) December 6th, 2024 Covered Calls position were exercised yesterday.  Because the iShares 20+ Year Treasury Bond ETF price increased from $90.54 when this position was established to $94.02 at yesterday's market close, the original $.45 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 December 6th options expiration date, the owner of these Calls exercised their option to buy the 300 TLT shares at the $89.50 strike price in order to receive Monday's approximately $.31 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +18.2% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the current 4.6% yield of 30-year treasury bonds. The post when this TLT Covered Calls position was originally established is here.

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Covered Calls Established in Tyson Foods Inc.

Early in this morning's trading, my buy/write Covered Calls position was transacted in Tyson Foods Inc. (ticker TSN) at a net debit limit order price of $61.76 per share.  Three hundred shares were purchased at $63.24 and three December 20th, 2024 Call options were sold at the $62.50 strike price at $1.48 per share.  This provides a time value profit potential of $.74 per share [$1.43 Call options premium - ($63.24 stock purchase price - $62.50 strike price)].  There was a 61.7% probability of the stock closing in-the-money on the options expiration date when this position was established.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here).   Tyson Foods has an upcoming quarterly ex-dividend of $.50 per share (a 3.2% annual dividend yield) that goes ex-dividend on November 29th, 2024 (which is prior to the Dec. 20th options expiration date).  This dividend is included in the detailed potential return-on-investment calculations below.  Also as preferred, the next quarterly earnings report on February 3rd, 2025 is after the December 20th, 2024 options expiration date.  

As detailed below, a potential return-on-investment result is:  +2.0% absolute return (equivalent to +30.4% annualized return-on-investment over the next 24 days) if the stock is assigned on the December 20th, 2024 options expiration date.

Tyson Foods Inc. (TSN) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
11/26/2024 Bought 300 shares of Tyson Foods @ $63.24 per share.  
11/26/2024 Sold 3 TSN December 20th, 2024 $62.50 Call options @ $1.48 per share.  The Implied Volatility of these Call options was 15.3 today when this transaction was executed. 

A possible overall performance result (including commissions) if this stock is in-the-money (and therefore the stock is assigned (i.e. sold) at the $62.50 strike price) on the Dec. 20th options expiration date is as follows:
Covered Calls Net Investment: $18,530.01
= ($63.24 - $1.48) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$441.99
= ($1.48 * 300 shares) - $2.01 commission
(b) Dividend Income (If assigned on the 12/20/2024 options expiration date): +$150.00
= $.50 x 300 shares
(c) Capital Appreciation (If 300 Tyson Foods shares assigned at the $62.50 strike price): -$222.00
+($62.50 strike price - $63.24 stock purchase price) * 300 shares

Total Net Profit Potential (If 300 Tyson Foods Inc. shares assigned at the $62.50 strike price at the options expiration date): +$369.99
= (+$441.99 options income +$150.00 dividend income - $222.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.0%
= +$369.99/$18,530.01
Potential Annualized Return-on-Investment (if assigned on the 12/20/2024 options expiration date): +30.4%
= (+$369.99/$18,530.01) * (365/24 days)

Covered Calls Established in Netease Inc. ADR

This afternoon my buy/write Covered Calls position was transacted in Netease Inc. ADR (ticker NTES) at a net debit limit order price of $82.18 per share.  Two hundred shares were purchased at $85.61 and two December 6th, 2024 Call options were sold at the $83.00 strike price at $3.43 per share.  This provides a time value profit potential of $.82 per share [$3.43 Call options premium - ($85.61 stock purchase price - $83.00 strike price)].  There was a 71.3% probability of closing in-the-money on the options expiration date when this position was established.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Netease has an upcoming quarterly ex-dividend of $.435 per share (a 2.0% annual dividend yield) that goes ex-dividend on November 29th, 2024 which is prior to the Dec. 6th options expiration date.  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 December 6th, 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 preferred, the next quarterly earnings report on February 22nd, 2025 is after the December 6th options expiration date.  

Netease began as a Chinese internet portal in the late 1990s but has now become the second largest mobile gaming company in the world.  It owns one of the most well-known massively multiplayer franchises in China -- Fantasy Westward Journey.  The firm's other investments in music streaming, online education, and e-commerce also have long-term potential.  Although primarily in China, they also offer services worldwide including in Japan, U.S., Europe, and SE Asia.  

The fourteen analysts that cover Netease have an average target price of $111.70 (+30.5% above today's purchase price) and every analyst has either a Strong Buy or Buy rating on the company -- none have a Hold, Sell, or Strong Sell rating.  Netease also appeared today in my "Ratings Versus Peers" stock screener (see chart below) where it met all 14 screener filters.  I was also pleased to see that LSEG (Refinitiv) rates Netease as a 9 (out of 10) for both its Average Score and its Optimized Score, which puts it in the top 12% of companies monitored by Refinitiv.

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

•  +1.0% absolute return (equivalent to +90.3% annualized return-on-investment for the next 4 days) in the relatively unlikely event that the stock price moves substantially higher and is assigned early (the last business day prior to the November 29th ex-dividend date); OR 

• +1.5% absolute return (equivalent to +50.4% annualized return-on-investment over the next 11 days) if the stock is assigned on the December 6th options expiration date.

Netease Inc. ADR (NTES) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
11/25/2024 Bought 200 shares of Netease Inc. @ $85.61 per share.  
11/25/2024 Sold 2 NTES December 6th, 2024 $83.00 Call options @ $3.43 per share.  The Implied Volatility of these Call options was 29.3 today when this transaction was executed.
11/29/2024 Ex-dividend at $.435 per share. 

Two possible overall performance results (including commissions) for this Netease Inc. ADR Covered Calls position is as follows:
Covered Calls Net Investment: $16,437.34
= ($85.61 - $3.43) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$684.66
= ($3.43 * 200 shares) - $1.34 commission
(b) Dividend Income (If assigned early): +$0.00; OR
(b) Dividend Income (If assigned on the 12/6/2024 options expiration date): +$87.00
= $.435 x 200 shares
(c) Capital Appreciation (If 200 Netease Inc. shares assigned at $83.00 strike price): -$522.00
+($83.00 strike price - $85.61 stock purchase price) * 200 shares

1. Total Net Profit Potential (If 200 Netease Inc. shares assigned early prior to the ex-dividend date on 11/29): +162.66
= (+$684.66 options income +$0.00 dividend income - $522.00 capital appreciation); OR
2. Total Net Profit Potential (If 200 Netease Inc. shares assigned at $83.00 strike price at the options expiration date): +$249.66
= (+$684.66 options income +$87.00 dividend income - $522.00 capital appreciation)

1. Potential Absolute Return-on-Investment (if early assignment): +1.0%
= +$162.66/$16,437.34
Potential Annualized Return-on-Investment (if early assignment): +90.3%
= (+$162.66/$16,437.34) * (365/4 days); OR
2. Potential Absolute Return-on-Investment (if assigned on the 12/6/2024 options expiration date: +1.5%
= +$249.66/$16,437.34
Potential Annualized Return-on-Investment (if assigned on the 12/6/2024 options expiration date): +50.4%
= (+$249.66/$16,437.34) * (365/11 days)

Established Covered Calls Position in the iShares 20+ Year Treasury Bond ETF

Today a short-term in-the-money Covered Calls position was established in the iShares 20+ Year Treasury Bond ETF (ticker TLT) at the December 6th, 2024 weekly options expiration date and at the $89.50 strike price.  Three hundred TLT shares were purchased at $90.54 per share and three 12/6/2024 $89.50 Calls were sold at $1.49 per share. The corresponding potential time value profit is $.45 per share [$1.49 Call options premium - ($89.50 strike price - $90.54 ETF purchase price)].  The probability that these Calls will be in-the-money on the options expiration date was 70.1% when this position was established.  In addition to the potential time value profit of $.45 per share, there is an upcoming monthly ex-distribution on December 1st which will be approximately $.31 per share and which is prior to the December 6th options expiration date.  

As you know, I normally prefer to establish Covered Calls using individual stocks rather than broader indices such as ETFs.  The reasons for this is described in my prior post entitled "Exploiting Our Covered Calls Investing "Edges"' (see items #2 and #3 in the article here).  Many investors are satisfied with buying-and-holding T-Bonds, but we Covered Calls investors know we can do better than the 4.39% yield currently available buying 30-year T Bonds.  This is true not only for our usual Covered Calls positions using stocks as the underlying equity, but this TLT Covered Calls position demonstrates that it is also true for Covered Calls with this conservative Treasury Bond ETF (i.e. TLT), whose potential annualized-return-on-investment (aroi) result of +22.1% at the options expiration date, as detailed below, greatly exceeds the current yield from simply owning long-term Treasury Bonds. 

Two potential return-on-investment results are: (a) +0.5% absolute return (equivalent to +18.2% annualized return-on-investment for the next 10 days) if TLT is assigned early on the day prior to the Dec. 2nd, 2024 ex-distribution date; or (b) +0.8% absolute return (equivalent to +22.1% annualized return-on-investment for the next 14 days) if it is assigned at market close on the December 6th, 2024 options expiration date.  

iShares 20+ Year Treasury Bond ETF (TLT) -- New Covered Calls Position 

The simultaneous buy/write transaction was as follows:
11/22/2024 Bought 300 iShares 20+ Year Treasury Bond ETF shares at $90.54.

11/22/2024 Sold 3 TLT December 6th, 2024 $89.50 Call options @ $1.49 per share.
12/1/2023 Estimated ex-distribution of $.31 per share.

The overall performance results (including commissions) if TLT remains in-the-money at options expiration would be as follows:
Covered Calls Net Investment: $26,717.01
= ($90.54 - $1.49) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$444.99
= ($1.49 * 300 shares) - $2.01 commission

(b) Distribution Income [If TLT is assigned early on the last business day prior to the December 2nd ex-distribution date: +$0.00
(b) Distribution Income [If TLT price is in-the-money (i.e. above the $89.50 strike price) and the position is assigned (i.e. closed out) at options expiration on Dec. 6th]: +$93.00

= $.31 distribution per share x 300 TLT shares

(c) Capital Appreciation (If TLT is assigned at the $87.00 strike price either early or on the 5/10/2024 options expiration date): -$312.00

= ($89.50 strike price - $90.54 purchase price) * 300 shares

Total Net Profit:

1.  If TLT shares are assigned early on the day prior to the ex-distribution date: +$132.99
     = (+$444.99 options income +$0.00 distribution income -$312.00 capital appreciation)

2.  If TLT share price is in-the-money (i.e. above the $89.50 strike price) at options expiration: +$225.99
= (+$444.99 options income +$93.00 distribution income -$312.00 capital appreciation)

Potential Absolute Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +0.5%

    = +$132.99/$26,717.01

2. If TLT shares are above the $89.50 strike price at the Dec. 6th, 2024 options expiration): +0.8%

    = +$225.99/$26,717.01

Potential Annualized Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +18.2% 

    = (+$132.99/$26,717.01) * (365/10 days)

2. If TLT shares are above the $89.50 strike price at the Dec. 6th, 2024 options expiration): +22.1%

    = (+$225.99/$26,717.01) * (365/14 days)

Covered Calls Position Closed in Target Corporation

Today I closed out my Covered Calls position in Target Corporation (TGT).  The position was unwound by selling-to-close the 200 shares and simultaneously buying-to-close the 2 November 29th, 2024 $145.00 Call options.  I am taking a substantial $3,137.34 net loss on this position since the stock declined sharply two days ago when they reported a trifecta miss on their quarterly earnings report -- missing analysts' estimates on revenue, earnings, and they also lowered estimates for their upcoming holiday quarter.  I decided to close out this position because Target's current performance is weaker than that of all their primary competitors, which includes Walmart, Costco, and Amazon.com, so Target's stock is likely to remain in the penalty box until they can demonstrate more positive results like that of their competitors.  This unsatisfactory result reinforces why I have long believed that stock positions should not be held on earnings reporting dates.  Unfortunately, I didn't follow my own rule in this instance and was burned as a result and therefore I'll be more diligent about not holding positions on their earnings reporting dates going forward.      

The transactions history for this Target Covered Calls position and its associated return-on-investment results are detailed below.

Target Corporation (TGT) -- Closed Covered Calls Position
The original 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 Quarterly ex-dividend of $1.12 per share.

The 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: +$2,490.66
= ($12.51 - $.05) * 200 shares - $1.34 commission
(b) Dividend Income: +$224.00
= ($1.12 dividend per share x 200 shares)

(c) Capital Appreciation (Target shares closed out by selling at $125.15): -$5,852.00
+($125.15 - $154.41) * 200 shares

Total Net Loss: -$3,137.34

= (+$2,490.66 +$224.00 -$5,852.00)

Absolute Return-on-Investment: -11.1%

= -$3,137.34/$28,381.34

Annualized Return-on-Investment: -504.3%

= (-$3,137.34/$28,381.34) * (365/8 days)

Established Covered Calls in Nvidia Corporation

Early this afternoon a Covered Calls position was established in Nvidia Corporation (ticker NVDA). Three hundred shares were purchased at $144.31 and three December 6th, 2024 weekly Call options were sold at the $140.00 strike price at $7.74 per share--a buy/write net debit amount of $136.57 per share which provides a $3.43 per share time value profit potential.  

As detailed below, a potential return-on-investment result is +2.5% absolute return-on-investment (equivalent to +61.0% annualized return-on-investment for the next 15 days) if the Nvidia share price is in-the-money (i.e. above the $140.00 strike price) and therefore assigned on its Dec. 6th, 2024 options expiration date.  The probability this outcome will be achieved was 62.0% when this position was established.

 
Nvidia Corporation (NVDA) -- New Covered Calls Position

The buy/write market order transaction was as follows:
11/21/2024 Bought 300 Nvidia Corporation shares at $144.31.

11/21/2024 Sold 3 NVDA 12/6/2024 $140.00 Call options @ $7.74 per share.  The Implied Volatility of the Calls was very high at 43.2 when these Calls were sold.

A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $40,973.01
= ($144.31 - $7.74) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$2,319.99
= ($7.74 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $140.00 strike price at expiration): -$1,293.00
+($140.00 - $144.31) * 300 shares

Total Net Profit Potential (If 300 Nvidia shares in-the-money and therefore assigned at the $140.00 strike price at the options expiration date): +$1,026.99
= (+$2,319.99 options income + $0.00 dividend income - $1,293.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.5%
= +$1,026.99/$40,973.01
Potential Annualized Return-on-Investment: +61.0%
= (+$1,026.99/$40,973.01) * (365/15 days)

Early Assignment of Covered Calls Position in Wheaton Precious Metals Corp.

I was notified early this morning by Schwab that the five Call options in my Wheaton Precious Metals Corp. (ticker WPM) November 29th, 2024 Covered Calls position were exercised yesterday.  Because the Wheaton Precious Metals stock price increased from $59.74 when this position was established to $62.96 at yesterday's market close, the original $.88 time value in the Calls when the position was established had declined on yesterday's market close to $0.00.  So, with eight days remaining until the November 29th options expiration date, the owner of these Calls exercised their option to buy the 500 WPM shares at the $58.00 strike price in order to receive today's $.155 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +62.0% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +38.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 29th, 2024 options expiration date.   

The post when this Wheaton Precious Metals Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Wheaton Precious Metals Covered Calls position was +1.5% absolute return in 8 days (equivalent to a +62.0% annualized return-on-investment).

Wheaton Precious Metals Corp. (WPM) -- Covered Calls Position Closed by Early Assignment
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 Five WPM 11/29/2024 $58.00 Calls exercised early, so the Calls expired and the 500 Wheaton Precious Metals shares were sold at the $58.00 strike price.

The 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 (WPM Call options exercised early on Nov. 20th, the business day prior to the Nov. 21st, 2024 ex-div date): +$0.00

(c) Capital Appreciation): -$870.00
+($58.00 strike price - $59.74 stock purchase price) * 500 shares

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

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

Absolute Return-on-Investment: +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)

Early Assignment of Covered Calls Position in Marathon Petroleum Corporation

I was notified by Schwab early this morning that the two Marathon Petroleum Corporation (ticker MPC) November 29th, 2024 Call options were exercised yesterday.  Because the Marathon Petroleum stock price increased from $154.87 when this position was established to $158.80 at yesterday's market close, the original $1.54 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 November 29th options expiration date, the owner of these Calls exercised their option to buy the 200 shares at the $150.00 strike price in order to receive today's $.91 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +53.9% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +37.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 29th, 2024 options expiration date.   

The post when this Marathon Petroleum Corp. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this MPC Covered Calls position was +1.0% absolute return in 7 days (equivalent to a +53.9% annualized return-on-investment).

Marathon Petroleum Corp. (MPC) -- Covered Calls Position Closed by Early Assignment

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: Two Marathon Petroleum Calls were exercised on the day prior to their November 20th, 2024 ex-dividend date, so the Calls expired and the 200 MPC shares were sold at the $150.00 strike price.

The 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 (MPC Cal options exercised early on Nov. 19th, the last business day prior to the November 20th ex-div date): +$0.00
(c) Capital Appreciation: -$974.00
+($150.00 strike price - $154.87 stock price) * 200 shares

Total Net Profit: +$306.66

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

Absolute Return-on-Investment: +1.0%

= +$306.66/$29,693.34

Annualized Return-on-Investment: +53.9%

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

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.