There is an upcoming ex-dividend of $.91 per
share (3.1% annual dividend yield) on January 16th, 2024 which is prior to the Jan. 26th options expiration date. So, two potential return-on-investment results for this position are detailed below:
(1) Early exercise on the day prior to the January 16th, 2024 ex-dividend date; OR
(2) Assignment on the January 26th, 2024 options expiration date. So, this position is evaluated in the table at the bottom of this post to determine how many of the 9 criteria in the Covered Calls Advisor's Dividend Capture Strategy would be met by this Covered Calls position if it were to be established. In this case, all nine criteria were met so a new Covered Calls Dividend Capture strategy position in EOG Resources was established.
Given the Covered Calls Advisor's current Neutral Overall Market Meter outlook, a slightly in-the-money Covered Calls
position was established -- the Delta was 67.8 when this position was established, which approximates a
probability of 67.8% that the Call options will be
in-the-money on the options expiration date. According to Refinitiv, EOG is covered by 30 brokerage firm analysts and their average target price is $143.29 which is +23.2% above
today's purchase price. The trailing twelve months earnings per share was $11.92--a P/E ratio of 9.8 based on today's stock purchase price and below the prior 5-year average P/E ratio of 11.1.
As detailed below, a potential return-on-investment result is +0.9% absolute return (equivalent to +48.7% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the Jan. 16th ex-date); OR +1.7% absolute return (equivalent to +37.3% annualized return-on-investment over the next 17 days) if the stock is assigned on the January 26th, 2024 options expiration date.
EOG Resources Inc. (EOG) -- New Covered Calls Position
The buy/write transaction today was as follows:
1/9/2024 Bought 300 EOG Resources Inc. shares @ $116.35
1/9/2024 Sold 3 EOG 1/26/2024 $113.50 Call options @ $3.91 per share.
1/16/2024 Upcoming regular ex-dividend of $.91 per share.
Two possible overall performance results (including commissions) for this EOG Resources Covered Calls position are as follows:
Covered Calls Net Investment: $33,734.01
= ($116.35 - $3.91) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$1,170.99
= ($3.91 * 300 shares) - $2.01 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Jan. 16th ex-div date): +$0.00; or
(b) Dividend Income (If EOG shares assigned at the Jan. 26th, 2024 options expiration): +$273.00
= ($.91 dividend per share x 300 shares)
(c) Capital Appreciation (If EOG shares assigned early on January 16th, 2024): -$855.00
+($113.50 - $116.35) * 300 shares ;or
(c) Capital Appreciation (If EOG shares assigned at $113.50 strike price at options expiration): -$855.00
= +($113.50 - $116.35) * 300 shares
These returns will be achieved as long as the stock is
above the $113.50 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $111.53 ($116.35 -$3.91 -$.91)
provides 4.1% downside protection below today's purchase
price.
You will notice that the Covered Calls Advisor always calculates
potential return-on-investment results (using "annualized-return-on-investment") BEFORE establishing any Covered Calls position. This approach enables us to obtain a good perspective on whether or not the potential annualized-return-on-investment results (including their associated probability of assignment) provides a risk/reward profile that qualifies as a potential investment if it meets or exceeds the minimum thresholds specified in criteria 8 and 9 in the Dividend Capture Strategy table below.
The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy. The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved. As shown in the table below, all nine criteria are met for this EOG Resources Inc. Covered Calls position.
