Established Covered Calls in APA Corporation

A Covered Calls position was established in APA Corporation (ticker APA) when my buy/write limit order for the January 26th, 2023 $33.00s executed at a net debit price of $32.37.  Six hundred APA shares were purchased at $33.92 and 6 January 26th, 2024 $33.00 Calls were sold at $1.55 per share.  So, the corresponding time value (aka extrinsic value) was $.63 per share = [$1.55 Call options premium - ($33.92 stock purchase price - $33.00 strike price)].  I established this position in the Energy Sector as a replacement for the Halliburton position that was closed out earlier today.

APA, formerly known as Apache, is a mid-cap worldwide oil and gas exploration and production company based in Houston.  Their stock has declined significantly since their announcement yesterday morning of their acquisition agreement with Callon Petroleum.  I view this acquisition positively for both companies with Callon's properties in the Permian Basin a nice complement to APA's existing presence there.  The deal has several significant synergies which will begin to contribute immediately to APA's earnings; so I consider the initial stock price decline to be a temporary overreaction.

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 65.4 which closely approximates the probability that the Call options will be in-the-money on the options expiration date.  In addition, the Implied Volatility of the Calls was 32.5 when the position was established which, as desired, was above the VIX which is now only 13.6. 

APA Corp. goes ex-dividend at $.25 per share which is a 2.9% annualized dividend yield at today's stock purchase price.  This dividend is included in the potential return-on-investment results shown below.  As preferred, there is no earnings report prior to the options expiration date and analysts' current stock target price is $47.12 per share (+38.9% above today's purchase price).

As detailed below, two potential return-on-investment results for this APA Covered Calls position are: (a) +1.9% absolute return (equivalent to +50.2% annualized return for the next 14 days) if the stock is assigned early [i.e. on January 18th which is the last trading day prior to the January 19th ex-dividend date]; OR (b) +2.7% absolute return (equivalent to +46.9% annualized return over the next 21 days) if the stock is assigned on the December 26th, 2024 options expiration date. 

APA Corporation (APA) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
1/5/2024 Bought 600 shares of APA Corporation stock @ $33.92 per share.  
1/5/2024 Sold 6 APA January 26th, 2024 $33.00 Call options @ $1.55 per share.
1/19/2024 Upcoming ex-dividend at $.25 per share

The overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $19,426.02
= ($33.92 - $1.55) * 600 shares + $4.02 commission

Net Profit Components:
(a) Options Income: +$925.98
= ($1.55 * 600 shares) - $4.02 commission
(b) Dividend Income (If APA stock assigned on the Jan.19th ex-dividend date): $0.00
(b) Dividend Income (If APA stock assigned on the Jan. 26th, 2024 options expiration date): +$150.00
= $.25 dividend per share x 600 shares
(c) Capital Appreciation (If APA stock assigned on the Jan. 19th ex-dividend date): -$552.00
= ($33.00 - $33.92) * 600 shares
(c) Capital Appreciation (If APA stock is above $33.00 strike price and therefore assigned at the Dec. 26th options expiration date): -$552.00
= ($33.00 - $33.92) * 600 shares

1. Potential Net Profit (If APA shares assigned on 1/18/2024, the day prior to the Jan. 19th ex-dividend date): +$373.98
= (+$925.98 options income +$0.00 dividend income - $552.00 capital appreciation)
2. Potential Net Profit (If APA stock price is above $33.00 strike price at the Dec. 26th options expiration): +$523.98
= (+$925.98 options income +$150.00 dividend income - $552.00 capital appreciation)

1. Absolute Return-on-Investment (If APA shares assigned on 1/18/2024, the day prior to the 1/19/2024 ex-dividend date): +1.9%
= +$373.98/$19,426.02
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +50.2%
= (+$373.98/$19,426.02) * (365/14 days)

2. Absolute Return-on-Investment (If APA price is above $33.00 strike price and therefore assigned at the Dec. 26th options expiration): +2.7%
= +$523.98/$19,426.02
Equivalent Annualized Return-on-Investment (If assigned on the 1/26/2024 options expiration date): +46.9%
= (+$523.98/$19,426.02) * (365/21 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved for this APA Corporation Covered Calls position.