At 9:53am ET this morning, a Covered Call position was established in FedEx Corporation (ticker symbol FDX) when the Covered Calls Advisor's buy/write limit order was executed. One hundred shares were purchased at $243.00 and 1 March 15th, 2024 monthly Call option was sold at $8.10 at the $237.50 strike price--so, the corresponding potential time value profit is $2.60 per share [$8.10 Call option premium - ($243.00 stock purchase price -
$237.50 strike price)]. Given the Covered Calls Advisor's current "Neutral" Overall Market Meter outlook, a slightly in-the-money Covered Call position was
established -- the Delta was 67.2 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 21.0 which (as I prefer) is significantly higher than the current 14.1 of the S&P 500 volatility index (i.e. VIX). There is an upcoming ex-dividend on March 8th of $1.26 per share (2.1% annual dividend yield), which is included in the potential return-on-investment results shown below.
FedEx stock price has declined by 13.2% since its last quarterly eps result was below analysts' average expectation. However, year-over-year eps results are expected to resume an increase above their prior year results beginning with the current quarter report upcoming on March 21st. As I prefer, this report will be after the March 15th options expiration date for this FedEx Covered Call position. In addition the Wall Street analysts' current average target price being +22.3% above today's purchase price, I was also impressed when reviewing the Refinitiv Stocks Reports current Average Score for FedEx garnered its highest rating of 10 (on their scale of 1 to 10).
As detailed below, two potential return-on-investment results for this FedEx Corporation Covered Call position are: (a) +1.1% absolute return (equivalent to +28.8% annualized
return-on-investment for the next 14 days) if the stock is assigned early [on the last trading day prior to the ex-dividend date]; OR (b) +1.6%
absolute return (equivalent to +28.5% annualized return over the next 21 days) if the stock is assigned on the March 15th, 2024 options expiration date.
FedEx Corporation (FDX) -- New Covered Call Position
The buy/write transaction was:
2/23/2024 Bought 100 FedEx shares @ $243.00.
2/23/2024 Sold 1 FedEx 3/15/2024 $237.50 Call option @ $8.10 per share.
3/8/2024 Upcoming quarterly ex-dividend of $1.26 per share
Two possible overall performance results (including commissions) for this FedEx Covered Call position are as follows:
Covered Call Net Investment: $23,490.67
= ($243.00 - $8.10) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$809.33
= ($8.10 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on the business day prior to the ex-div date): +$0.00;
or
(b) Dividend Income (If FedEx shares assigned at the March 15th, 2024 options expiration): +$126.00
= ($1.26 dividend per share x 100 shares)
(c) Capital Appreciation (If FedEx shares assigned early): -$550.00
+($237.50 strike price -$243.00 stock purchase cost) * 100 shares;
or
(c) Capital Appreciation (If FedEx shares assigned at $237.50 strike price at options expiration): -$550.00
+($237.50 - $243.00) * 100 shares
1. Total Net Profit [If option exercised on March 7th, 2024 (last business day prior to the March 8th ex-dividend date)]: +$259.33
= (+$809.33 option income +$0.00 dividend income -$550.00 capital appreciation); or
2. Total Net Profit (If FedEx shares assigned at $237.50 at the March 15th, 2024 options expiration): +$385.33
= (+$809.33 option income +$126.00 dividend income -$550.00 capital appreciation)
1. Absolute Return-on-Investment (If FedEx option exercised early on the business day prior to the expiration date): +1.1%
= +$259.33/$23,490.67
Annualized Return-on-Investment (If option exercised early): +28.8%
= (+$259.33/$23,490.67) * (365/14 days); or
2. Absolute Return-on-Investment (If FedEx shares assigned at the $237.50 strike price at the March 15th, 2024 options expiration date): +1.6%
= +$385.33/$23,490.67
Annualized Return-on-Investment (If FedEx stock assigned at the $237.50 strike price at the March 15th expiration date): +28.5%
= (+$385.33/$23,490.67) * (365/21 days)
Either
outcome would provide a satisfactory return-on-investment result. These returns will be achieved as long as the stock is
above the $237.50 strike price at assignment. If the stock declines
below the strike price, the breakeven price of $233.64 ($243.00 -$8.10 -$1.26)
provides 3.9% 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 (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 FedEx Covered Call position.
As always, I encourage your email questions related to Covered Calls at any time. My email address is partlow@cox.net.
Best Wishes,
Jeff Partlow (The Covered Calls Advisor)
