On January 26th, 2024 I established a Covered Calls position in Las Vegas Sands Corporation (ticker LVS) at the $48.00 strike price and for the February 16th, 2024 monthly options expiration date. The stock price has increased from $49.90 when purchased to $51.70 this morning. I have a "Rule-of-Thumb for Early Close Out" table (shown below), and this Las Vegas Sands Covered Calls position exceeded the minimum annualized-return-on-investment (aroi) threshold for closing out a position early. This position has been held for 11 days now and there were 21 days total duration until the 2/16/2024 options expiration date which corresponds to category #4 in the rules table below. The category #2 decision criteria is that the aroi if closed early be at least 40% higher than the aroi if the position was instead assigned on the original options expiration date. The aroi if assigned on the 2/16/2024 expiration date would be +31.3% and a minimum threshold for a 40% increase above +31.3% is +43.8%. As detailed below, this Covered Calls position aroi result of +41.8% was slightly below the +43.8% threshold. However, I am very satisfied with the result obtained since the remaining time value profit potential of $.25 per share until the options expiration date would have provided only a +19.0% aroi for the remaining 10 days if the stock price was above the strike price on the original 2/16/2024 options expiration date -- and I plan to re-invest the cash received from closing this position into a new Covered Calls position with an aroi potential greater than +19.0% .
Las Vegas Sands Corporation (LVS) -- Covered Calls Position Closed Out by Early Decision
The buy/write transaction was:
1/26/2024 Bought 400 Las Vegas Sands shares @ $49.90.
1/26/2024 Sold 4 LVS 2/16/2024 $48.00 Call options @ $2.56 per share.
Note: Implied Volatility (IV) of the Call options was at 29.7 when this position was transacted which, as preferred, is above the current VIX of 13.4.
2/5/2024 LVS quarterly ex-dividend of $.20 per share.
2/6/2024 Unwound this LVS Covered Calls position by simultaneously Selling-to-Close 400 shares @ $51.70 and Buying-to-Close 4 LVS 2/16/2024 $48.00 Call options @ $3.95 per share -- a net credit of $47.75 per share.The overall performance results (including commissions) are as follows:
Covered Calls Net Investment: $18,938.68
= ($49.90 - $2.56) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: -$561.36
= ($2.56 - $3.95) * 400 shares - $5.36 commissions
(b) Dividend Income: +$80.00
= ($.20 dividend per share x 400 shares)
(c) Capital Appreciation (400 LVS shares sold at $51.70 per share): +$720.00
+($51.70 sales price - $49.90 purchase price) * 400 shares
Total Net Profit: +$238.64
= (-$561.36 options income +$80.00 dividend income +$720.00 capital appreciation)
Absolute Return-on-Investment: +1.3%
= +$238.64/$18,938.68
Annualized Return-on-Investment: +41.8%
= (+$238.64/$18,938.68) * (365/11 days)
