Established Covered Calls in Newmont Corporation

A buy/write limit order was entered in Newmont Corporation (ticker NEM) to buy 600 shares and simultaneously sell 6 Call options at the March 15th, 2024 monthly options expiration date and at the $28.50 strike price. The net debit limit price for my order was $28.23 and this order was executed at 10:38am when 600 shares were purchased at $29.65 and 6 March 15th, 2024 Call options were sold for $1.42 per share.  Therefore, a maximum potential time value profit of $.27 per share = [$1.42 options premium - ($29.65 stock price - $28.50 strike price)] is available for this position.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy since Newmont has an upcoming quarterly ex-dividend of $.25 per share on March 4th which is prior to the March 15th options expiration date.  This is equivalent to an absolute annual dividend yield of 3.4% and an equivalent annualized dividend yield of 19.2% = [($.25/$29.65) x (365/16 days to expiration)].  This dividend is included in the detailed return-on-investment calculations below.  Either an early assignment this Friday (the last trading day prior to next Monday's ex-dividend date) or on the March 15th options expiration date would be desirable to the Covered Calls Advisor given the potential annualized return on investments for either outcome.  Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on April 25th, 2024 is after the 3/15/2024 options expiration date.

As shown on the table at the bottom of this post, eight of the nine criteria of the Dividend Capture Strategy are met with this position.  Even if Newmont's stock price declines somewhat during the next 16 days until the options expiration date, if the stock closes above the $28.50 strike price, then a very satisfactory annualized-return-on-investment of +41.5% will be achieved.  The Delta for these Call options was approximately 73.5 when this position was established which approximates the probability of 73.5% that the position will be in-the-money at market close on the options expiration date.  

Newmont is the world's largest gold miner.  Its stock price was greatly oversold on a very short-term basis with an RSI(2)=7.5 when this position was established.  I was also encouraged by the +58.9% stock price upside of the 22 Analysts' current average target price of $47.10.  

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

•  +0.9% absolute return (equivalent to +68.1% annualized return-on-investment for the next 5 days) if the stock is assigned early (on the last business day prior to the March 4th ex-dividend date); or  

• +1.8% absolute return (equivalent to +41.5% annualized return-on-investment over the next 16 days) if the stock is assigned on the March 15th, 2024 options expiration date.

Newmont Corporation (NEM) -- New Covered Calls Position
The buy/write transaction was:
2/28/2024 Bought 600 Newmont shares @ $29.65.
2/28/2024 Sold 6 NEM 3/15/2024 $28.50 Call options @ $1.42 per share.
Note: Implied Volatility (IV) of the Call options was at 28.7 when this position was transacted which, as I prefer, is above the current VIX of 13.5.   
3/4/2024 Upcoming quarterly ex-dividend of $.25 per share.

Two possible overall performance results (including commissions) for this Newmont Corporation Covered Calls position are as follows:
Covered Calls Net Investment: $16,933.98
= ($29.65 - $1.42) * 600 shares + $4.02 commission

Net Profit Components:
(a) Options Income: +$847.98
= ($1.42 * 600 shares) - $4.02 commission
(b) Dividend Income (If Newmont Call options exercised early on March 1st, 2024, the last business day prior to the March 4th ex-div date): +$0.00; or
(b) Dividend Income (If Newmont stock assigned at the March 15th, 2024 options expiration): +$150.00
= ($.25 dividend per share x 600 shares)

(c) Capital Appreciation (If Newmont's Call options assigned early on March 1st): -$690.00

+($28.50 strike price - $29.65) * 600 shares; or
(c) Capital Appreciation (If shares assigned at $28.50 strike price at the 3/15/2024 options expiration): -$690.00
+($28.50 - $29.65) * 600 shares

1. Total Net Profit [If option exercised early (business day prior to the March 4th ex-dividend date)]: +$157.98

= (+$847.98 options income +$0.00 dividend income -$690.00 capital appreciation); or

2. Total Net Profit (If 600 Newmont shares assigned at the $28.50 strike price at the March 15th, 2024 expiration): +$307.98

= (+$847.98 +$150.00 -$690.00)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to next Monday's ex-dividend date]: +0.9%

= +$157.98/$16,933.98

Potential Annualized Return-on-Investment (If option exercised early): +68.1%

= (+$157.98/$16,933.98) * (365/5 days); or

2. Potential Absolute Return-on-Investment (If Newmont's shares assigned on the March 15th options expiration date): +1.8%

= +$307.98/$16,933.98

Potential Annualized Return-on-Investment (If 600 Newmont shares assigned at $28.50 at the March 15th, 2024 expiration): +41.5%

= (+$307.98/$16,933.98) * (365/16 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 Newmont Corporation Covered Calls position.