This position uses the Covered Calls Advisor's Dividend Capture Strategy since U.S. Bancorp has an upcoming quarterly ex-dividend of $.49 per share on March 27th which is prior to the April 12th options expiration date. This is equivalent to an absolute annual dividend yield of 4.7% and an equivalent annualized dividend yield of 17.7% = [($.49/$42.15) x (365/24 days to expiration)]. This dividend is included in the detailed return-on-investment calculations below. Either an early assignment next week on the last trading day prior to the 3/27/2024 ex-dividend date) or on the April 12th 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 17th, 2024 is after the April 12th, 2024 options expiration date.
U.S. Bancorp (USB) -- New Covered Calls Position
The buy/write transaction was:
3/19/2024 Bought 500 U.S. Bancorp shares @ $42.15.
3/19/2024 Sold 6 USB 4/12/2024 $40.00 Call options @ $2.44 per share.
Note: Implied Volatility (IV) of the Call options was at 23.1 when this position was transacted which, as I prefer, is above the current VIX of 13.8.
3/27/2024 Upcoming quarterly ex-dividend of $.49 per share.
Two possible overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Covered Calls Net Investment: $19,858.35
= ($42.15 - $2.44) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,216.65
= ($2.44 * 500 shares) - $3.35 commission
(b) Dividend Income (If U.S. Bancorp Call options exercised early on March 26th, 2024, the last business day prior to the March 27th ex-div date): +$0.00; or
(b) Dividend Income (If U.S. Bancorp stock assigned at the April 12th, 2024 options expiration): +$245.00
= ($.49 dividends per share x 500 shares)
(c) Capital Appreciation (If shares assigned at $40.00 strike price at the 4/12/2024 options expiration): -$1,075.00
+($40.00 - $42.15) * 500 shares
As detailed below, two potential return-on-investment results are:
- +0.7% absolute return (equivalent to +32.5% annualized return-on-investment for the next 8 days) if the stock is assigned early (on the last business day prior to the March 27th ex-dividend date); or
- +1.9% absolute return (equivalent to +29.6% annualized return-on-investment over the next 24 days) if the stock is assigned on the April 12th, 2024 options expiration date.
The buy/write transaction was:
3/19/2024 Bought 500 U.S. Bancorp shares @ $42.15.
3/19/2024 Sold 6 USB 4/12/2024 $40.00 Call options @ $2.44 per share.
Note: Implied Volatility (IV) of the Call options was at 23.1 when this position was transacted which, as I prefer, is above the current VIX of 13.8.
3/27/2024 Upcoming quarterly ex-dividend of $.49 per share.
Two possible overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Covered Calls Net Investment: $19,858.35
= ($42.15 - $2.44) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,216.65
= ($2.44 * 500 shares) - $3.35 commission
(b) Dividend Income (If U.S. Bancorp Call options exercised early on March 26th, 2024, the last business day prior to the March 27th ex-div date): +$0.00; or
(b) Dividend Income (If U.S. Bancorp stock assigned at the April 12th, 2024 options expiration): +$245.00
= ($.49 dividends per share x 500 shares)
(c) Capital Appreciation (If U.S. Bancorp's Call options assigned early on March 27th): -$1,075.00
+($40.00 strike price - $42.15 stock purchase price) * 500 shares; or(c) Capital Appreciation (If shares assigned at $40.00 strike price at the 4/12/2024 options expiration): -$1,075.00
+($40.00 - $42.15) * 500 shares
1. Total Net Profit [If option exercised early (business day prior to the March 27th ex-dividend date)]: +$141.65
= (+$1,216.65 options income +$0.00 dividend income -$1,075.00 capital appreciation); or
2. Total Net Profit (If 500 U.S. Bancorp shares assigned at the $40.00 strike price at the April 12th, 2024 expiration): +$386.65
= (+$1,216.65 options income +$245.00 dividend income -$1,075.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 3/27/2024 ex-dividend date]: +0.7%
= +$141.65/$19,858.35
Potential Annualized Return-on-Investment (If option exercised early): +32.5%
= (+$141.65/$19,858.35) * (365/8 days); or
2. Potential Absolute Return-on-Investment (If U.S. Bancorp's shares assigned on the April 12th options expiration date): +1.9%
= +$386.65/$19,858.35
Potential Annualized Return-on-Investment (If 500 U.S. Bancorp shares assigned at $40.00 at the April 12th, 2024 expiration): +29.6%
= (+$386.65/$19,858.35) * (365/24 days)
