Given that the Beta (1-year) for Globe Life is only 0.53, I am pleased that the Implied Volatility of the Calls was higher than expected at 31.8 when this position was transacted which, as preferred, is substantially higher than the 13.3 of the S&P 500 Volatility Index (i.e. VIX). The Delta for these Call options was approximately 72.0 when this position was established which approximates the probability of 72.0% that the position will be in-the-money at market close on the options expiration date. Also, importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on May 8th, 2024 is after the April 19th options expiration date. Globe Life is now the only holding in my Covered Calls Advisor Portfolio in the Financial Sector, now having replaced the U.S. Bancorp position that had an early assignment this morning.
As detailed below, two potential return-on-investment results for this Globe Life Inc. in-the-money Covered Calls position are:
Globe Life Inc. (GL) -- New Covered Calls Position
The buy/write transaction was:
3/27/2024 Bought 200 Globe Life shares @ $116.50.
3/27/2024 Sold 2 GL 4/19/2024 $110.00 Call options @ $8.70 per share.
4/4/2024 Upcoming annual ex-dividend of $.24 per share.
Two possible overall performance results (including commissions) for this Globe Life Covered Calls position are as follows:
Covered Calls Net Investment: $21,561.34
= ($116.50 - $8.70) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,738.66
= ($8.70 * 200 shares) - $1.34 commission
(b) Dividend Income (If Globe Life Call options exercised early on April 3rd, 2024, the last business day prior to the April 4th ex-div date): +$0.00; or
(b) Dividend Income (If stock assigned at the April 19th, 2024 options expiration date): +$48.00
= ($.24 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $110.00 strike price at the April 19th options expiration): -$1,300.00
+($110.00 - $116.50) * 200 shares
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) should be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, only seven of the nine criteria are achieved for this Globe Life Inc. Covered Calls position.
This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here) since Globe Life Inc. has an upcoming quarterly ex-dividend of $.24 per share (0.8% annual dividend yield) eight days from today on April 4th which is prior to the April 19th options expiration date. I am encouraged by the 6.7% increase in their annual dividend and this dividend is included in the detailed return-on-investment calculations below. Although an early assignment on the day prior to the ex-dividend date is unlikely, either an early assignment on April 3rd (the last trading day prior to the April 4th ex-dividend date) or on the April 19th options expiration date would provide a nice annualized-return-on-investment result for this position.
Globe Life Inc. is an insurance company with core operations in life insurance, supplemental health insurance, and annuities and their primary customers are U.S. middle-income families. According to LSEG (Refinitiv), there are 9 analysts covering Globe Life and their current average Target Price is $136.42 which is +17.1% above today's stock purchase price, and Globe Life receives Refinitiv's highest Average Score of 10 which puts them in the top 5% of all North American stocks they cover. Another reason for establishing this position was that it is highly ranked in my "Future 5-Year PEG Ratio" stock screener since it met all 15 filters (see chart below where I circled the 5-Year Forward PEG Ratio filter of 0.78 -- a very attractive valuation metric). This is calculated as the trailing twelve months P/E Ratio of 11.6 divided by the projected next 5 years compounded annual EPS growth rate (i.e. CAGR) of 14.9%. In addition, Globe Life also met all filters in both my Basic Filters stock screener and my Earnings Growers stock screener.
As detailed below, two potential return-on-investment results for this Globe Life Inc. in-the-money Covered Calls position are:
- +2.0% absolute return-on-investment (equivalent to +92.8% annualized
return-on-investment for the next 8 days) if the stock is assigned early (on the last business day
prior to the April 4th ex-dividend date); or
- +2.3% absolute return-on-investment (equivalent to +35.8% annualized return-on-investment over the next 23 days) if the stock is assigned on the April 19th, 2024 options expiration date.
The buy/write transaction was:
3/27/2024 Bought 200 Globe Life shares @ $116.50.
3/27/2024 Sold 2 GL 4/19/2024 $110.00 Call options @ $8.70 per share.
4/4/2024 Upcoming annual ex-dividend of $.24 per share.
Two possible overall performance results (including commissions) for this Globe Life Covered Calls position are as follows:
Covered Calls Net Investment: $21,561.34
= ($116.50 - $8.70) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,738.66
= ($8.70 * 200 shares) - $1.34 commission
(b) Dividend Income (If Globe Life Call options exercised early on April 3rd, 2024, the last business day prior to the April 4th ex-div date): +$0.00; or
(b) Dividend Income (If stock assigned at the April 19th, 2024 options expiration date): +$48.00
= ($.24 dividend per share x 200 shares)
(c) Capital Appreciation (If Globe Life's Call options assigned early on April 3rd): -$1,300.00
+($110.00 strike price - $116.50 stock purchase price) * 200 shares; or(c) Capital Appreciation (If shares assigned at $110.00 strike price at the April 19th options expiration): -$1,300.00
+($110.00 - $116.50) * 200 shares
1. Total Net Profit [If option exercised early (business day prior to the April 4th ex-dividend date)]: +$438.66
= (+$1,738.66 options income +$0.00 dividend income -$1,300.00 capital appreciation); or
2. Total Net Profit (If Globe Life's shares assigned at $110.00 at the April 19th, 2024 expiration): +$486.66
= (+$1,738.66 options income +$48.00 dividend income -$1,300.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the April 4th, 2024 ex-dividend date]: +2.0%
= +$438.66/$21,561.34
Potential Annualized Return-on-Investment (If option exercised early): +92.8%
= (+$438.66/$21,561.34) * (365/8 days); or
2. Potential Absolute Return-on-Investment (If Globe Life's shares assigned on the April 19th options expiration date): +2.3%
= +$486.66/$21,561.34
Potential Annualized Return-on-Investment (If shares are assigned at $110.00 at the April 19th, 2024 options expiration date): +35.8%
= (+$486.66/$21,561.34) * (365/23 days)
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) should be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, only seven of the nine criteria are achieved for this Globe Life Inc. Covered Calls position.
