Established Covered Calls Position in Oshkosh Corporation

This afternoon at 1:05pm, a Covered Calls position was established in Oshkosh Corporation (ticker OSK).  I bought 200 shares and simultaneously sold 2 Call options at the May 17th, 2024 monthly options expiration date and at the $110.00 strike price. The net debit limit price for my order was $108.62 and the 200 shares were purchased at $113.16 and 2 May 17th, 2024 Call options were sold for $4.54 per share.  Therefore, a maximum potential time value profit of $1.38 per share = [$4.54 options premium - ($113.16 stock price - $110.00 strike price)] is available for this position.  

This Oshkosh position uses the Covered Calls Advisor's Dividend Capture Strategy since it has an upcoming quarterly ex-dividend of $.46 per share on May 10th which is a week prior to the options expiration date.  This is equivalent to an absolute annual dividend yield of 1.6% and an equivalent annualized dividend yield if assigned on its 5/17 options expiration date of 8.7% = [($.46/$113.16) x (365/17)].  This dividend is included in the detailed return-on-investment calculations below.  Either an early assignment on the last trading day prior to the ex-dividend date or on the May 17th 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 quarterly earnings report will not occur until the end of July.

As shown on the table at the bottom of this post, eight of the nine criteria for my Dividend Capture Strategy are met with this position.  Even if the Oshkosh Corp. stock price declines somewhat during the next 17 days until the options expiration date, if the stock closes above the $110.00 strike price, then a very satisfactory annualized-return-on-investment of +36.2% will be achieved.  The probability that these Call options will be in-the-money on the options expiration date was 69.8% when this Covered Calls position was established.  

Oshkosh Corporation is an Industrial sector company headquartered in Oshkosh, Wisconsin.  They manufacture purpose-built equipment for the access, Defense, fire and emergency, refuse collection, and concrete placement markets.  I am impressed with their CEO and the company was identified in two of my stock screeners: (1) Dividend Growth; and (2) Quantitative Value.  The results below for the Quantitative Value stock screener show that all 21 filters were met.  In addition, Oshkosh was the highest rated stock in the Industrial sector for this Quantitative Value screener.   

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

•  +1.3% absolute return (equivalent to +46.1% annualized return-on-investment for the next 10 days) if the stock is assigned early (on the last business day prior to the May 10th ex-dividend date); or  
  

• +1.7% absolute return (equivalent to +36.2% annualized return-on-investment over the next 17 days) if the stock is assigned on the May 17th, 2024 options expiration date.

Oshkosh Corporation (OSK) -- New Covered Calls Position
The buy/write transaction was:
4/30/2024 Bought 200 Oshkosh Corporation shares @ $113.16.
4/30/2024 Sold 2 OSK 5/17/2024 $110.00 Call options @ $4.54 per share.
Note: Implied Volatility (IV) of the Call options was at 22.6 when this position was transacted which, as preferred, is above the current VIX of 15.5.   
5/10/2024 Upcoming quarterly ex-dividend of $.46 per share.  

Two possible overall performance results (including commissions) for this Oshkosh Covered Calls position are as follows:
Covered Calls Net Investment: $21,725.34
= ($113.16 - $4.54) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$906.66
= ($4.54 * 200 shares) - $1.34 commission
(b) Dividend Income (If OSK Call options exercised early on May 9th, 2024, the last business day prior to the May 10th ex-div date): +$0.00; or
(b) Dividend Income (If Oshkosh stock assigned at the May 17th, 2024 options expiration): +$92.00
= ($.46 dividend per share x 200 shares)

(c) Capital Appreciation (If OSK's Call options assigned early on May 10th): -$632.00

+($110.00 - $113.16) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $110.00 strike price at the 5/17/2024 options expiration): -$632.00

+($110.00 - $113.16) * 200 shares

1. Total Net Profit [If option exercised early (business day prior to the May 10th ex-dividend date)]: +$274.66

= (+$906.66 options income +$0.00 dividend income -$632.00 capital appreciation); or

2. Total Net Profit (If Oshkosh's shares assigned at $110.00 at the May 17th, 2024 expiration): +$366.66

= (+$906.66 options income +$92.00 dividend income -$632.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.3%

= +$274.66/$21,725.34

Potential Annualized Return-on-Investment (If option exercised early): +46.1%

= (+$274.66/$21,725.34) * (365/10 days); or

2. Potential Absolute Return-on-Investment (If shares assigned on the May 17th options expiration date): +1.7%

= +$366.66/$21,725.34

Potential Annualized Return-on-Investment (If Oshkosh Corporation's shares assigned at $110.00 at the May 17th, 2024 expiration): +36.2%

= (+$366.66/$21,725.34) * (365/17 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, eight of the nine metrics are achieved for this Oshkosh Corp. Covered Calls position.

Covered Calls Position Established in Citigroup Inc.

Today, a Covered Calls position was established in Citigroup Inc. (ticker symbol C) with the purchase of 500 shares at $61.99 per share and five May 10th, 2024 Call options were sold for $2.25 per share at the $60.00 strike price.  Given the Covered Calls Advisor's currently Neutral Overall Market Meter sentiment, a slightly in-the-money Covered Calls positions was established. The net debit limit price for my order was $59.74 so a maximum potential time value profit of $.26 per share = [$2.25 options premium - ($61.99 stock price - $60.00 strike price)] is available for this position.  The probability that the Calls will be in-the-money and therefore assigned at the $60.00 strike price on the options expiration date was 81.8% when this position was established today.  

Citigroup reported their Q1 2024 earnings seventeen days ago at $1.58 per share which exceeded analysts' estimates by $.35 per share and their current P/E Ratio is only 6.1.  A common valuation metric for banks is price-to-book-value.  Citi has by far the lowest current value at only 0.6 which is substantially lower than its next nearest competitor (Bank of America at 1.1) in the mega-cap banking industry.  During her relatively short 3-year term at Citi, CEO Jane Fraser is providing strong leadership and is committed to continuing to divest losing businesses and improving key overall bank metrics.   The average target price of the analysts following Citigroup is $66.30 (+7.0% above today's purchase price).    

Most mid- to large-cap companies in the Financial Sector provide only modest growth prospects, but they often pay 2.0%+ annual dividend yields.  Consequently, the Covered Calls Advisor is targeting opportunities to use the Dividend Capture Strategy in all Financial Sector Covered Calls positions.  Citi has announced that their next ex-dividend date will be 5/03/2024 and at $.53 per share which is a 3.4% annual dividend yield at its current price.  This new May 10th Citigroup Covered Calls position continues the Dividend Capture Strategy of often selling in-the-money monthly Covered Calls for one of the six U.S. mega-cap banks (Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley) during each options expiration month:
(JPMorgan Chase quarterly for Jan, Apr, July, and Oct options expirations; Citigroup, Wells Fargo, and Morgan Stanley for Feb, May, Aug, and Nov options expirations; and Bank of America and Goldman Sachs for Mar, Jun, Sep, and Dec options expirations).  

Two potential return-on-investment results are: (a) +0.4% absolute return (equivalent to +39.7% annualized return for the next 4 days) if the stock is assigned early [on the last trading day prior to the 5/3/2024 ex-dividend date]; OR (b) +1.3% absolute return (equivalent to +43.9% annualized return over the next 11 days) if the stock is assigned on the May 10th, 2024 options expiration date. 

Citigroup Inc. (C) -- New Covered Calls Position
The transactions were:
4/29/2024 Bought 500 Citigroup shares @ $61.99
4/29/2024 Sold 5 Citigroup 5/10/2024 $60.00 Call options @ $2.25 per share.
Note: the Implied Volatility of these Call options was 19.4 when this position was established.
5/3/2024 Upcoming quarterly ex-dividend of $.53 per share

Two possible overall performance results (including commissions) for this Citigroup Covered Calls position are as follows:
Covered Calls Net Investment: $29,873.35
= ($61.99 - $2.25) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,125.00
= ($2.25 * 500 shares)
(b) Dividend Income (If option exercised early on the business day prior to the ex-div date): +$0.00; or
(b) Dividend Income (If Citi shares assigned at the May 10th, 2024 expiration): +$265.00
= ($.53 dividend per share x 500 shares)
(c) Capital Appreciation (If Citigroup shares assigned early): -$995.00
+($60.00 strike price - $61.99 stock purchase cost) * 500 shares; or
(c) Capital Appreciation (If Citi shares assigned at the $60.00 strike price at options expiration): -$995.00   = ($60.00- $61.99) * 500 shares

1. Total Net Profit [If option exercised this Thursday on May 2nd, 2024 (the last business day prior to the May 3rd ex-dividend date)]: +$130.00

= (+$1,125.00 options income +$0.00 dividend income - $995.00 capital appreciation); or

2. Total Net Profit (If Citi shares assigned at $60.00 at the May 10th, 2024 options expiration): +$395.00

= (+$1,125.00 options income +$265.00 dividend income -$995.00 capital appreciation)

1. Absolute Return (If Citigroup options exercised early on the business day prior to the expiration date): +0.4%

= +$130.00/$29,873.35

Annualized Return (If option exercised early): +39.7%

= (+$130.00/$29,873.35) * (365/4 days); or

2. Absolute Return (If Citigroup shares assigned at $60.00 at the Nov. 10th, 2024 expiration): +1.3%

= +$395.00/$29,873.35

Annualized Return (If Citi stock assigned at $37.50 at the Nov. 10th expiration date): +43.9%

= (+$395.00/$29,873.35) * (365/11 days)

Either outcome would provide a good return-on-investment result.  These returns will be achieved as long as the stock is above the $60.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $59.21 ($61.99 -$2.25 -$.53) provides 4.5% downside protection below today's stock purchase price.

Continuation of Covered Calls Position in APA Corporation

The Covered Calls Advisor Portfolio has a Covered Calls position in APA Corporation (ticker APA) which expired last Friday with the stock at $32.49 which was below the $34.00 strike price.  Today this position was continued by rolling out to the May 10th, 2024 weekly options expiration at the same $34.00 strike price by selling-to-open four Calls at $.40 per share when the price of APA was $32.50.  

As detailed below, a potential outcome for this APA Corporation investment if the stock is in-the-money and therefore assigned on the options expiration date is +3.5% absolute return-on-investment over 31 days (equivalent to +41.8% annualized-return-on-investment) if the stock closes above the $34.00 strike price on the May 10th, 2024 options expiration date.  The transactions history of this APA Covered Calls position to-date along with a potential return-on-investment result if the stock is assigned on the May 10th, 2024 options expiration date is as follows:

APA Corporation (APA) -- Continuation of Covered Calls Position
The simultaneous buy/write transactions was as follows:
4/9/2024 Bought 400 shares of APA Corporation stock @ $34.87 per share.  
4/9/2024 Sold 4 APA April 26th, 2024 $34.00 Call options @ $1.42 per share.
4/19/2024 Ex-dividend at $.25 per share
4/26/2024 APA Corp. stock price was below the $34.00 strike price, so the Calls expired and the 400 APAS shares remained in the Covered Calls Advisor Portfolio.
4/29/2024 Continued this APA Corp. Covered Calls position by selling four May 10th, 2024 $34.00 Call options @ $.40 per share when the stock was trading today at $32.50.  

The overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $13,382.68
= ($34.87 - $1.42) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$722.64
= ($1.42 + $.40) * 400 shares - $5.36 commissions
(b) Dividend Income (If APA stock assigned on the May 10th, 2024 options expiration date): +$100.00
= $.25 dividend per share x 400 shares
(c) Capital Appreciation (If APA stock is above the $34.00 strike price and therefore assigned at the May 10th options expiration date): -$348.00
= ($34.00 - $34.87) * 400 shares

Potential Net Profit (If APA stock price is above $34.00 strike price at the May 10th options expiration): +$474.64
= (+$722.64 options income +$100.00 dividend income - $348.00 capital appreciation)

Potential Absolute Return-on-Investment: +3.5%
= +$474.64/$13,382.68
Potential Equivalent Annualized Return-on-Investment: +41.8%
= (+$474.64/$13,382.68) * (365/31 days)

Established Covered Calls in Las Vegas Sands Corporation

Today, a buy/write limit order was entered in Las Vegas Sands Corporation (ticker LVS) to buy 500 shares and simultaneously sell 5 Call options at the May 17th, 2024 monthly options expiration date and at the $44.50 strike price. The net debit limit price for my order was $43.78 and this order was executed when 500 shares were purchased at $45.54 and 4 May 17th, 2024 Call options were sold for $1.76 per share.  Therefore, a maximum potential time value profit of $.72 per share = [$1.76 options premium - ($45.54 stock price - $44.50 strike price)] is available for this position.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy since Las Vegas Sands has an upcoming quarterly ex-dividend of $.20 per share on Monday, May 6th which is prior to the May 17th options expiration date.  This is equivalent to an absolute annual dividend yield of 1.8% and an equivalent annualized dividend yield of 7.6% = [($.20/$45.54) x (365/21 days to expiration)].  This dividend is included in the detailed return-on-investment calculations below.  Either an early assignment next Friday, May 3rd (the last trading day prior to the ex-dividend date) or on the May 17th 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 July 17th, 2024 is two months after the May 17th options expiration date.

Despite the name "Las Vegas Sands", their casino properties are primarily in Macau.  Their current profitable growth is likely to continue for years to come and I like that they are spending capital to maintain their properties as top-rate destinations as well as for investor-friendly dividends and stock buybacks.  The average target price of the 15 analysts covering Las Vegas Sands is $62.84 (+38.0% above today's stock purchase price).  Also, Las Vegas Sands appeared in my Stock Rover Overall stock screener by meeting all 16 filter as show in this chart:

                

As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  Even if the Las Vegas Sands stock price declines somewhat during the next 21 days until the options expiration date, if the stock closes above the $44.50 strike price, then a very satisfactory annualized-return-on-investment of +36.3% will be achieved.  The probability that these Call options will expire in-the-money on the options expiration date was 65.2% when this position was established.   

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

•  +1.6% absolute return (equivalent to +59.5% annualized return-on-investment for the next 10 days) if the stock is assigned early (on the last business day prior to the May 6th ex-dividend date); or  
  

• +2.1% absolute return (equivalent to +36.3% annualized return-on-investment over the next 21 days) if the stock is assigned on the May 17th, 2024 options expiration date.

Las Vegas Sands Corporation (LVS) -- New Covered Calls Position
The buy/write transaction was:
4/26/2024 Bought 500 Las Vegas Sands shares @ $45.54
4/26/2024 Sold 5 LVS 5/17/2024 $44.50 Call options @ $1.76 per share.
Note: Implied Volatility (IV) of the Call options was at 24.3 when this position was transacted which, as preferred, is above the current VIX of 15.2.   
5/6/2024 Upcoming quarterly ex-dividend of $.20 per share.

Two possible overall performance results (including commissions) for this Las Vegas Sands Corp. Covered Calls position are as follows:
Covered Calls Net Investment: $21,893.35
= ($45.54 - $1.76) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$876.65
= ($1.76 * 500 shares) - $3.35 commission
(b) Dividend Income (If LVS Call options exercised early on May 3rd, 2024, the last business day prior to the May 6th ex-div date): +$0.00; or
(b) Dividend Income (If LVS stock assigned at the May 17th, 2024 options expiration): +$100.00
= ($.20 dividend per share x 500 shares)

(c) Capital Appreciation (If Las Vegas Sand's Call options assigned early on May 6th): -$520.00

+($44.50 - $45.54) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $44.50 strike price at the May 17th options expiration): -$520.00
+($44.50 - $45.54) * 500 shares

1. Total Net Profit [If option exercised early (business day prior to the May 6th ex-dividend date)]: +$356.65

= (+$876.65 options income +$0.00 dividend income -$520.00 capital appreciation); or

2. Total Net Profit (If LVS's shares assigned at $44.50 at the May 17th, 2024 expiration): +$456.65

= (+$876.65 options income + $100.00 dividend income - $520.00 capital appreciation)

1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.6%

= +$356.65/$21,893.35

Potential Annualized Return (If option exercised early): +59.5%

= (+$356.65/$21,893.35) * (365/10 days); or

2. Potential Absolute Return-on-Investment (If LVS's shares assigned on May 17th options expiration date): +2.1%

= +$456.65/$21,893.35

Potential Annualized Return (If Las Vegas Sand's shares assigned at $44.50 at the 5/17/2024 options expiration date): +36.3%

= (+$456.65/$21,893.35) * (365/21 days)

Either outcome provides an attractive return-on-investment result for this Las Vegas Sands investment.  These returns will be achieved as long as the stock is above the $44.50 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $43.58 ($45.54 -$1.76 -$.20) provides 4.3% downside protection below today's stock 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 below, all nine criteria are achieved for this Las Vegas Sands Corporation Covered Calls position.

Established Covered Calls Position in the iShares 20+ Year Treasury Bond ETF

Today a short-term in-the-money Covered Calls position was established in the iShares 20+ Year Treasury Bond ETF (ticker TLT) at the May 10th, 2024 weekly options expiration date and at the $87.00 strike price.  Three hundred TLT shares were purchased at $87.77 per share and three May 10th, 2024 $87.00 Calls were sold at $1.53 per share. The corresponding potential time value profit is $.76 per share [$1.53 Call options premium - ($87.00 strike price - $87.77 ETF purchase price)].  The probability that these Calls will be in-the-money on the May 10th options expiration date was 63.3% when this position was established.  In addition to the potential time value profit of $.76 per share, there is an upcoming monthly ex-distribution on May 1st which will be approximately $.31 per share and which is prior to the May 10th options expiration date.  

As you know, I normally prefer to establish Covered Calls using individual stocks rather than broader indices such as ETFs.  The reasons for this is described in my prior post entitled "Exploiting Our Covered Calls Investing "Edges"' (see items #2 and #3 in the article here).  Many investors are satisfied with buying-and-holding T-Bonds, but we Covered Calls investors know we can do better than the 4.78% yield currently available buying 30-year T Bonds.  This is true not only for our usual Covered Calls positions using stocks as the underlying equity, but this TLT Covered Calls position demonstrates that it is also true for Covered Calls with this conservative Treasury Bond ETF (i.e. TLT), whose potential annualized-return-on-investment (aroi) result of +30.0% at the options expiration date, as detailed below, greatly exceeds the current yield from simply owning long-term Treasury Bonds. 

As we know, bond prices move inversely (i.e. opposite) to bond yields.  Given today's GDP report showing a slowing trend in our economy, a possible lower (or at least stable) interest rate environment now seems likely.  If so, this position will achieve the return-on-investment returns detailed below. 

Two potential return-on-investment results are: (a) +0.9% absolute return (equivalent to +53.1% annualized return-on-investment for the next 6 days) if TLT is assigned early on the day prior to the May 1st, 2024 ex-distribution date; or (b) +1.2% absolute return (equivalent to +30.0% annualized return-on-investment for the next 15 days) if it is assigned at market close on the May 10th, 2024 options expiration date.  

iShares 20+ Year Treasury Bond ETF (TLT) -- New Covered Calls Position 

The buy/write transaction was as follows:
4/25/2024 Bought 300 iShares 20+ Year Treasury Bond ETF shares at $87.77.

4/25/2024 Sold 3 TLT May 10th, 2024 $87.00 Call options @ $1.53 per share.
5/1/2023 Estimated ex-distribution of $.31 per share.

The overall performance results (including commissions) if TLT remains in-the-money at options expiration would be as follows:
Covered Calls Net Investment: $25,874.01
= ($87.77 - $1.53) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$456.99
= ($1.53 * 300 shares) - $2.01 commission

(b) Distribution Income [If TLT is assigned early on the last business day prior to the May 1st ex-distribution date: +$0.00
(b) Distribution Income [If TLT price is in-the-money (i.e. above the $87.00 strike price) and the position is assigned (i.e. closed out) at options expiration on May 10th]: +$93.00

= $.31 distribution per share x 300 TLT shares

(c) Capital Appreciation (If TLT is assigned at the $87.00 strike price either early or on the 5/10/2024 options expiration date): -$231.00

= ($87.00 strike price - $87.77 purchase price) * 300 shares

Total Net Profit:

1.  If TLT shares are assigned early on the day prior to the ex-distribution date: +$225.99
     = (+$456.99 options income +$0.00 distribution income -$231.00 capital appreciation)

2.  If TLT share price is in-the-money (i.e. above the $87.00 strike price) at options expiration: +$318.99
= (+$456.99 options income +$93.00 distribution income -$231.00 capital appreciation)

Potential Absolute Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +0.9%

    = +$225.99/$25,874.01

2. If TLT shares are above the $87.00 strike price at the May 10th, 2024 options expiration): +1.2%

    = +$318.99/$25,874.01

Potential Annualized Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +53.1% 

    = (+$225.99/$25,874.01) * (365/6 days)

2. If TLT shares are above the $87.00 strike price at the May 10th, 2024 options expiration): +30.0%

    = (+$318.99/$25,874.01) * (365/15 days)

Either outcome provides an attractive return-on-investment result for this iShares 20+ Year Treasury Bond ETF investment.  These returns will be achieved as long as the price is above the $87.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $85.93 ($87.77 -$1.53 -$.31) provides 2.1% downside protection below today's stock 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 below, eight of the nine criteria are achieved for this iShares 20+ Year Treasury Bond ETF Covered Calls position.

Please email if you have any comments or questions related to this post or to anything related to the Covered Calls investing strategy.

Regards and Godspeed,
Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

Closed Out Covered Calls Position in Globe Life Inc.

This Covered Calls position in Globe Life Inc. (ticker GL) has been a disastrous one.  My blog post when this position was originally established in late March is shown here.  A short seller issued an extensive report claiming fraudulent activities at Globe Life and as a direct result, the stock price plummeted by 53% from the closing price on April 11th of $104.92 to a closing price of $49.16 on April 12th.  In my over four decades as a Covered Calls investor, this is the first time that I've had an experience like this occur where one of the companies I was invested in was accused of fraud.  I was not surprised that the company issued a statement in reply saying that the report showed a great lack of understanding of Globe Life's business practices and was inaccurate in their accusations.  

I decided at that time to await their quarterly earnings report results and to listen to the related conference call which occurred yesterday.  They grew both revenue and earnings by high-single-digit percents which was largely in-line with analysts' expectations and they continued to defend the integrity of their business practices.  On the other hand, they have hired an independent party to study and then report their findings to Globe's management on the claims asserted by the short seller.  There is also an ongoing inquiry by the Department of Justice, the scope of which is somewhat unclear at this time.  Given these two uncertainties, both in the time duration until their conclusion as well as the specific outcomes, I feel that exiting the position today at $79.52 per share at a huge loss was a prudent decision. The stock price has already recovered about half of its original loss, but I am highly uncertain in the near term whether the stock price will continue its recovery or not.  Sometimes it is better to accept the results from a bad investment, put it behind us by closing out the position, and then moving on to other companies where we have a more bullish current outlook.          

As detailed below, the return-on-investment results for this Globe Life Inc. position was: -26.0% absolute return in 22 days (equivalent to a -431.6% annualized return-on-investment).  This result will have a substantially negative effect on the overall prior year results in the Covered Calls Advisor Portfolio which will be reported as part of my next monthly options expiration summary report on May 17th, 2024.

Globe Life Inc. (GL) -- Closed Out 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 Ex-dividend of $.24 per share.
4/19/2024 GL Calls expired deep out-of-the-money with the stock at $67.41, so 200 GL shares remained in the Covered Calls Advisor Portfolio.

4/24/2024 Sold 200 Global Life shares at $79.52 to close out this position.

 
The 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: +$48.00
= ($.24 dividend per share x 200 shares)

(c) Capital Appreciation (200 Globe Life shares sold at $79.52 per share): -$7,396.00

+($79.52 sales price - $116.50 purchase price) * 200 shares

Total Net Loss: -$5,609.34

= (+$1,738.66 options income +$48.00 dividend income -$7,396.00 capital appreciation)

Absolute Return-on-Investment: -26.0%

= -$5,609.34/$21,561.34

Annualized Return-on-Investment: -431.6%

= (-$5,609.34/$21,561.34) * (365/22 days)

Closed Covered Calls Position in Euronet Worldwide Inc.

At last Friday's April 19th, 2024 options expiration, the Covered Calls position in Euronet Worldwide Inc. (ticker EEFT) expired with the stock price at $102.38 which was below the $105.00 strike price, so the 200 shares remained in the Covered Calls Advisor Portfolio. By today, the price of Euronet Worldwide shares recovered along with the overall market and the Covered Calls Advisor decided to close out the position by selling the 200 shares at $106.125 per share.

As detailed below, the return-on-investment result for this Euronet Worldwide Inc. Covered Calls position was +2.9% absolute return-on-investment in 34 days (equivalent to a +33.4% annualized return-on-investment). 

Euronet Worldwide Inc. (EEFT) -- Covered Calls Position Closed Out 

The Buy/Write transaction was as follows:
3/22/2024 Bought 200 shares of Euronet Worldwide Inc. @ $108.22 per share.  
3/22/2024 Sold 2 EEFT April 19th, 2024 $105.00 Call options @ $5.12 per share.  The Implied Volatility of these Call options was 23.3 and the Delta was 68.9 when this transaction was executed.
4/19/2024 200 Euronet Worldwide shares closed out-of-the-money so 2 Calls expired and 200 EEFT shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 200 Euronet Worldwide shares were sold at $106.125 per share to close out this Covered Calls position.

The overall performance result (including commissions) for this Euronet Worldwide Inc. Covered Calls position was as follows:
Covered Calls Net Investment: $20,621.34
= ($108.22 - $5.12) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,022.66
= ($5.12 * 200 shares) - $1.34 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (200 Euronet Worldwide Inc. shares sold at $106.125): -$419.00
+($106.125 - $108.22) * 200 shares

Total Net Profit (200 EEFT shares sold at $106.125 to close out this Covered Calls position): +$603.66
= (+$1,022.66 options income +$0.00 dividend income -$419.00 capital appreciation)

Absolute Return-on-Investment: +2.9%
= +$603.66/$20,621.34
Potential Annualized Return-on-Investment: +33.4%
= (+$603.66/$20,621.34) * (365/32 days)

Continuation of Covered Calls Positions in Aptiv PLC, Netease Inc. ADR, Oracle Corporation, and Schlumberger Ltd.

The Covered Calls positions in Aptiv PLC (ticker APTV), Netease Inc. ADR (NTES), Oracle Corporation (ORCL), and Schlumberger Ltd. (SLB) closed out-of-the-money at last Friday's monthly options expiration date.  So, the Calls expired and the shares remained in the Covered Calls Advisor Portfolio.  Today I decided to continue these four Covered Calls positions by selling Call options to roll out to the May 3rd, 2024 options expiration date for the Oracle, Netease, and SLB positions and to the May 17th, 2024 expiration for the Aptiv position. The transactions-to-date for these positions as well as the potential return-on-investment results if these positions are in-the-money and therefore assigned on their respective expiration dates are as follows:

1. Aptiv PLC (APTV) -- Continuation of Covered Calls Position

The buy/write transaction was:
3/14/2024 Bought 200 Aptiv PLC shares @ $77.04
3/14/2024 Sold 2 APTV 4/19/2024 $75.00 Call options @ $4.40 per share.  The Implied Volatility of these Calls was 31.0 when this position was estalished.
4/19/2024 200 Aptiv PLC shares closed out-of-the-money so 2 Calls expired and 200 Aptiv shares remain in the Covered Calls Advisor Portfolio.

4/23/2024 Continued Covered Calls position by selling 2 APTV 5/17/2024 Call options at the $72.50 strike price for $2.40 per share when the stock price was $70.65.

A possible overall performance result (including commissions) for this Aptiv Covered Calls position is as follows:
Aptiv Covered Calls Net Investment: $14,529.34
= ($77.04 - $4.40) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,357.32
= ($4.40 + $2.40) * 200 shares - $2.68 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 200 shares)
(c) Capital Appreciation (If APTV shares assigned at $72.50 strike price at expiration): -$908.00
+($72.50 - $77.04) * 200 shares

Total Net Profit (If options exercised on the 5/17/2024 options expiration date): +$449.32

= (+$1,357.32 options income +$0.00 dividend income -$908.00 capital appreciation)

Potential Absolute Return-on-Investment: +3.1%

= +$449.32/$14,529.34

Potential Annualized Return-on-Investment (If 200 Aptiv PLC shares assigned at $72.50 at the 5/17/2024 options expiration): +17.6%

= (+$449.32/$14,529.34) * (365/64 days)

2. Netease Inc. ADR (NTES) -- Continuation of Covered Calls Position 

The Buy/Write transaction was as follows:
3/28/2024 Bought 200 shares of Netease Inc. @ $103.50 per share.  
3/28/2024 Sold 2 NTES April 19th, 2024 $100.00 Call options @ $5.78 per share.  The Implied Volatility of these Call options was 35.6 today when this transaction was executed and its Beta (1-year) is 1.02. 
4/19/2024 200 Netease shares closed out-of-the-money so 2 Calls expired and 200 NTES shares remain in the Covered Calls Advisor Portfolio.

4/23/2024 Continued Covered Calls position by selling 2 NTES 5/3/2024 Call options at the $97.00 strike price for $1.10 per share when the stock price was $93.53.

A possible overall performance result (including commissions) for this Netease Inc. ADR Covered Calls position is as follows:
Covered Calls Net Investment: $19,545.34
= ($103.50 - $5.78) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$1,373.32
= ($5.78 + $1.10) * 200 shares - $2.68 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 200 Netease Inc. shares assigned at $97.00 strike price at the May 3rd, 2024 options expiration date): -$1,300.00
+($97.00 strike price - $103.50 stock purchase price) * 200 shares

Total Net Profit Potential (If 200 Netease Inc. shares assigned at the $97.00 strike price at the 5/3/2024 options expiration date): +$73.32
= (+$1,373.32 options income +$0.00 dividend income -$1,300.00 capital appreciation)

Potential Absolute Return-on-Investment: +0.4%
= +$73.32/$19,545.34
Potential Annualized Return-on-Investment: +2.9%
= (+$73.32/$19,545.34) * (365/47 days)

3. Oracle Corporation (ORCL) -- Continuation of Covered Calls Position

The buy/write transaction was:
4/2/2024 Bought 200 Oracle Corporation shares @ $124.00.
4/2/2024 Sold 2 ORCL 4/19/2024 $121.00 Call options @ $4.02 per share.
Note: the Implied Volatility of the Call options was 17.7 when this buy/write transaction was executed, which (as preferred) is above the 15.2 for VIX.
4/9/2024 Upcoming quarterly ex-dividend of $.40 per share
4/19/2024 200 Oracle Corp. shares closed out-of-the-money so 2 Calls expired and 200 Oracle shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 Continued Covered Calls position by selling 2 Oracle Corp. 5/3/2024 Call options at the $117.00 strike price for $1.17 per share when the stock price was $115.16.

A possible overall performance result (including commissions) for this Covered Calls position are as follows:
Covered Calls Net Investment: $23,997.34
= ($124.00 - $4.02) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,035.32
= ($4.02 + $1.17) * 200 shares - $2.68 commissions
(b) Dividend Income: $80.00
= ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $117.00 strike price at the 5/3/2024 options expiration date): -$1,400.00
+($117.00 - $124.00) * 200 shares

Total Net Loss: -$284.68

= (+$1,035.32 options income +$80.00 dividend income -$1,400.00 capital appreciation)

Potential Absolute Return-on-Investment (If ORCL shares assigned at $117.00 at the 5/3/2024 options expiration date): -1.2%

= -$284.68/$23,997.34

Potential Annualized Return-on-Investment: -14.0%

= (-$284.68/$23,997.34) * (365/31 days)

4. Schlumberger Ltd. (SLB) -- Continuation of Covered Calls Position

The net debit buy/write limit order was executed as follows:

3/26/2024 Bought 300 shares of SLB stock @ $54.08 per share.  
3/26/2024 Sold 3 SLB April 19th, 2024 $52.50 Call options @ $2.48 per share.  Note: the Implied Volatility of the Calls was 26.3 when this position was established.  
4/19/2024 300 SLB shares closed out-of-the-money so 3 Calls expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.
4/23/2024 Continued Covered Calls position by selling 3 SLB 5/3/2024 Call options at the $50.00 strike price for $.76 per share when the stock price was $49.65.

A possible overall performance result (including commissions) for this position if it is in-the-money on the options expiration date is as follows:
Covered Calls Net Investment: $15,482.01
= ($54.08 - $2.48) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$967.98
= ($2.48 + $.76) * 300 shares - $4.02 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SLB stock is above the $50.00 strike price at the May 3rd options expiration date): -$1,224.00
= ($50.00 strike price - $54.08 stock purchase price) * 300 shares

Potential Total Net Loss (If SLB is in-the-money and therefore assigned at expiration): -$256.02
= (+$967.98 options income + $0.00 dividend income - $1,224.00 capital appreciation)

Potential Absolute Return-on-Investment (If stock price is in-the-money and therefore assigned on the 5/3/2024 options expiration date): -1.7% = -$256.02/$15,482.01

Potential Equivalent Annualized-Return-on-Investment: -15.9%
= (-$256.02/$15,482.01) * (365/38 days)

Jeff Partlow (The Covered Calls Advisor)

partlow@cox.net

 

Continuation of Covered Calls Position in JD.com Inc.

The Covered Calls Advisor Portfolio has a Covered Calls position in JD.com Inc. (ticker JD) which expired last Friday with the stock at $25.12 which was below the $26.50 strike price at last Friday's options expiration.  Today this position was continued by rolling out to the May 3rd, 2024 weekly options expiration date at the same $26.50 strike price by selling-to-open four Calls at $.82 per share when the price of JD.com stock was $26.52.  This two-week extension to a 5/3/2024 expiration is prior to their next quarterly earnings report which is on May 9th.  

As detailed below, a potential outcome for this JD.com investment if the stock is in-the-money and therefore assigned on the options expiration date is +8.5% absolute return-on-investment over 44 days (equivalent to +70.8% annualized-return-on-investment) if the stock closes above the $26.50 strike price on the May 3rd, 2024 options expiration date.  The transactions history of this JD.com Covered Calls position to-date along with a potential return-on-investment result if the stock is assigned on the 5/3/2024 options expiration date is as follows:

JD.com Inc. (JD) -- Continuation of Covered Calls Position
The buy/write transaction was:
3/20/2024 Bought 400 JD.com shares @ $27.86.
3/20/2024 Sold 4 JD.com 4/19/2024 $26.50 Call options @ $2.00 per share.  The Implied Volatility of these Call options was 35.7 when this position was established which, as I prefer, is well above the current 13.8 of the S&P 500 Volatility Index (i.e. VIX).
4/4/2024 Upcoming annual ex-dividend of $.76 per share.

4/19/2024 4 JD.com Calls expired out-of-the-money with the stock at $25.12 per share, so the 400 JD.com shares remained in the Covered Calls Advisor Portfolio.

4/22/2024 Continued JD.com Covered Calls position by selling-to-open 4 JD May 3rd, 2024 $26.50 Call options at $.82 when the stock was at $26.52 per share.

A possible overall performance result (including commissions) for this JD.com Covered Calls position if it is in-the-money and therefore assigned at the $26.50 strike price is as follows:
Covered Calls Net Investment: $10,346.68
= ($27.86 - $2.00) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,122.64
= ($2.00 + $.82) * 400 shares - $5.36 commissions
(b) Dividend Income: +$304.00
= ($.76 dividend per share x 400 shares)

(c) Capital Appreciation (If shares assigned at $26.50 strike price at the 5/3/2024 options expiration): -$544.00

+($26.50 - $27.86) * 400 shares

Total Net Profit (If JD.com shares assigned at $26.50 at the May 3rd, 2024 expiration): +$882.04

= (+1,122.64 options income +$304.00 dividend income -$544.00 capital appreciation)

Potential Absolute Return-on-Investment (If JD.com's shares assigned on the May 3rd options expiration date): +8.5%

= +$882.04/$10,346.68

Potential Annualized Return-on-Investment: +70.8%

= (+$882.04/$10,346.68) * (365/44 days)

Closed Covered Call Positions in Amdocs Ltd., Mondelez International Inc., Halozyme Therapeutics Inc., and Yum China Holdings Inc.

At last Friday's monthly options expiration date, eleven Covered Calls positions ended with their stock price below their respective strike prices (i.e. out-of-the-money).  Today I closed out four of these positions by selling their shares.  In each instance these companies have upcoming quarterly earnings reports during the next two weeks and given the stock price volatility that often occurs immediately after earnings reports, I decided to sell my shares prior to earnings.  Two positions (Amdocs and Mondelez) closed at a net loss and the other two positions (Halozyme and Yum China) closed with small net profits.  Detailed transactions for each position and the return-on-investment results are provided below.

1. Amdocs Ltd. (DOX) -- Closed Out Covered Calls Position
The buy/write transaction was:
3/20/2024 Bought 200 Amdocs Ltd. shares @ $91.53.
3/20/2024 Sold 2 DOX 4/19/2024 $90.00 Call options @ $2.63 per share.  
3/27/2024 Upcoming annual ex-dividend of $.48 per share.

4/19/2024 2 Calls expired out-of-the-money with the stock at $85.59 per share, so the 200 Amdocs shares remained in the Covered Calls Advisor Portfolio.

4/22/2024 Closed out this Amdocs position by selling 200 shares at $86.42. 

The overall performance results (including commissions) for this Amdocs Ltd. Covered Calls position is as follows:
Covered Calls Net Investment: $17,781.34
= ($91.53 - $2.63) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$524.66
= ($2.63 * 200 shares) - $1.34 commission
(b) Dividend Income: +$96.00
= ($.48 dividend per share x 200 shares)

(c) Capital Appreciation (200 Amdocs shares sold at $86.42 per share: -$1,022.00

+($86.42 - $91.53) * 200 shares

Total Net Loss: -$401.34

= (+$524.66 options income +$96.00 dividend income -$1,022.00 capital appreciation)

Absolute Return-on-Investment: -2.3%

= -$401.34/$17,781.34

Annualized Return-on-Investment: -25.0%

= (-$401.34/$17,781.34) * (365/33 days)

2. Mondelez International Inc. (MDLZ) -- Closed Out Covered Calls Position

The buy/write transaction was:
3/19/2024 Bought 300 Mondelez shares @ $72.25
3/19/2024 Sold 2 MDLZ 4/5/2024 $71.00 Call options @ $1.65 per share.  The Implied Volatility of these Calls was 11.9 when this position was established.

4/5/2024 Call options expired out-of-the-money and the 300 MDLZ shares remain in the Covered Calls Advisor Portfolio.

4/8/2024 Continued this Covered Calls position by selling 3 MDLZ April 19th, 2024 $69.00 Call options against the 300 shares owned.

4/19/2024 3 Calls expired out-of-the-money with the stock at $67.56 per share, so the 300 Mondelez shares remained in the Covered Calls Advisor Portfolio.

4/22/2024 Closed out this Mondelez position by selling 300 shares at $68.37.

The overall performance result (including commissions) for this Mondelez position is follows:
Covered Calls Net Investment: $21,182.01
= ($72.25 - $1.65) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$640.98
= ($1.65 + $.50) * 300 shares - $4.02 commissions
(b) Dividend Income: +$127.50
= $.425 per share x 300 shares
(c) Capital Appreciation (300 MDLZ shares sold at $68.37): -$1,164.00
= ($68.37 -$72.25) * 300 shares

Net Loss: -$395.52
= (+$640.98 options income +$127.50 dividend income - $1,164.00 capital appreciation)

Absolute Return-on-Investment: -1.9%
= -$395.52/$21,182.01
Annualized Return-on-Investment: -20.0%
= (-$395.52/$21,182.01) * (365/34 days)

3. Halozyme Therapeutics Inc. (HALO) -- Closed Out Covered Calls Position

The net debit buy/write limit order was executed as follows:

3/13/2024 Bought 400 shares of Halozyme Therapeutics stock @ $41.54 per share.  
3/13/2024 Sold 4 HALO April 19th, 2024 $40.00 Call options @ $2.86 per share.  Note: the Implied Volatility of the Calls was 35.2 when this position was established.  

4/19/2024 4 Calls expired out-of-the-money with the stock at $38.14 per share, so the 400 Halozyme shares remained in the Covered Calls Advisor Portfolio.

4/22/2024 Closed out this Halozyme position by selling 400 shares at $38.98.

The overall performance results (including commissions) for this position is as follows:
Halozyme Covered Calls Net Investment: $15,474.68
= ($41.54 - $2.86) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,141.32
= ($2.86 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (400 Halozyme shares sold at $38.98): -$1,024.00
= ($38.98 sales price - $41.54 stock purchase price) * 400 shares

Total Net Profit: +$117.32
= (+$1,141.32 options income + $0.00 dividend income - $1,024.00 capital appreciation)

Absolute Return-on-Investment: +0.8% = +$117.32/$15,474.68

Annualized-Return-on-Investment: +6.9%
= (+$117.32/$15,474.68) * (365/40 days)

4. Yum China Holdings Inc. (YUMC) -- Closed Out Covered Calls Position
The buy/write transaction was:
4/3/2024 Bought 500 Yum China shares @ $39.43.
4/3/2024 Sold 5 Yum China 4/19/2024 $37.50 Call options @ $2.45 per share.  

4/19/2024 5 Calls expired out-of-the-money with the stock at $37.12 per share, so the 500 Yum China shares remained in the Covered Calls Advisor Portfolio.

4/22/2024 Closed out this Yum China position by selling 500 shares at $37.02.

The overall performance results (including commissions) for this Yum China Holdings Inc. Covered Calls position is as follows:
Covered Calls Net Investment: $18,493.35
= ($39.43 - $2.45) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,221.65
= ($2.45 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (500 Yum China shares sold at $37.02): -$1,205.00

+($37.02 sales price - $39.43 stock purchase price) * 500 shares

Total Net Profit: +$16.65

= (+$1,221.65 options income +$0.00 dividend income -$1,205.00 capital appreciation)

Absolute Return-on-Investment: +0.1%

= +$16.65/$18,493.35

Annualized Return-on-Investment: +1.7%

= (+$16.65/$18,493.35) * (365/19 days)

Monthly Options Expiration Results through April 19th, 2024

Each month after the monthly options expiration date, this summary report provides the results on all positions that have been closed out during the past month (i.e. since the prior month's options expiration date). So, this post covers the period from the day after last month's March 15th, 2024 options expiration through yesterday's April 19th, 2024 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio closed a total of six positions.  In addition, there were eleven Covered Calls positions with monthly expiration dates yesterday.  All of these eleven positions expired out-of-the-money on yesterday's April 19th options expiration date (so those shares currently remain in the Covered Calls Advisor Portfolio).   

The specific results for each closed position are summarized as follows:

• Five Covered Calls positions were closed out in-the-money on their weekly options expiration date during the past month as follows:

1. KraneShares CSI China Internet ETF -- +2.3% absolute return-on-investment in 21 days (equivalent to a +40.5% annualized return-on-investment).
2. Match Group Inc. -- +2.9% absolute return-on-investment in 29 days (equivalent to a +36.6% annualized return-on-investment).
3. Merck & Company Inc. -- +1.3% absolute return-on-investment in 15 days (equivalent to a +31.0% annualized return-on-investment).
4. Microsoft Corporation -- +1.3% absolute return-on-investment in 17 days (equivalent to a +27.9% annualized return-on-investment).
5. Novo-Nordisk Global -- +2.3% absolute return-on-investment in 17 days (equivalent to a +49.5% annualized return-on-investment).

• One Covered Calls position was closed out by early assignment on the day prior to its ex-dividend date as follows:  U.S. Bancorp -- +0.8% absolute return-on-investment in 8 days (equivalent to a +32.5% annualized return-on-investment).

• As mentioned above, all eleven Covered Calls positions closed out yesterday on their April 19th, 2024 monthly options expiration date with their stock price below the strike price, so the shares now remain in the Covered Calls Advisor Portfolio.  Despite selling in-the-money Covered Calls positions that provide some downside protection, these 11 positions were not immune to the sharp 5.2% market decline so far in April, so their price declines took their prices below their respective strike prices.  These positions are: 200 shares of Amdocs Ltd., 200 shares of Aptiv Corporation, 200 Euronet Worldwide Inc., 200 Globe Life Inc., 400 Halozyme Therapeutics Inc., 400 JD.com Inc., 300 Mondelez International Inc., 200 Netease Inc. ADR, 200 Oracle Corporation, 300 Schlumberger Ltd., and 500 Yum China Holdings Inc.  Next week, decisions will be made to either close out the positions by selling the shares or to continue the Covered Calls positions by selling future Call options against the shares currently held.  Since most of these companies have first quarter earnings reports upcoming in the next couple of weeks (and since I prefer to avoid holding positions through earnings report price volatility), I will likely be selling several of these companies and realizing losses in them.  As always, the details of all transactions-to-date will be posted on this blog site on the same day the transactions occur.

During the past year (last 12 months) 113 of 126 positions (89.7%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit.  The Covered Calls Advisor Portfolio weighted average annualized-return-on-investment (aroi) was +16.9% during the past year and the average holding period for these 126 closed positions was 20.0 days.  In comparison, the benchmark S&P 500 has returned +19.5% during the same prior one-year period.  

This Covered Calls Advisor blog is available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I also encourage you to email me at partlow@cox.net any time you would like my feedback on your Covered Call position ideas or your questions on anything related to the Covered Calls investing strategy.

 

Best Wishes,

Jeff Partlow
Covered Calls Advisor
partlow@cox.net

Continuation of Covered Calls Position in Match Group Inc.

The Covered Calls Advisor Portfolio has a Covered Calls position in Match Group Inc. (ticker MTCH) which expired last Friday with the stock at $32.68 which was below the $34.00 strike price.  Today this position was continued by rolling out to the May 3rd, 2024 weekly options expiration at the $33.50 strike price by selling-to-open six Calls at $.80 per share when the price of Match Group stock was $32.75.  

As detailed below, a potential outcome for this Match Group investment if the stock is in-the-money and therefore assigned on the options expiration date is +2.0% absolute return-on-investment over 31 days (equivalent to +24.1% annualized-return-on-investment) if the stock closes above the $33.50 strike price on the May 3rd, 2024 options expiration date.  The transactions history of this Match Group Covered Calls position to-date along with a potential return-on-investment result if the stock is assigned on the May 28th, 2024 options expiration date is as follows:

Match Group Inc. (MTCH) -- Continuation of Covered Calls Position

The buy/write transaction was:
4/2/2024 Bought 600 Match Group Inc. shares @ $35.28.
4/2/2024 Sold 6 MTCH 4/12/2024 $34.00 Call options @ $1.68 per share.  The Implied Volatility of these Calls was 34.4 when this transaction was made.
4/12/2024 Match Group stock price was below the $34.00 strike price, so the Calls expired and the 600 MTCH shares remained in the Covered Calls Advisor Portfolio. 

4/15/2024 Continued this Match Group Covered Calls position by selling six May 3rd, 2024 $33.50 Call options @ $.80 per share when the stock was trading today at $32.75.  

An overall performance result (including commissions) for this Match Group Covered Calls position if the stock price is above the $33.50 strike price on the options expiration date is as follows:
Match Group Covered Calls Net Investment: $20,164.02
= ($35.28 - $1.68) * 600 shares + $4.02 commission

Net Profit:
(a) Options Income: +$1,479.96
= ($1.68 + $.80) * 600 shares - $8.04 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 600 shares)
(c) Capital Appreciation (If MTCH shares assigned at $33.50 strike price at expiration): -$1,068.00
+($33.50 strike price - $35.28 stock purchase price) * 600 shares

Total Net Profit (If options exercised on the 5/3/2024 options expiration date): +$411.96

= (+$1,479.96 options income +$0.00 dividend income -$1,068.00 capital appreciation)

Potential Absolute Return-on-Investment (If the Match Group Inc. shares are assigned at the $33.50 strike price at the May 3rd, 2024 options expiration date): +2.0%

= +$411.96/$20,164.02

Potential Annualized Return-on-Investment (If 600 Match Group shares assigned at $33.50 at the 5/3/2024 options expiration date): +24.1%

= (+$411.96/$20,164.02) * (365/31 days)

Established Covered Calls Position in APA Corporation

A Covered Calls position was established in APA Corporation (ticker APA) when my buy/write limit order for the April 26th, 2024 $34.00s executed at a net debit price of $33.45.  Four hundred APA shares were purchased at $34.87 and 4 April 26th, 2024 $34.00 Calls were sold at $1.42 per share.  So, the corresponding time value (aka extrinsic value) was $.55 per share = [$1.42 Call options premium - ($34.87 stock purchase price - $34.00 strike price)].  

APA, formerly known as Apache, is a worldwide oil and gas exploration and production company based in Houston.  Given the Covered Calls Advisor's current Neutral Overall Market Meter outlook, a slightly in-the-money Covered Calls position was established.  The probability that the position will close in-the-money on the April 26th weekly options expiration date is 65.8%.  In addition, the Implied Volatility of the Calls was 27.2 which, as desired, is well above the VIX which is now 15.4. 

APA Corp. goes ex-dividend at $.25 per share which is a 2.9% annualized dividend yield at today's stock purchase price.  This dividend is included in the potential return-on-investment results shown below.  As preferred, there is no earnings report prior to the options expiration date and analysts' current stock target price is $41.27 per share (+18.4% above today's purchase price).  APA also meets all eleven filters in my Large-Cap Sustainable Competitive Advantage stock screener.

As detailed below, two potential return-on-investment results for this APA Covered Calls position are: (a) +1.6% absolute return-on-investment (equivalent to +59.3% annualized return-on-investment for the next 10 days) if the stock is assigned early [i.e. on April 18th which is the last trading day prior to the April 19th ex-dividend date]; OR (b) +2.4% absolute return-on-investment (equivalent to +50.9% annualized return-on-investment over the next 17 days) if the stock is assigned on the April 26th, 2024 options expiration date. 

APA Corporation (APA) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
4/9/2024 Bought 400 shares of APA Corporation stock @ $34.87 per share.  
4/9/2024 Sold 4 APA April 26th, 2024 $34.00 Call options @ $1.42 per share.
4/19/2024 Upcoming ex-dividend at $.25 per share

The overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $13,382.68
= ($34.87 - $1.42) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$565.32
= ($1.42 * 400 shares) - $2.68 commission
(b) Dividend Income (If APA stock assigned on the April 19th ex-dividend date): $0.00
(b) Dividend Income (If APA stock assigned on the April 26th, 2024 options expiration date): +$100.00
= $.25 dividend per share x 400 shares
(c) Capital Appreciation (If APA stock assigned on the April 19th ex-dividend date): -$348.00
= ($34.00 strike price - $34.87 stock purchase price) * 400 shares
(c) Capital Appreciation (If APA stock is above the $34.00 strike price and therefore assigned at the April 26th options expiration date): -$348.00
= ($34.00 - $34.87) * 400 shares

1. Potential Net Profit (If APA shares assigned on 4/18/2024, the day prior to the April 19th ex-dividend date): +$217.32
= (+$565.32 options income +$0.00 dividend income - $348.00 capital appreciation)
2. Potential Net Profit (If APA stock price is above $34.00 strike price at the April 26th options expiration): +$317.32
= (+$565.32 options income +$100.00 dividend income - $348.00 capital appreciation)

1. Potential Absolute Return-on-Investment (If APA shares assigned on 4/18/2024, the day prior to the 4/19/2024 ex-dividend date): +1.6%
= +$217.32/$13,382.68
Potential Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +59.3%
= (+$217.32/$13,382.68) * (365/10 days)

2. Potential Absolute Return-on-Investment (If APA price is above $34.00 strike price and therefore assigned at the April 26th options expiration): +2.4%
= +$317.32/$13,382.68
Potential Equivalent Annualized Return-on-Investment (If assigned on the 4/26/2024 options expiration date): +50.9%
= (+$317.32/$13,382.68) * (365/17 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 APA Corporation Covered Calls position.

Continuation of Covered Calls Position in Mondelez International Inc.

The Covered Calls Advisor Portfolio has a Covered Calls position in Mondelez International Inc. (ticker MDLZ) which expired last Friday with the stock at $67.99 which was below the $71.00 strike price at last Friday's options expiration.  An important reason why the stock price has declined recently is that the price of cocoa has spiked by 40% during the last month and among the companies owned by Mondelez are Cadbury and Toblerone.  Today this position was continued by rolling out to the April 19th, 2024 monthly options expiration date at the $69.00 strike price by selling-to-open three Calls at $.50 per share this morning when the price of Mondelez stock was $68.16.  This two-week extension to a 4/19/2024 expiration is prior to their next quarterly earnings report which is on April 25th and is an effort to repair the unrealized loss in this position back closer to breakeven.  

As detailed below, a potential outcome for this Mondelez investment if the stock is in-the-money and therefore assigned on the options expiration date is -1.0% absolute return-on-investment over 31 days (equivalent to -11.5% annualized-return-on-investment) if the stock closes above the $69.00 strike price on the April 19th, 2024 options expiration date.  The transactions history of this Mondelez Covered Calls position to-date along with a potential return-on-investment result if the stock is assigned on the 4/19/2024 options expiration date is as follows:

Mondelez International Inc. (MDLZ) -- Continuation of Covered Calls Position

The buy/write transaction was:
3/19/2024 Bought 300 Mondelez shares @ $72.25
3/19/2024 Sold 2 MDLZ 4/5/2024 $71.00 Call options @ $1.65 per share.  The Implied Volatility of these Calls was 11.9 when this position was established.

4/5/2024 Call options expired out-of-the-money and the 300 MDLZ shares remain in the Covered Calls Advisor Portfolio.

4/8/2024 Continued this Covered Calls position by selling 3 MDLZ April 19th, 2024 $69.00 Call options against the 300 shares owned.

A possible overall performance result (including commissions) if the stock closes above the $69.00 strike price on the 4/19/2024 options expiration date would be as follows:
Covered Calls Net Investment: $21,182.01
= ($72.25 - $1.65) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$640.98
= ($1.65 + $.50) * 300 shares - $4.02 commissions
(b) Dividend Income: +$127.50
= $.425 per share x 300 shares
(c) Capital Appreciation (If MDLZ shares assigned with stock above the $69.00 strike price at the April 19th options expiration): -$975.00
= ($69.00 -$72.25) * 300 shares

Potential Net Profit (If Mondelez price is above $69.00 strike price at the April 19th options expiration): -$206.52
= (+$640.98 options income +$127.50 dividend income - $975.00 capital appreciation)

Absolute Return-on-Investment (If MDLZ price is above $69.00 strike price at the April 19th options expiration date): -1.0%
= -$206.52/$21,182.01
Equivalent Annualized Return-on-Investment (If assigned on the 4/5/2024 options expiration date): -11.5%
= (-$206.52/$21,182.01) * (365/31 days)

April 5th, 2024 Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with April 5th, 2024 options expirations.  The position containing 500 shares in KraneShares CSI China Internet ETF (ticker KWEB) at the $25.50 strike price closed in-the-money at $26.58 on yesterday's options expiration date.  So, the five Calls expired and the shares were called away (i.e. sold) at the $25.50 strike price.  The second position in Mondelez International Inc. closed out-of-the-money yesterday so the Calls expired and the 300 MDLZ shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for both positions is as follows:

1. KraneShares CSI China Internet ETF -- +2.3% absolute return (equivalent to +40.5% annualized return-on-investment) for the 21 days of this investment.  The original post detailing this Covered Calls position is here. 

2. Mondelez International Inc. -- Mondelez closed out-of-the-money yesterday at $67.99 which was below its $71.00 strike price, so the three 4/5/2024 Call options expired and 300 Mondelez shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either close out the position by selling the shares or continuing with this Covered Calls position by selling three MDLZ Calls against the 300 shares currently owned.  The original post detailing this Covered Calls position is here.  

Jeff Partlow

The Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in Yum China Holdings Inc.

Today my buy/write limit order was executed in Yum China Holdings Inc. (ticker YUMC) when 500 shares were bought and 5 Call options were sold simultaneously at the April 19th, 2024 monthly options expiration date and at the $37.50 strike price. The net debit limit price for my order was $36.98 per share which was executed when 500 shares were purchased at $39.43 and 5 April 19th, 2024 Call options were sold for $2.45 per share.  Therefore, a maximum potential time value profit of $.52 per share = [$2.45 options premium - ($39.43 stock price - $37.50 strike price)] is available for this position.  A Covered Calls position was preferable to its comparable Cash-Secured Puts position since the time value of $.52 for the Calls exceeded the $.40 available for the Puts. 

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 29th, 2024 is after the April 19th options expiration date.  The Implied Volatility of the Calls seemed attractive at 33.2 when this position was established since the Beta (1 Year) is relatively low at 0.78.  The probability of being in-the-money on the options expiration date is 74.0%.    

According to LSEG (Refinitiv), there are 27 Wall Street analysts covering Yum China and their average Target Price is +40.0% above today's purchase price.  Another reason for establishing this position was that Yum China met all 17 filters in my Future 5-Year PEG Ratios stock screener (see Rankings and Filter breakdown in the chart below).   I highlighted some particularly impressive numbers in green.   

 
As detailed below, a potential result is +1.4% absolute return-on-investment (equivalent to +31.7% annualized return-on-investment over the next 16 days) if the stock is assigned on the April 19th, 2024 options expiration date.

Yum China Holdings Inc. (YUMC) -- New Covered Calls Position
The buy/write transaction was:
4/3/2024 Bought 500 Yum China shares @ $39.43.
4/3/2024 Sold 5 Yum China 4/19/2024 $37.50 Call options @ $2.45 per share.  

A possible overall performance results (including commissions) for this Yum China Holdings Inc. Covered Calls position is as follows:
Covered Calls Net Investment: $18,493.35
= ($39.43 - $2.45) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,221.65
= ($2.45 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If shares assigned at $37.50 strike price at the April 19th options expiration): -$965.00

+($37.50 strike price - $39.43 stock purchase price) * 500 shares

Total Net Profit (If YUMC's shares assigned at $37.50 at the April 19th, 2024 expiration): +$256.65

= (+$1,221.65 options income +$0.00 dividend income -$965.00 capital appreciation)

Potential Absolute Return-on-Investment (If Yum China's shares assigned on the April 19th options expiration date): +1.4%

= +$256.65/$18,493.35

Potential Annualized Return-on-Investment: +31.7%

= (+$256.65/$18,493.35) * (365/16 days)