In addition to this $1.02 per share time value profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.40 (annual dividend yield of 1.3%) on April 9th, 2024. So, the two potential return-on-investment results detailed below are: (1) the possibility of early assignment since the April 9th ex-dividend is prior to the April 19th, 2024 options expiration date; and (2) the possibility that this Covered Calls position is in-the-money (and therefore assigned) on the options expiration date. As preferred, the next quarterly earnings report on June 10th, 2024 is after the April 19th options expiration date.
The 24 analysts covering Oracle have an average target price of $140.07 (+13.0% above today's stock purchase price). As shown in the stock screener chart below, Oracle meets all 19 filters of my Earnings Growers stock screener.
Two potential return-on-investment results are:
- +0.8% absolute return-on-investment (equivalent to +44.0% annualized return-on-investment for the next 7 days) if the stock is assigned early (on the last business day prior to the April 9th, 2024 ex-dividend date); OR
- +1.2% absolute return-on-investment (equivalent to +25.3% annualized return-on-investment over the next 17 days) if the stock is assigned on the April 19th options expiration date.
These potential returns are attractive given this is a large-cap company with relatively stable financial performance trends and a Beta (1-year) of 1.30. Details of this Oracle Corp. Covered Calls position and two potential return-on-investment results are as follows:
Oracle Corporation (ORCL) -- New Covered Calls Position
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
Two possible overall performance results (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: +$802.66
= ($4.02 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on April 8th, the last business day prior to the April 9th ex-div date): +$0.00; or
(b) Dividend Income (If ORCL stock assigned at the April 19th, 2024 expiration date): $80.00
= ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If ORCL Call options assigned early on April 9th): -$600.00
+($121.00 strike price - $124.00 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $121.00 strike price at the 4/19/2024 options expiration date): -$600.00
+($121.00 - $124.00) * 200 shares
1. Total Net Profit [If option exercised early on the last business day prior to the April 9th ex-dividend date)]: +$202.66
= (+$802.66 options income +$0.00 dividend income -$600.00 capital appreciation); or
2. Total Net Profit (If stock shares assigned at $121.00 strike price at the 4/19/2024 expiration): +$282.66
= (+$802.66 options income +$80.00 dividend income -$600.00 capital appreciation)
1. Absolute Return-on-Investment (If option exercised early on April 9th): +0.8%
= +$202.66/$23,997.34
Potential Annualized Return-on-Investment: +44.0%
= (+$202.66/$23,997.34) * (365/7 days); or
2. Absolute Return-on-Investment (If ORCL shares assigned at $121.00 at the 4/19/2024 options expiration date): +1.2%
= +$282.66/$23,997.34
Potential Annualized Return-on-Investment (If shares assigned at the 4/19/2024 options expiration date): +25.3%
= (+$282.66/$23,997.34) * (365/17 days)
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position. As shown below with this Oracle Corporation position, all nine criteria were met.
