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.
