Continuation of Covered Calls Position in Target Corporation

The Covered Calls Advisor Portfolio has a Covered Calls position in Target Corporation (ticker TGT) with 200 shares and 2 Call options at the $150.00 strike price scheduled to expire today.  Early in this afternoon's trading when the stock was at $145.48, my net credit limit order at $2.16 per share was executed to roll-down-and-out the Covered Calls to the $148.00 strike price and at the June 21st, 2024 monthly options expiration date.  

As detailed below, a potential outcome for this Target Corp. investment if the stock is in-the-money and therefore assigned on the options expiration date is +2.1% absolute return-on-investment over 45 days (equivalent to +17.4% annualized-return-on-investment) if the stock closes above the $148.00 strike price on the June 21st, 2024 options expiration date.  The transactions history of this Target Covered Calls position so far along with a potential return-on-investment result if the stock is assigned on the June 21st options expiration date is as follows:

Target Corporation (TGT) -- Continuation of Covered Calls Position
The buy/write transaction was:
5/7/2024 Bought 200 Target Corporation shares @ $160.06.
5/7/2024 Sold 2 TGT 5/24/2024 $150.00 Call options @ $11.99 per share.
5/14/2024 Ex-dividend of $1.10 per share.

5/24/2024 Continued this Target Corporation Covered Calls position with a rollout transaction by simultaneously buying-to-close 2 Target 5/24/2024 $150.00 Calls at $.01 per share and selling-to-open 2 6/21/2024 $148.00 Calls at $2.17 per share when the stock price was $145.48.

A possible overall performance result (including commission) for this Covered Call position is as follows:
Covered Calls Net Investment: $29,615.34
= ($160.06 - $11.99) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,827.32
= ($11.99 -$.01 + $2.17) * 200 shares - $2.68 commissions
(b) Dividend Income: $220.00

= ($1.10 per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $148.00 strike price at the 6/21/2024 options expiration date): -$2,412.00
+($148.00 strike price - $160.06 stock purchase price) * 200 shares

Total Net Profit (If stock shares assigned at $148.00 strike price at the 6/21/2024 options expiration date): +$635.32

= (+$2,827.32 options income +$220.00 dividend income -$2,412.00 capital appreciation)

Potential Absolute Return-on-Investment (if assigned on the 6/21/2024 options expiration date): +2.1%

= +$635.32/$29,615.34

Potential Annualized Return-on-Investment: +17.4%

= (+$635.32/$29,615.34) * (365/45 days)

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net

 

Covered Calls Position Established in Lear Corporation

Early this afternoon, my buy/write limit order for Lear Corporation (ticker LEA) was executed.  My net debit limit price of $118.72 was executed when two hundred shares were purchased at $123.92 and two June 21st, 2024 Call options were sold at $5.20 per share at the $120.00 strike price.  The potential time value profit was $1.28 per share = [$120.00 strike price - ($123.92 stock purchase price - $5.20 Call options price)].   There is also a $.77 ex-dividend (2.5% annual dividend yield) on June 6th which is prior to the June 21st options expiration date, so this dividend is included in the potential return-on-investment results shown below. 

Given my current "Neutral" stock market outlook, a slightly in-the-money Covered Calls position was established with a 71.2% probability that the stock will be in-the-money and therefore assigned on its June 21st, 2024 options expiration date.  The Implied Volatility of the Calls was 18.0 when this position was established and, as I prefer, there is no earnings report prior to the June 21st options expiration date since the next earnings report is on August 6th, 2024.  Also, the Beta (1-Year) for Lear Corporation is 1.03.  

Lear Corporation supplies automotive seating and electric power management systems to global vehicle manufacturers.  LSEG (Refinitiv) has an average rating of nine (out of a maximum of 10) for Lear and the average target price by the 13 analysts that follow the company is now $164.31 (+32.6% above today's stock purchase price).   As desired, the next quarterly earnings report on August 6th is after the June 21st, 2024 options expiration date.

As shown in the chart below, Lear meets all 21 filters of my Acquirer's Multiple stock screener.

As detailed below, two potential return-on-investment results for this Lear Corporation Covered Calls position are as follows: (a) +1.1% absolute return-on-investment (equivalent to +28.0% annualized return-on-investment) for the next 14 days if the stock is assigned early on the day prior to the June 6th ex-dividend date; or (b) +1.7% absolute return-on-investment (equivalent to +21.7% annualized return-on-investment) for the next 29 days if the stock is instead assigned on its June 21st, 2024 options expiration date.

Lear Corporation (LEA) -- New Covered Calls Position
The buy/write transaction was:
5/23/2024 Bought 200 Lear Corporation shares @ $123.92.
5/23/2024 Sold 2 LEA 6/21/2024 $120.00 Call options @ $5.20 per share.
6/6/2024 Ex-dividend of $.77 per share.

Two possible overall performance results (including commission) for this Covered Calls position are as follows:
Covered Calls Net Investment: $23,745.34
= ($123.92 - $5.20) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,038.66
= ($5.20 * 200 shares) - $1.34 commission
(b) Dividend Income: $154.00

= ($.77 per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $120.00 strike price at the 6/6/2024 options expiration date): -$784.00
+($120.00 strike price - $123.92 stock purchase price) * 200 shares

1. Total Net Profit (If stock shares assigned at $120.00 strike price on the day prior to the June 6th ex-dividend date): +$254.66

= (+$1,038.66 options income +$0.00 dividend income - $784.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $120.00 strike price at the 6/21/2024 options expiration date): +$408.66

= (+$1,038.66 options income +$154.00 dividend income -$784.00 capital appreciation)

1. Potential Absolute Return-on-Investment (if assigned early on the day prior to the 6/6/2024 ex-dividend): +1.1%

= +$254.66/$23,745.34

Potential Annualized Return-on-Investment: +28.0%

= (+$254.66/$23,745.34) * (365/14 days); or

2. Potential Absolute Return-on-Investment (if assigned on the 6/21/2024 options expiration date): +1.7%

= +$408.66/$23,745.34

Potential Annualized Return-on-Investment: +21.7%

= (+$408.66/$23,745.34) * (365/29 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 Lear Corporation Covered Calls position.

Established Covered Calls Position in KraneShares CSI China Internet ETF

This afternoon a Covered Calls position was established in KraneShares CSI China Internet ETF (ticker KWEB).  One thousand shares were purchased at $31.90 and ten June 21st, 2024 monthly Call options were sold at the $30.00 strike price at $2.44 per share--a buy/write net debit transaction of $29.46 per share which provides a maximum $.54 per share time value profit potential.  The probability of the Calls being in-the-money on the options expiration date was 73.7% when this transaction occurred. 

As you know, I normally prefer establishing Covered Call positions of two to three weeks duration.  I will be on vacation touring throughout Italy beginning in another week and therefore will not be doing any of my normal stock research and trading activities until after I return on June 10th.  Therefore, the fewer than normal number of Covered Calls positions I am establishing now will not expire until the June 21st, 2024 monthly options expiration date.  So, most of my available investing funds will be held during the next month in a Schwab Money Market Fund (SWVXX) with a current annual yield of slightly above 5.0%.    

As detailed below, a potential result is +1.8% absolute return-on-investment (equivalent to +20.6% annualized return-on-investment for the next 32 days) if the KWEB share price is in-the-money (i.e. above the $30.00 strike price) and therefore assigned on its June 21st, 2024 options expiration date.

 
KraneShares CSI China Internet ETF (KWEB) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
5/20/2024 Bought 1,000 shares of CSI China Internet ETF @ $31.90 per share.  
5/20/2024 Sold 10 KWEB June 21st, 2024 $30.00 Call options @ $2.44 per share.  The Implied Volatility of the Calls was 31.2 when this position was established.  

A possible overall performance result (including commissions) for this CSI China Internet ETF Covered Calls position is as follows: 

KWEB Covered Calls Net Investment: $29,466.70

= ($31.90 - $2.44) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$2,433.30
= ($2.44 * 1,000 shares) - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 CSI China Internet ETF shares assigned at $30.00 strike price at expiration): -$1,900.00
+($30.00 strike price - $31.90 shares purchase price) * 1,000 shares

Total Net Profit Potential (If 1,000 CSI China Internet ETF shares assigned at $30.00 strike price at expiration): +$533.30
= (+$2,433.30 options income + $0.00 dividend income - $1,900.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.8%
= +$533.30/$29,466.70
Potential Annualized Return-on-Investment: +20.6%
= (+$533.30/$29,466.70) * (365/32 days)

Monthly Options Expiration Results through May 17th, 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 April 19th, 2024 options expiration through yesterday's May 17th, 2024 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio held a total of eighteen positions that were closed out.  Thirteen positions were closed out at a profit and five positions were closed at a loss.   

The specific results for each position are summarized as follows: 

• Three Covered Calls positions expired in-the-money (stock price above the strike price) on yesterday's May 17th, 2024 monthly options expiration date as follows:

1. Capital One Financial Corporation -- +1.2% absolute return-on-investment in 14 days (equivalent to a +31.1% annualized return-on-investment). 
2. Las Vegas Sands Corporation -- +2.1% absolute return-on-investment in 21 days (equivalent to a +36.3% annualized return-on-investment). 
3. Oracle Corporation -- +0.8% absolute return-on-investment in 45 days (equivalent to a +6.7% annualized return-on-investment). 

• Four Covered Calls positions expired in-the-money on their respective Weekly options expiration dates during the past month as follows:

1. Citigroup Inc. -- +1.3% absolute return-on-investment in 11 days (equivalent to a +43.9% annualized return-on-investment).
2. iShares 20+ Year Treasury Bond ETF -- +1.2% absolute return-on-investment in 15 days (equivalent to a +30.0% annualized return-on-investment).
3. JD.com Inc. -- +8.5% absolute return-on-investment in 44 days (equivalent to a +70.8% annualized return-on-investment).
4. Netease Inc. -- +0.4% absolute return-on-investment in 47 days (equivalent to a +2.9% annualized return-on-investment).

• Two Covered Calls positions were closed out by early assignment on the last trading day prior to their ex-dividend dates as follows: 

1. IBM Corporation -- +0.9% absolute return-on-investment in 8 days (equivalent to a +40.6% annualized return-on-investment).
2. Oshkosh Corporation -- +1.3% absolute return-on-investment in 10 days (equivalent to a +46.1% annualized return-on-investment).

• Nine Covered Calls positions were closed out by early decision as follows:

1. APA Corporation -- -8.3% absolute return-on-investment in 36 days (equivalent to a -84.7% annualized return-on-investment).
2. Aptiv PLC -- +2.6% absolute return-on-investment in 53 days (equivalent to a +18.2% annualized return-on-investment).
3. Amdocs Limited -- -2.3% absolute return-on-investment in 33 days (equivalent to a -25.0% annualized return-on-investment).
4. Euronet Worldwide -- +2.9% absolute return-on-investment in 34 days (equivalent to a +33.4% annualized return-on-investment).
5. Globe Life Inc. -- -26.0% absolute return-on-investment in 22 days (equivalent to a -431.6% annualized return-on-investment).
6. Halozyme Therapeutics Inc. -- +0.8% absolute return-on-investment in 40 days (equivalent to a +6.9% annualized return-on-investment).
7. Match Group Inc. -- -1.7% absolute return-on-investment in 34 days (equivalent to a -18.0% annualized return-on-investment).
8. Mondelez International Inc. -- -1.9% absolute return-on-investment in 34 days (equivalent to a -20.0% annualized return-on-investment).
9. Yum China Holdings Inc. -- +0.1% absolute return-on-investment in 19 days (equivalent to a +1.7% annualized return-on-investment).

During the past year (last 12 months) 121 of 137 positions (88.3%) in the Covered Calls Advisor Portfolio (CCAP) were closed out at a profit.  The Covered Calls Advisor Portfolio weighted average annualized-return-on-investment was +8.5% during the past year and the average holding period for these 137 closed positions was 21.5 days.  In comparison, the benchmark S&P 500 has returned +29.1% 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 Schlumberger Ltd

The Covered Calls Advisor Portfolio has a Covered Calls position in Schlumberger Ltd. (now SLB) with 300 shares and 3 Call options at the $50.00 strike price scheduled to expire today.  The stock was at $48.57 with less than 30 minutes remaining until the market close today when my net credit limit order at $.69 per share was executed to roll out the Covered Calls to the same $50.00 strike price at the June 21st, 2024 monthly options expiration date.  The Implied Volatility of the 6/21/2024 Calls was 20.3 when this transaction occurred, and the probability that the Calls will expire in-the-money and therefore be assigned on their 6/21 options expiration date was 33.8%. 

As detailed below, a potential outcome for this SLB investment if the stock is in-the-money and therefore assigned on the options expiration date is +0.7% absolute return-on-investment over 87 days (equivalent to +3.0% annualized-return-on-investment) if the stock closes above the $50.00 strike price on the June 21st, 2024 options expiration date.  The transactions history of this SLB Covered Calls position so far along with a potential return-on-investment result if the stock is assigned on the June 21st options expiration date is as follows:

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.

5/3/2024 Three SLB Calls closed out-of-the-money at $47.77 on their options expiration date, so the Call expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This SLB Covered Calls position was continued by selling 3 May 17th, 2024 $50.00 Calls at $.27 per share when the stock was trading at $48.25. 

5/17/2024 Rolled out the 3 SLB 5/17/2024 $50.00 Calls to 3 6/21/2024 $50.00 Calls at a net credit of $.67 per share.
6/5/2024 Upcoming ex-dividend of $.275 per share. 

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: +$1,251.96
= ($2.48 + $.76 + $.27 -$.01 + $.70) * 300 shares - $8.04 commissions
(b) Dividend Income: +$82.50
= $.275 per share x 300 shares
(c) Capital Appreciation (If SLB stock is above the $50.00 strike price at the June 21st, 2024 options expiration date): -$1,224.00
= ($50.00 strike price - $54.08 stock purchase price) * 300 shares

Potential Total Net Profit (If SLB is in-the-money and therefore assigned at expiration): +$110.46
= (+$1,251.96 options income + $82.50 dividend income - $1,224.00 capital appreciation)

Potential Absolute Return-on-Investment (If stock price is in-the-money and therefore assigned on the 6/21/2024 options expiration date): +0.7% = +$110.46/$15,482.01

Potential Equivalent Annualized-Return-on-Investment: +3.0%
= (+$110.46/$15,482.01) * (365/87 days)

Jeff Partlow (The Covered Calls Advisor)

partlow@cox.net

 

Covered Calls Position Established in Molson Coors Beverage Company

Today a Covered Calls position was established in Molson Coors Beverage Company (ticker TAP) when my buy/write limit order was executed.  Four hundred shares were purchased at $56.4295 and 4 June 21st, 2024 Call options were sold at $2.11 per share at the $55.00 strike price.  So, the potential time value profit for this Molson Coors Covered Calls position is $.6805 per share [$2.11 Call options premium - ($56.4295 stock purchase price - $55.00 strike price)].  There is also a $.44 ex-dividend (3.1% annual dividend yield) on June 6th which is prior to the June 21st options expiration date, so this dividend is included in the potential return-on-investment results shown below. 

Given my current "Neutral" stock market outlook, a slightly in-the-money Covered Calls position was established with a 70.3% probability that the stock will be in-the-money and therefore assigned on its June 21st, 2024 options expiration date.  The Implied Volatility of the Calls was 16.1 when this position was established and, as I prefer, there is no earnings report prior to the June 21st options expiration date since the next earnings report is on July 20th, 2024.  Also, the Beta (1-Year) for Molson Coors is 0.52.  LSEG (Refinitiv) has both the average rating and their optimized rating as nine (out of a maximum of 10) for Molson Coors and the average target price by the 21 analysts that follow the company is now $64.92 (+15.1% above today's stock purchase price). 

Molson Coors is one of the largest brewers in the world and was formed in early 2005 via the combination of Adolph Coors Co. and Molson, Inc.  They manufacture and market beer and other malt beverage products under various brands in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.  

As detailed below, two potential return-on-investment results are as follows: (a) +1.2% absolute return-on-investment (equivalent to +22.6% annualized return-on-investment) for the next 20 days if the stock is assigned early on the day prior to the ex-dividend date; or (b) +2.1% absolute return-on-investment (equivalent to +21.4% annualized return-on-investment) for the next 35 days if the stock is instead assigned on its June 21st, 2024 options expiration date.

Molson Coors Beverage Company (TAP) -- New Covered Calls Position
The buy/write transaction was:
5/17/2024 Bought 400 Molson Coors Beverage Company shares @ $56.4295.
5/17/2024 Sold 4 TAP 6/21/2024 $55.00 Call options @ $2.11 per share.
6/6/2024 Ex-dividend of $.44 per share.

Two possible overall performance results (including commission) for this Covered Calls position are as follows:
Covered Calls Net Investment: $21,730.48
= ($56.4295 - $2.11) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$841.32
= ($2.11 * 400 shares) - $2.68 commission
(b) Dividend Income: $176.00

= ($.44 per share x 400 shares)
(c) Capital Appreciation (If shares assigned at $55.00 strike price at the 6/6/2024 options expiration date): -$571.80
+($55.00 strike price - $56.4295 stock purchase price) * 400 shares

1. Total Net Profit (If stock shares assigned at $55.00 strike price on the day prior to the June 6th ex-dividend date): +$269.52

= (+$841.32 options income +$0.00 dividend income - $571.80 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $55.00 strike price at the 6/21/2024 options expiration date): +$445.52

= (+$841.32 options income +$176.00 dividend income -$571.80 capital appreciation)

1. Potential Absolute Return-on-Investment (if assigned early on the day prior to the 6/6/2024 ex-dividend): +1.2%

= +$269.52/$21,730.48

Potential Annualized Return-on-Investment: +22.6%

= (+$269.52/$21,730.48) * (365/20 days); or

2. Potential Absolute Return-on-Investment (if assigned on the 6/21/2024 options expiration date): +2.1%

= +$445.52/$21,730.48

Potential Annualized Return-on-Investment: +21.4%

= (+$445.52/$21,730.48) * (365/35 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 Molson Coors Beverage Company Covered Calls position.

Established Covered Call Position in CBOE Global Markets Inc.

Today a Covered Call position was established in CBOE Global Markets Inc. (ticker symbol CBOE) when the Covered Calls Advisor's buy/write limit order was executed -- 100 shares were purchased at $178.50 and one June 21st, 2024 Call option was sold at $6.70 per share at the $175.00 strike price.  Therefore, a net debit price of $171.80 which is a time value of $3.20 per share [$6.70 Call option price - ($178.50 stock price - $175.00 strike price)].  This is a moderately in-the-money position since its probability of closing in-the-money on the 6/21 options expiration date was 64.2% when this position was established.  The current average target price for the analysts covering CBOE is $196.62 (which is +10.2% above today's stock purchase price).  

Two potential return-on-investment results for this position are highlighted below and includes the possibility of early assignment since a quarterly ex-dividend of $.55 per share (1.2% annualized dividend yield) will most likely be announced very soon and with an ex-dividend date on May 30th, 2024 (which is prior to the June 21st options expiration date).  The stock would have to move up in price by the last business day prior to the ex-div date and by an amount that would cause the time value remaining in the option to decline from its $.55 value today to about $.15 or less.  If this occurs, the owner of the Call option might exercise their right to purchase the stock at the $175.00 strike price, in which case the option would immediately expire worthless but the owner of the Call would then own the stock and would capture the dividend.  This early assignment outcome would be desirable for me since the +48.5% annualized-return-on-investment would exceed the +21.5% annualized-return-on-investment if the assignment were to instead occur on the June 21st monthly options expiration date.  But either result would be attractive since they both exceed my preferred minimum annualized return-on-investment criteria (see criteria #8 and #9 at the bottom of this post) when using the Dividend Capture Strategy.  Also, as I prefer, there is no intervening quarterly earnings report since CBOE's next quarterly earnings report on August 2nd, 2024 is after the June 21st options expiration date.
  

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

•  +1.9% absolute return (equivalent to +48.5% annualized return for the next 14 days) if the stock is assigned early (business day prior to the estimated June 3rd ex-dividend date); OR 

• +2.2% absolute return (equivalent to +21.5% annualized return over the next 37 days) if the stock is assigned on the June 21st, 2024 options expiration date.

CBOE Global Markets Inc. (CBOE) -- New Covered Call Position
The buy/write transaction was:
5/15/2024 Bought 100 CBOE shares @ $178.50
5/15/2024 Sold 1 CBOE 6/21/2024 $175.00 Call option @ $6.70.  The Implied Volatility of the Call option was 18.4 when this transaction occurred.
5/30/2024 Upcoming quarterly ex-dividend of $.55 per share

Two possible overall performance results (including commissions) for this CBOE Covered Call position is as follows:
Covered Calls Net Investment: $17,180.67
= ($178.50 - $6.70) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$669.33
= ($6.70 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on May 29th, 2024, the last business day prior to the estimated May 30th ex-div date): +$0.00; or
(b) Dividend Income (If CBOE stock assigned at the June 21st, 2024 options expiration date): +$55.00
= ($.55 dividend per share x 100 shares)
(c) Capital Appreciation (If CBOE Call option assigned early): -$350.00
+($175.00 strike price - $178.50 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $175.00 strike price at options expiration): -$350.00 = +($175.00 - $178.50) * 100 shares

1. Total Net Profit [If options exercised early]: +$319.33

= (+$669.33 options income +$0.00 dividend income -$350.00 capital appreciation); or

2. Total Net Profit (If CBOE shares assigned at $175.00 at the June 21st expiration): +$374.33

= (+$669.33 options income +$55.00 dividend income -$350.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised early on May 29th (business day prior to ex-dividend date)]: +1.9%

= +$319.33/$17,180.67

Annualized Return-on-Investment (If option exercised early): +48.5%

= (+$319.33/$17,180.67) * (365/14 days); or

2. Absolute Return-on-Investment (If CBOE shares assigned at $175.00 at the June 21st, 2024 options expiration): +2.2%

= +$374.33/$17,180.67

Annualized Return-on-Investment (If CBOE shares assigned at $175.00 at the June 21st options expiration): +21.5%

= (+$374.33/$17,180.67) * (365/37 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 criteria are achieved for this CBOE Global Markets Inc. Covered Call position.

Covered Calls Position Closed in APA Corporation

Last Friday, the Covered Calls position in APA Corporation (ticker APA) closed out-of-the-money at $30.37 which was well below its $34.00 strike price.  Today I decided to close out this losing position rather than continuing it and hoping for a reversal in the recent decline in crude oil prices.  Crude oil has declined rapidly (by 8.5% since this position was established) and I am not confident that its price will recover in the coming few weeks.  I believe this is one of those situations where, in my judgment, it is better to accept a loss rather than prolonging it and hoping to repair it back toward breakeven or profitability.  

The transactions history of this APA Covered Calls and associated return-on-investment results are detailed below.

APA Corporation (APA) -- Closed Out 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.
5/10/2024 Four APA $34.00 Calls expired out-of-the-money and 400 shares remain in the Covered Calls Advisor Portfolio.
5/15/2024 Sold 400 APA shares at $30.02 to close out this APA Covered Calls position. 

The overall performance results (including commissions) are 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: +$100.00
= $.25 dividend per share x 400 shares
(c) Capital Appreciation (APA shares sold at $30.02 on May 15th, 2024): -$1,940.00
= ($30.02 - $34.87) * 400 shares

Net Loss): -$1,117.36
= (+$722.64 options income +$100.00 dividend income - $1,940.00 capital appreciation)

Absolute Return-on-Investment: -8.3%
= -$1,117.36/$13,382.68
Equivalent Annualized Return-on-Investment: -84.7%
= (-$1,117.36/$13,382.68) * (365/36 days)

May 10th, 2024 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with May 10th, 2024 weekly options expiration dates.  Two positions (Citigroup Inc. and iShares 20+ Year Treasury Bond ETF) closed in-the-money so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  One position in APA Corporation closed out-of-the-money so the Calls expired and the shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for each of these three positions are as follows:

1. Citigroup Inc. (C) -- +1.3% absolute return (equivalent to +43.9% annualized return-on-investment) for the 11 days of this investment.  This Covered Call position was assigned at the $60.00 strike price on its 5/10/2024 options expiration date since the stock closed in-the-money at $63.35 per share.  The most recent post detailing the history of this Covered Calls position is here. 

2. iShares 20+ Year Treasury Bond ETF (TLT) -- +1.2% absolute return (equivalent to +30.0% annualized return-on-investment) for the 15 days of this investment.  This Covered Calls position was assigned at the $87.00 strike price on its May 10th options expiration date since it closed in-the-money yesterday at $90.06 per share.  The most recent post detailing the history of this Covered Calls position is here. 

3. APA Corporation (APA) -- This Covered Calls position closed yesterday at $30.37 which was below its $34.00 strike price, so the four 5/10/2024 APA Corp. Call options expired and 400 shares now remain in the Covered Calls Advisor Portfolio.  The most recent post detailing this position is here.  Early this week I will decide to either continue this Covered Calls position by selling 4 Call options against the 400 APA shares currently held or close out the position by selling the 400 APA shares.  

I welcome your feedback at my email address shown below with your questions or topics related to this blog post specifically or anything related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Early Assignment of Covered Calls Position in Oshkosh Corporation

I was notified by Schwab early this morning that the two Oshkosh Corporation May 17th, 2024 Call options were exercised yesterday.  Because the Oshkosh stock price increased from $113.16 when this position was established to $118.70 at yesterday's market close, the original $1.38 time value in the Calls when the position was established had declined on yesterday's market close to $0.20, so (with one week remaining until the May 17th options expiration date), the owner of these Calls exercised their option to buy the 200 shares at the $110.00 strike price in order to receive today's $.46 per share ex-dividend.  I am pleased with the +46.1% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +36.2% aroi that might have been achieved if this position was instead assigned on its May 17th, 2024 options expiration date.   

The post when this Oshkosh Corporation Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Oshkosh Covered Calls position was +1.3% absolute return in 10 days (equivalent to a +46.1% annualized return-on-investment).

Oshkosh Corporation (OSK) -- Covered Calls Position Closed Out by Early Assignment
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 Two Oshkosh Corp. Calls were exercised on the day prior to the May 10th, 2024 ex-dividend date, so the Calls expired and the 200 Oshkosh shares were sold at the $110.00 strike price.

The 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 (OSK Call options exercised early on May 9th, 2024, the last business day prior to the May 10th ex-div date): +$0.00

(c) Capital Appreciation: -$632.00

+($110.00 stock sales price (i.e. strike price) - $113.16 stock purchase price) * 200 shares

Total Net Profit: +$274.66

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

Absolute Return-on-Investment: +1.3%

= +$274.66/$21,725.34

Annualized Return-on-Investment: +46.1%

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

Early Assignment of Covered Calls Position in IBM Corporation

I was notified this morning that the two IBM Corporation May 17th, 2024 Call options were exercised yesterday.  Because the IBM stock price increased from $165.23 when this position was established to $169.90 at yesterday's market close, the original $1.44 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so the owner of these IBM Calls exercised their option to buy the 200 shares at the $162.50 strike price in order to receive today's $1.67 per share ex-dividend.  The +40.6% annualized-return-on-investment (aroi) achieved by early assignment is slightly less than the +44.0% aroi that might have been achieved if this position was instead assigned on its May 17th options expiration date.   

The post when this IBM Corporation Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this IBM Covered Calls position was +0.9% absolute return in 8 days (equivalent to a +40.6% annualized return-on-investment).

IBM Corporation (IBM) -- Covered Calls Position Closed by Early Assignment
The buy/write transaction was:
5/1/2024 Bought 200 IBM shares @ $165.23
5/1/2024 Sold 2 IBM 5/17/2024 $162.50 Call options @ $4.17.  The Implied Volatility of the Calls was 17.4 when this transaction occurred.
5/9/2024 Two IBM Calls were exercised on the day prior to the May 9th, 2024 ex-dividend date, so the Calls expired and the 200 IBM shares were sold at the $162.50 strike price.

The overall performance results (including commissions) for this IBM Covered Calls position are as follows:
Covered Calls Net Investment: $32,213.34
= ($165.23 - $4.17) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$832.66
= ($4.17 * 200 shares) - $1.34 commission
(b) Dividend Income (Call options exercised early on May 8th, the last business day prior to the May 9th ex-div date): +$0.00
(c) Capital Appreciation: -$546.00
+($162.50 strike price - $165.23 stock purchase price) * 200 shares

Total Net Profit (2 IBM Call options exercised early): +$286.66

= (+$832.66 options income +$0.00 dividend income -$546.00 capital appreciation)

Absolute Return-on-Investment: +0.9%

= +$286.66/$32,213.34

Annualized Return-on-Investment: +40.6%

= (+$286.66/$32,213.34) * (365/8 days)

Covered Calls Position Established in Target Corporation

Today a Covered Calls position was established in Target Corporation (ticker TGT) when my buy/write limit order was executed.  Two hundred shares were purchased at $160.06 and 2 May 24th, 2024 Call options were sold at $11.99 per share at the $150.00 strike price.  So, the potential time value profit for this Target Covered Calls position is $1.93 per share [$11.99 Call options premium - ($160.06 stock purchase price - $150.00 strike price)].  There is also a $1.10 ex-dividend one week from today (on May 14th) which is prior to the May 24th options expiration date, so this dividend is included in the potential return-on-investment results shown below. 

Given my current "Neutral" stock market outlook, a slightly in-the-money Covered Calls position was established with a 76.7% probability that the stock will be in-the-money and therefore assigned on its May 24th, 2024 options expiration date.  The Implied Volatility of the Calls was high for Target at 37.8 when this position was established, the reason being that there is a quarterly earnings report two days prior to the May 24th options expiration date.  In comparison, the Implied Volatility for Target Call options with a May 17th in-the-money strike were only about 17.5, so I decided to capture the higher Call option premiums with the May 24th expiration.  However, I will watch this position closely and might close it out early (prior to the May 22nd earnings release) to avoid the stock price volatility often resulting from earnings reports.     

As detailed below, two potential return-on-investment results are as follows: (a) +1.3% absolute return-on-investment (equivalent to +67.7% annualized return-on-investment) for the next 7 days if the stock is assigned early on the day prior to the ex-dividend date; or (b) +2.0% absolute return-on-investment (equivalent to +43.8% annualized return-on-investment) for the next 17 days if the stock is instead assigned on its May 24th, 2024 options expiration date.

Target Corporation (TGT) -- New Covered Calls Position
The buy/write transaction was:
5/7/2024 Bought 200 Target Corporation shares @ $160.06.
5/7/2024 Sold 2 TGT 5/24/2024 $150.00 Call options @ $11.99 per share.
5/14/2024 Ex-dividend of $1.10 per share.

Two possible overall performance results (including commission) for this Covered Call position are as follows:
Covered Calls Net Investment: $29,615.34
= ($160.06 - $11.99) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,396.66
= ($11.99 * 200 shares) - $1.34 commission
(b) Dividend Income: $220.00

= ($1.10 per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $150.00 strike price at the 5/24/2024 options expiration date): -$2,012.00
+($150.00 strike price - $160.06 stock purchase price) * 200 shares

1. Total Net Profit (If stock shares assigned at $150.00 strike price on the day prior to the May 14th ex-dividend date): +$384.66

= (+$2,396.66 options income +$0.00 dividend income - $2,012.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $150.00 strike price at the 5/24/2024 options expiration date): +$604.66

= (+$2,396.66 options income +$220.00 dividend income -$2,012.00 capital appreciation)

1. Potential Absolute Return-on-Investment (if assigned early on the day prior to the 5/14 ex-dividend): +1.3%

= +$384.66/$29,615.34

Potential Annualized Return-on-Investment: +67.7%

= (+$384.66/$29,615.34) * (365/7 days); or

2. Potential Absolute Return-on-Investment (if assigned on the 5/24/2024 options expiration date): +2.0%

= +$604.66/$29,615.34

Potential Annualized Return-on-Investment: +43.8%

= (+$604.66/$29,615.34) * (365/17 days)

Continuation of Covered Calls Positions in Oracle Corporation and Schlumberger Ltd.

The Covered Calls positions in Oracle Corporation (ticker ORCL) and Schlumberger Ltd. (ticker SLB) closed out-of-the-money, so the Calls expired and shares remained in the Covered Calls Advisor Portfolio.  This morning, I decided to continue both of these Covered Calls positions by selling Call options to roll out to the May 17th, 2024 monthly options expiration dates. The transactions-to-date for these positions as well as the potential return-on-investment results if these positions are assigned on their May 17th expiration date are as follows:

1. 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.

5/3/2024 Two Oracle Calls closed out-of-the-money at $116.38 on their options expiration date, so the Call expired and 200 Oracle shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This Oracle Corp. Covered Calls position was continued by selling 2 May 17th, 2024 $118.00 Calls at $1.42 per share when the stock was trading at $116.88. 

 

A possible overall performance result (including commissions) for this Oracle Covered Calls position if assigned on its 5/17 options expiration date is as follows:
Covered Calls Net Investment: $23,997.34
= ($124.00 - $4.02) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,317.98
= ($4.02 + $1.17 + $1.42) * 200 shares - $4.02 commissions
(b) Dividend Income: $80.00
= ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If shares assigned at $118.00 strike price at the 5/17/2024 options expiration date): -$1,200.00
+($118.00 strike price - $124.00 stock purchase price) * 200 shares

Total Net Profit: +$197.98

= (+$1,317.98 options income +$80.00 dividend income -$1,200.00 capital appreciation)

Potential Absolute Return-on-Investment (If ORCL shares assigned at $118.00 at the 5/17/2024 options expiration date): +0.8%

= +$197.98/$23,997.34

Potential Annualized Return-on-Investment: +6.7%

= (+$197.98/$23,997.34) * (365/45 days)

2. 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.

5/3/2024 Three SLB Calls closed out-of-the-money at $47.77 on their options expiration date, so the Call expired and 300 SLB shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 This SLB Covered Calls position was continued by selling 3 May 17th, 2024 $50.00 Calls at $.27 per share when the stock was trading at $48.25. 

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: +$1,046.97
= ($2.48 + $.76 + $.27) * 300 shares - $6.03 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SLB stock is above the $50.00 strike price at the May 17th, 2024 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): -$177.03
= (+$1,046.97 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 5/17/2024 options expiration date): -1.1% = -$177.03/$15,482.01

Potential Equivalent Annualized-Return-on-Investment: -8.0%
= (-$177.03/$15,482.01) * (365/52 days)

Jeff Partlow (The Covered Calls Advisor)

partlow@cox.net

 

Closed Covered Calls Positions in Aptiv PLC and Match Group Inc.

Covered Calls positions in Aptiv PLC (ticker APTV) and Match Group Inc. (MTCH) were closed out during today's trading session. 

Aptiv reported very strong quarterly earnings last Thursday and the stock price has made a nice move to a price more than $10.00 higher than its $72.50 strike price. I considered rolling up to a higher strike price, but the bid/ask spreads for the rollout spread transaction were too wide. So, with 11 days remaining until the May 17th options expiration date, I decided not to continue to wait 11 more days to capture a small additional time value profit now remaining in the Calls, but instead to close out the position today at a profit. 

With Match Group I faced a very different situation. The original Covered Calls position closed out-of-the-money at last Friday's options expiration. Instead of continuing the Covered Calls position by selling six more Calls against the current 600 MTCH shares, I decided to close out the position today at a loss since Match has an earnings report after market close tomorrow and I prefer to avoid the stock price volatility associated with earnings reports. 

Detailed transactions-to-date for both positions and the return-on-investment results are provided below.

1.  Aptiv PLC (APTV) -- Closed Out 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.

5/6/2024 I decided to close out this Aptiv Covered Calls position early by buying-to-close the 2 May 17th, 2024 $72.50 Call options at $10.70 per share and simultaneously selling-to-close the 200 shares at $82.88 -- a net credit of $72.08 per share. 

The 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: -$784.02
= ($4.40 + $2.40 - $10.70) * 200 shares - $4.02 commissions
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 200 shares)
(c) Capital Appreciation (APTV shares sold at $82.88 per share): +$1,168.00
+($82.88 - $77.04) * 200 shares

Total Net Profit: +$383.98

= (-$784.02 options income +$0.00 dividend income + $1,168.00 capital appreciation)

Absolute Return-on-Investment: +2.6%

= +$383.98/$14,529.34

Annualized Return-on-Investment: +18.2%

= (+$383.98/$14,529.34) * (365/53 days)

2.  Match Group Inc. (MTCH) -- Closed Out 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.  

5/3/2024 Match Group stock closed out-of-the-money at $32.00 per share, so 600 MTCH shares remain in the Covered Calls Advisor Portfolio.

5/6/2024 Closed out this Covered Calls position by selling 600 shares at $32.25 per share. 

The overall performance result (including commissions) for this Match Group Covered Calls position 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 (MTCH shares closed out by selling at $32.25 per share): -$1,818.00
+($32.25 selling price per share - $35.28 stock purchase price) * 600 shares

Total Net Loss: -$338.04

= (+$1,479.96 options income +$0.00 dividend income -$1,818.00 capital appreciation)

Absolute Return-on-Investment: -1.7%

= -$338.04/$20,164.02

Annualized Return-on-Investment: -18.0%

= (-$338.04/$20,164.02) * (365/34 days)

May 3rd, 2024 Options Expiration Results

The Covered Calls Advisor Portfolio had five Covered Calls positions with May 3rd, 2024 options expirations.  Two positions (JD.com Inc. and Netease Inc. ADR) closed in-the-money so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  Three positions (Match Group Inc., Oracle Corporation, and Schlumberger Ltd.) closed out-of-the-money so the Calls expired and the shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for each of these five positions are as follows:

1. JD.com Inc. -- +8.5% absolute return (equivalent to +70.8% annualized return-on-investment) for the 44 days of this investment.  This Covered Call position was assigned at the $26.50 strike price on its 5/3/2024 options expiration date since the stock closed in-the-money at $32.87 per share.  The most recent post detailing the history of this Covered Calls position is here. 

2. Netease Inc. ADR (NTES) -- +0.4% absolute return (equivalent to +2.9% annualized return-on-investment) for the 47 days of this investment.  This Covered Calls position was assigned at the $97.00 strike price on its May 3rd options expiration date since it closed in-the-money yesterday at $103.02 per share.  The most recent post detailing the history of this Covered Calls position is here. 

3. Match Group Inc. (MTCH) -- This Covered Calls position closed yesterday at $32.00 which was below its $33.50 strike price, so the six 5/3/2024 Match Group Call options expired and 600 shares now remain in the Covered Calls Advisor Portfolio.  Since I prefer to avoid holding positions during quarterly earnings report and since Match Group's report is after market close this Tuesday, I will sell these 600 shares this Monday which will close out this Covered Calls position.  I will also post the final return-on-investment results for this position Monday after this transaction has been completed.  

4. Oracle Corporation (ORCL) -- This Covered Calls position closed yesterday at $116.38 which was below its $117.00 strike price, so the two 5/3/2024 Oracle Call options expired and 200 Oracle Corp. shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either continue with this Covered Calls position by selling two Call options against the 200 shares currently owned (my most likely decision) or close out the position by selling the 200 shares.  

4. Schlumberger Ltd. (SLB) -- This Covered Calls position closed yesterday at $47.77 which was below its $50.00 strike price, so the three 5/3/2024 SLB Call options expired and 300 SLB shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either continue with this Covered Calls position by selling three Call options against the 300 shares currently owned (my most likely decision) or close out the position by selling the 300 shares.  As always, I will post the transactions-to-date when my next transaction is executed.

I welcome your feedback at my email address shown below with your questions or topics related to this blog post specifically or anything related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls Position in Capital One Financial Corporation

This afternoon a Covered Calls position was established in Capital One Financial Corporation (ticker symbol COF) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $142.21 and two May 17th, 2024 Call options were sold at $5.25 per share at the $138.00 strike price.  Therefore, a net debit price of $136.96 which is a time value of $1.04 per share [$5.25 Call options price - ($142.21 stock price - $138.00 strike price)].  This is a moderately in-the-money position since its probability of closing in-the-money on the 5/17 options expiration date was 76.0% when this position was established.  The current average target price of the analysts covering Capital One Financial is $152.48 (+7.2% above today's stock purchase price).  

Two potential return-on-investment results for this position are highlighted below and includes the possibility of early assignment since a quarterly ex-dividend of $.60 per share (1.7% annualized dividend yield) goes ex-dividend on May 10th (which is prior to the May 17th options expiration date).  The stock would have to move up in price by the last business day prior to the May 10th ex-div date and by an amount that would cause the time value remaining in the option to decline from its $1.04 value today to about $.20 or less.  If this occurs, the owner of the two Call options might exercise their right to purchase the stock at the $138.00 strike price, in which case the options would immediately expire worthless but the owner of the Calls would then own the stock and would capture the dividend.  This early assignment would be a desirable outcome since its +39.3% annualized return-on-investment (aroi) is greater than the +31.1% aroi that would be achieved if the position were to be instead assigned on its May 17th options expiration date.  But either result would be attractive since they both exceed my preferred minimum annualized return-on-investment criteria (see criteria #8 and #9 at the bottom of this post) when using my Dividend Capture Strategy.  Also, as I prefer, there is no intervening quarterly earnings report since Capital One's next quarterly earnings report on July 18th, 2024 is after this position's May 17th, 2024 options expiration date.

  

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

•  +0.8% absolute return (equivalent to +39.3% annualized return-on-investment for the next 7 days) if the stock is assigned early (business day prior to the May 10th ex-dividend date); OR 

• +1.2% absolute return (equivalent to +31.1% annualized return-on-investment over the next 14 days) if the stock is assigned on the May 17th, 2022 options expiration date.

Capital One Financial Corporation (COF) -- New Covered Calls Position
The buy/write transaction was:
5/3/2024 Bought 200 Capital One Financial shares @ $142.21
5/3/2024 Sold 2 Capital One 5/17/2024 $138.00 Call options @ $5.25 per share.  The Implied Volatility of the Calls was 20.2 when this transaction occurred which, as I prefer, is well above the current S&P 500 Volatility Index (i.e. VIX) of 13.6.
5/10/2024 Upcoming quarterly ex-dividend of $.60 per share

Two possible overall performance results (including commissions) for this Capital One Covered Calls position are as follows:
Covered Calls Net Investment: $27,393.34
= ($142.21 - $5.25) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,048.66
= ($5.25 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on May 9th, the last business day prior to the May 10th ex-div date): +$0.00; or
(b) Dividend Income (If COF stock assigned at the May 17th, 2024 options expiration date): +$120.00
= ($.60 dividend per share x 200 shares)
(c) Capital Appreciation (If Capital One Call options assigned early): -$842.00
+($138.00 strike price - $142.21 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $138.00 strike price at options expiration): -$842.00 = +($138.00 - $142.21) * 200 shares

1. Total Net Profit [If options exercised early]: +$206.66

= (+$1,048.66 options income +$0.00 dividend income -$842.00 capital appreciation); or

2. Total Net Profit (If COF shares assigned at $138.00 at the May 17th expiration): +$326.66

= (+$1,048.66 options income +$120.00 dividend income -$842.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised early on May 9th (business day prior to ex-dividend date)]: +0.8%

= +$206.66/$27,393.34

Annualized Return-on-Investment (If option exercised early): +39.3%

= (+$206.66/$27,393.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Capital One shares assigned at $138.00 at the May 17th, 2024 options expiration date): +1.2%

= +$326.66/$27,393.34

Annualized Return-on-Investment (If COF shares assigned at $138.00 at the May 17th options expiration): +31.1%

= (+$326.66/$27,393.34) * (365/14 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.  All nine criteria are achieved for this Capital One Financial Covered Calls position.

Established Covered Calls Position in IBM Corporation

Today a Covered Call position was established in IBM Corp. (ticker symbol IBM) when the Covered Calls Advisor's buy/write limit order was executed -- 200 shares were purchased at $165.23 and two May 17th, 2024 Call options were sold at $4.17 per share at the $162.50 strike price.  Therefore, a net debit price of $161.06 which is a time value of $1.44 per share [$4.17 Call options price - ($165.23 stock price - $162.50 strike price)].  This is a moderately in-the-money position since its probability of closing in-the-money on the 5/17 options expiration date was 68.0% when this position was established.  The current average target price of the 20 analysts covering IBM is $184.84 (+11.9%).  

Two potential return-on-investment results for this position are highlighted below and includes the possibility of early assignment since a quarterly ex-dividend of $1.67 per share (4.0% annualized dividend yield) goes ex-dividend on May 9th (which is prior to the May 17th options expiration date).  The stock would have to move up in price by the last business day prior to the May 9th ex-div date and by an amount that would cause the time value remaining in the option to decline from its $1.44 value today to about $.25 or less.  If this occurs, the owner of the two Call options might exercise their right to purchase the stock at the $162.50 strike price, in which case the options would immediately expire worthless but the owner of the Calls would then own the stock and would capture the dividend.  This early assignment outcome would not be as desirable at a +40.6% annualized return-on-investment (aroi) as if the position would instead be in-the-money and therefore assigned at its May 17th options expiration date--which would achieve a +44.0% aroi.  But either result would be attractive since they both exceed my preferred minimum annualized return-on-investment criteria (see criteria #8 and #9 at the bottom of this post) when using the Dividend Capture Strategy.  Also, as I prefer, there is no intervening quarterly earnings report since IBM's next quarterly earnings report on July 24th, 2024 is after this month's options expiration date.
  

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

•  +0.9% absolute return (equivalent to +40.6% annualized return for the next 8 days) if the stock is assigned early (business day prior to the May 9th ex-dividend date); OR 

• +1.9% absolute return (equivalent to +44.0% annualized return over the next 16 days) if the stock is assigned on the May 17th, 2022 options expiration date.

IBM Corporation (IBM) -- New Covered Call Position
The buy/write transaction was:
5/1/2024 Bought 200 IBM shares @ $165.23
5/1/2024 Sold 2 IBM 5/17/2024 $162.50 Call options @ $4.17.  The Implied Volatility of the Calls was 17.4 when this transaction occurred.
5/9/2024 Upcoming quarterly ex-dividend of $1.67 per share

Two possible overall performance results (including commissions) for this IBM Covered Calls position are as follows:
Covered Calls Net Investment: $32,213.34
= ($165.23 - $4.17) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$832.66
= ($4.17 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on May 8th, the last business day prior to the May 9th ex-div date): +$0.00; or
(b) Dividend Income (If IBM stock assigned at the May 17th, 2024 options expiration date): +$334.00
= ($1.67 dividend per share x 200 shares)
(c) Capital Appreciation (If IBM Call options assigned early): -$546.00
+($162.50 strike price - $165.23 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $162.50 strike price at options expiration): -$546.00 = +($162.50 - $165.23) * 200 shares

1. Total Net Profit [If options exercised early]: +$286.66

= (+$832.66 options income +$0.00 dividend income -$546.00 capital appreciation); or

2. Total Net Profit (If IBM shares assigned at $162.50 at the May 17th expiration): +$620.66

= (+$832.66 options income +$334.00 dividend income -$546.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised early on May 8th (business day prior to ex-dividend date)]: +0.9%

= +$286.66/$32,213.34

Annualized Return-on-Investment (If option exercised early): +40.6%

= (+$286.66/$32,213.34) * (365/8 days); or

2. Absolute Return-on-Investment (If IBM shares assigned at $162.50 at the May 17th, 2024 options expiration): +1.9%

= +$620.66/$32,213.34

Annualized Return-on-Investment (If IBM shares assigned at $162.50 at the May 17th options expiration): +44.0%

= (+$620.66/$32,213.34) * (365/16 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.  Eight of the nine criteria are achieved for this IBM Covered Calls position.