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)