SLB has an intervening ex-dividend date so the potential results detailed below includes the possibility of a position close out by early assignment if the stock moves significantly higher by the market close on September 3rd (the last business day prior to the ex-dividend date).
As shown in the Future 5-Year PEG Ratio stock screener results below, SLB meets all the filters of my stock screener including a very attractive 0.6 for the 5-Yr Forward PEG Ratio. Also, the average Target Price of the 23 analysts that cover SLB is $65.64 (+47.9% above today's $44.37 stock purchase price).
Schlumberger Ltd. (SLB) -- New Covered Calls Position
The buy/write transaction was:
8/20/2024 Bought 800 SLB shares @ $44.37
8/20/2024 Sold 8 SLB 9/13/2024 $43.00 Call options @ $1.96
Note: the Time Value (aka Extrinsic Value) in the Call options was $.59 per share = [$1.96 Call options premium - ($44.37 stock price - $43.00 strike price)]
9/04/2024 Upcoming quarterly ex-dividend of $.275 per share
Two possible overall performance results (including commissions) for this SLB Covered Calls position are as follows:
Covered Calls Net Investment: $33,933.36
= ($44.37 - $1.96) * 800 shares + $5.36 commission
Net Profit Components:
(a) Options Income: +$1,568.00
= ($1.96 * 800 shares)
(b) Dividend Income (If option exercised early on Sept. 3rd, the business day prior to the Sept 4th ex-div date): +$0.00; or
(b) Dividend Income (If SLB stock assigned at the Sept. 13th, 2024 expiration): +$220.00
= ($.275 dividend per share x 800 shares)
Either outcome provides an attractive return-on-investment result for this Schlumberger investment. These returns will be achieved as long as the stock is above the $43.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $42.135 ($44.37 -$1.96 -$.275) provides 5.0% downside protection below today's stock purchase price.
As shown in the Future 5-Year PEG Ratio stock screener results below, SLB meets all the filters of my stock screener including a very attractive 0.6 for the 5-Yr Forward PEG Ratio. Also, the average Target Price of the 23 analysts that cover SLB is $65.64 (+47.9% above today's $44.37 stock purchase price).
Two potential return-on-investment results are:
- +1.4% absolute return (equivalent to +56.4% annualized return for the next 9 days) if the stock is assigned early (on the last business day prior to the September 4th, 2024 ex-dividend date); OR
- +2.0% absolute return (equivalent to +31.0% annualized return over the next 24 days) if the stock is assigned on the September 13th options expiration date.
The buy/write transaction was:
8/20/2024 Bought 800 SLB shares @ $44.37
8/20/2024 Sold 8 SLB 9/13/2024 $43.00 Call options @ $1.96
Note: the Time Value (aka Extrinsic Value) in the Call options was $.59 per share = [$1.96 Call options premium - ($44.37 stock price - $43.00 strike price)]
9/04/2024 Upcoming quarterly ex-dividend of $.275 per share
Two possible overall performance results (including commissions) for this SLB Covered Calls position are as follows:
Covered Calls Net Investment: $33,933.36
= ($44.37 - $1.96) * 800 shares + $5.36 commission
Net Profit Components:
(a) Options Income: +$1,568.00
= ($1.96 * 800 shares)
(b) Dividend Income (If option exercised early on Sept. 3rd, the business day prior to the Sept 4th ex-div date): +$0.00; or
(b) Dividend Income (If SLB stock assigned at the Sept. 13th, 2024 expiration): +$220.00
= ($.275 dividend per share x 800 shares)
(c) Capital Appreciation (If SLB Call options assigned early on Sept. 4th): -$1,096.00
+($43.00 strike price - $44.37 stock purchase price) * 800 shares; or
(c) Capital Appreciation (If SLB shares assigned at $43.00 strike price at the Sept. 13th options expiration date): -$1,096.00
+($43.00 - $44.37) * 800 shares
+($43.00 strike price - $44.37 stock purchase price) * 800 shares; or
(c) Capital Appreciation (If SLB shares assigned at $43.00 strike price at the Sept. 13th options expiration date): -$1,096.00
+($43.00 - $44.37) * 800 shares
1. Total Net Profit [If option exercised early on Sept. 3rd, 2024]: +$472.00
= (+$1,568.00 options income +$0.00 dividend income -$1,096.00 capital appreciation); or
2. Total Net Profit (If SLB shares assigned at $43.00 strike price at the Sept. 13th, 2024 expiration): +$692.00
= (+$1,568.00 options income +$220.00 dividend income -$1,096.00 capital appreciation)
1. Absolute Return-on-Investment (early assignment): +1.4%
= +$472.00/$33,933.36
Annualized Return-on-Investment (If options assigned early): +56.4%
= (+$472.00/$33,933.36) * (365/9 days); or
2. Absolute Return-on-Investment (If SLB shares assigned at $43.00 at the 9/13/2024 options expiration date): +2.0%
= +$692.00/$33,933.36
Annualized Return-on-Investment (If SLB shares assigned at $43.00 at the Sept. 13th, 2024 options expiration date): +31.0%
= (+$692.00/$33,933.36) * (365/24 days)
Either outcome provides an attractive return-on-investment result for this Schlumberger investment. These returns will be achieved as long as the stock is above the $43.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $42.135 ($44.37 -$1.96 -$.275) provides 5.0% 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 explanation of my Dividend Capture Strategy here) must be 'YES' prior to establishing a position. As shown below with this SLB position, all nine criteria were met.
