Established Covered Calls Position in Citigroup Inc.

A buy/write limit order in Citigroup Inc. (ticker C) was executed at the Covered Calls Advisor's net debit price of $59.47 per share.  Five hundred shares were purchased at $62.67 and five November 8th, 2024 weekly Call options were sold for $3.20 at the $60.00 strike price, a time value of $.53 = [$3.20 options premium - ($62.67 stock price - $60.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Citigroup announced (after market close yesterday) its next upcoming quarterly ex-dividend of $.56 per share (an increase from the previous rate of $.53) that goes ex-dividend on November 1st, 2024 which is prior to the November 8th options expiration date. This is equivalent to an absolute annual dividend yield of 3.6% (at the current $62.67 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 21.7% = [($.56/$62.67) x (365/15 days-to-expiration)] for the 15 days duration of this position.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the November 8th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment upon assignment for either outcome.

Citigroup has beat analysts' earnings-per-share estimates in each of their past 4 quarters and they project fiscal year 2025 eps to be +23.2% above this year.  In addition, Citi's price-to-tangible-book-value of .65 is less than half that of all its mega-bank peers.  The 22 analysts following Citi have a buy rating on the stock and an average target price of $73.20 (+16.8% above today's purchase price). 

As detailed on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  The Covered Calls Advisor's current Overall Market Meter outlook remains Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its November 8th, 2024 expiration date was 76.3% when this position was established.     

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

•  +0.9% absolute return (equivalent to +40.1% annualized return-on-investment for the next 8 days) if the stock is assigned early (business day prior to the November 1st ex-dividend date); OR 

• +1.8% absolute return (equivalent to +44.3% annualized return-on-investment over the next 15 days) if the stock is assigned on the November 8th options expiration date.

Citigroup Inc. (C) -- New Covered Calls Position
The simultaneous buy/write transaction was:
10/24/2024 Bought 500 Citigroup Inc. shares @ $62.67.
10/24/2024 Sold 5 C 11/08/2024 $60.00 Call options @ $3.20 per share.
Note: The Implied Volatility of the Call options was 27.9 when this position was transacted.
11/01/2024 Upcoming quarterly ex-dividend of $.56 per share.

Two possible overall performance results (including commissions) for this Citigroup Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $29,738.35
= ($62.67 - $3.20) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,596.65
= ($3.20 * 500 shares) - $3.35 commission
(b) Dividend Income (If options exercised early on Oct. 31st, the business day prior to the Nov. 1st, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Citigroup stock assigned on the Nov. 8th, 2024 options expiration): +$280.00
= ($.56 dividend per share x 500 shares)

(c) Capital Appreciation (If Citi Call options assigned early on October 31st): -$1,335.00
+($60.00 strike price - $62.67 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $60.00 strike price at options expiration): -$1,335.00
+($60.00 - $62.67) * 500 shares

1. Total Net Profit (If options exercised early): +$261.65

= (+$1,596.65 options income +$0.00 dividend income -$1,335.00 capital appreciation); or

2. Total Net Profit (If Citi shares assigned at $60.00 at the Nov. 1st, 2024 expiration): +$541.65

= (+$1,596.65 +$280.00 -$1,335.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 1st ex-dividend date]: +0.9%

= +$261.65/$29,738.35

Annualized Return-on-Investment (If option exercised early): +40.1%

= (+$261.65/$29,738.35) * (365/8 days); or

2. Absolute Return-on-Investment (If Citi shares assigned on the Nov. 8th, 2024 options expiration date): +1.8%

= +$541.65/$29,738.35

Annualized Return-on-Investment (If Citi shares assigned at $60.00 at the Nov. 1st, 2024 expiration): +44.3%

= (+$541.65/$29,738.35) * (365/15 days)

Either outcome provides a satisfactory return-on-investment result for this Citigroup Covered Calls investment.  These returns will be achieved as long as the stock is above the $175.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $172.24 = ($182.19 stock price - $9.45 Call options price - $.50 dividend) provides 5.5% 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 below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown in the chart below, all nine criteria are achieved for this Citigroup Covered Calls position.

Early Assignment of Covered Calls Position in Dell Technologies Inc.

I was notified by Schwab early this morning that the three Dell Technologies Inc. November 1st, 2024 Call options were exercised yesterday.  Because the Dell stock price increased from $118.56 when this position was established to $125.66 at yesterday's market close, the original $2.20 time value in the Calls when the position was established had declined on yesterday's market close to $0.86.  So, with ten days remaining until the November 1st options expiration date, the owner of these Calls exercised their option to buy the 300 shares at the $110.00 strike price in order to receive today's $.445 per share ex-dividend. 

I was surprised that the owner of the Calls exercised their option in this instance since they decided to immediately forego $.86 time value profit potential (which I am pleased to have received as an immediate profit addition to my return-on-investment result for this position). I am also pleased with the +49.5% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +35.7% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 1st, 2024 options expiration date.   

The post when this Dell Technologies Inc. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Dell Covered Calls position was +2.0% absolute return in 15 days (equivalent to a +49.5% annualized return-on-investment).

Dell Technologies Inc. (DELL) -- Covered Calls Position Closed Out by Early Assignment
The simultaneous buy/write transaction was:
10/7/2024 Bought 300 Dell Technologies Inc. shares @ $118.56.
10/7/2024 Sold 3 DELL 11/01/2024 $110.00 Call options @ $10.76 per share.
Note: the Implied Volatility of the Call options was 43.2 when this position was established.
10/22/2024 Three Dell Technologies Calls were exercised on the day prior to their October 22nd, 2024 ex-dividend date, so the Calls expired and the 300 Dell shares were sold at the $110.00 strike price.

Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $32,342.01
= ($118.56 - $10.76) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$3,225.99
= ($10.76 * 300 shares) - $2.01 commission
(b) Dividend Income (Dell options exercised early on Oct. 21st, the business day prior to the Oct. 22nd, 2024 ex-div date): +$0.00

(c) Capital Appreciation (Dell Call options assigned early on October 22nd): -$2,568.00
+($110.00 - $118.56) * 300 shares

Total Net Profit: +$657.99

= (+$3,225.99 options income +$0.00 dividend income -$2,568.00 capital appreciation)

Absolute Return-on-Investment: +2.0%

= +$657.99/$32,342.01

Annualized Return-on-Investment: +49.5%

= (+$657.99/$32,342.01) * (365/15 days)

Monthly Options Expiration Results through October 18th, 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 September 20th, 2024 options expiration through yesterday's October 18th, 2024 monthly options expiration date.  

During this past month, the Covered Calls Advisor Portfolio closed a total of seven positions.  All seven positions closed in-the-money and were assigned at their respective strike prices.  The specific results for each closed position are summarized as follows:

• Five Covered Calls positions closed in-the-money yesterday on their monthly options expiration date as follows:
1. U.S. Bancorp -- +2.0% absolute return-on-investment in 24 days (equivalent to a +30.1% annualized return-on-investment).
2. Medtronic PLC -- +1.9% absolute return-on-investment in 28 days (equivalent to a +24.3% annualized return-on-investment).
3. Global Payments Inc. -- +1.8% absolute return-on-investment in 24 days (equivalent to a +27.1% annualized return-on-investment).
4. General Dynamics Inc. -- +1.0% absolute return-on-investment in 10 days (equivalent to a +38.1% annualized return-on-investment).  
5. Lennar Corporation -- +1.6% absolute return-on-investment in 22 days (equivalent to a +26.4% annualized return-on-investment).

• Two Covered Calls positions closed in-the-money during the past month on their weekly options expiration date as follows:
1. Comcast Corporation -- +1.3% absolute return-on-investment in 15 days (equivalent to a +31.3% annualized return-on-investment).
2. Schlumberger (SLB) -- +1.4% absolute return-on-investment in 45 days (equivalent to a +11.3% annualized return-on-investment).

This Covered Calls Advisor blog is available to anyone interested in learning about implementing a successful Covered Calls investing strategy.  As always, I encourage you to email me at partlow@cox.net any time you would like my feedback on anything related to Covered Calls.

 

Jeff Partlow

Covered Calls Advisor
partlow@cox.net

Closed Out Covered Calls Position in Oracle Corporation

I decided to unwind (i.e. close out) my Covered Calls position in Oracle Corporation (ticker ORCL) with 10 minutes remaining in the trading day yesterday (Friday, 10/11/2024).  The position was established on September 24th and the stock price had increased from its $165.29 purchase price to $176.03 shortly before market close yesterday (Friday).  In addition, its $.40 ex-dividend occurred on the prior day (Thursday) so this dividend capture is included in the return-on-investment calculations detailed below.  

The original $1.71 time value in the Call options had declined to only $.20, so with one week remaining until the October 18th options expiration date, I decided to unwind the position.  The +25.7% annualized return-on-investment (aroi) achieved was greater than the +20.2% aroi that would be achieved if the position would instead have closed in-the-money and therefore be assigned at next Friday's options expiration date. 

Oracle Corporation (ORCL) -- Covered Calls Position Closed Out Early

The buy/write transaction was:
9/24/2024 Bought 200 Oracle Corporation shares @ $165.29
9/24/2024 Sold 2 ORCL 10/18/2024 $160.00 Call options @ $7.00 per share.  The Implied Volatility of these Calls was 19.7 when this position was established.
10/10/2024 Quarterly ex-dividend of $.40 per share.
10/11/2024 Unwound this Oracle Covered Calls position by simultaneously buying-to-close the two 10/18/2024 $160.00 Call options at $16.23 per share and selling the 200 Oracle shares at $176.03, for a net credit of $159.80 (only $.20 remaining time value).

The overall performance results (including commissions) are as follows:
Covered Calls Net Investment: $31,659.34
= ($165.29 - $7.00) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: -$1,848.68
= ($7.00 - $16.23) * 200 shares) - $2.68 commissions
(b) Dividend Income: +$80.00
= $.40 per share x 200 shares
(c) Capital Appreciation (Oracle shares sold at $176.03 per share): +$2,148.00
= ($176.03 stock selling price -$165.29 stock purchase price) * 200 shares

Net Profit: +$379.32
= (-$1,848.68 options income +$80.00 dividend income + $2,148.00 capital appreciation)

Absolute Return-on-Investment: +1.2%
= +$379.32/$31,659.34
Equivalent Annualized Return-on-Investment: +25.7%
= (+$379.32/$31,659.34) * (365/17 days)

Established Covered Call Position in General Dynamics Corporation

Shortly after this morning's market open, my buy/write limit order in General Dynamics Corporation (ticker GD) was executed at the net debit price of $290.88 per share. One hundred shares were purchased at $296.53 and one October 18th, 2024 Call option was sold for $5.65 at the $292.50 strike price, a time value of $1.62 per share = [$5.65 options premium - ($296.53 stock price - $292.50 strike price)]. 

General Dynamics has an upcoming quarterly ex-dividend of $1.42 per share that goes ex-dividend this Friday (October 11th, 2024) which is prior to the October 18th, 2024 monthly options expiration date. This is equivalent to an absolute annual dividend yield of 1.9% (at the current $296.53 stock price).  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the October 18th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive annualized return-on-investment upon assignment for either outcome.  The probability that this position will be in-the-money and therefore assigned on its Oct. 18th option expiration date was 69.2% when this position was established and as preferred, the next quarterly earnings report on Oct. 23rd is after the Oct. 18th options expiration date.

As shown in my StockRover Overall stock screener results in the table below, General Dynamics meets all sixteen filters, and it is currently the only Industrial sector stock that meets all sixteen filters: 

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

•  +0.6% absolute return (equivalent to +67.5% annualized return-on-investment for the next 3 days) if the stock is assigned early (business day prior to the October 11th ex-dividend date); OR 

• +1.0% absolute return (equivalent to +38.1% annualized return over the next 10 days) if the stock is assigned on the October 18th options expiration date.

General Dynamics Corporation (GD) -- New Covered Call Position
The simultaneous buy/write transaction was:
10/8/2024 Bought 100 General Dynamics Corporation shares @ $296.53.
10/8/2024 Sold 1 GD 10/18/2024 $292.50 Call option @ $5.65 per share.
Note: the Implied Volatility of the Call option was 14.3 when this position was established.
10/11/2024 Upcoming quarterly ex-dividend of $1.42 per share.

Two possible overall performance results (including commissions) for this General Dynamics Corporation Covered Call position are as follows:
Covered Call Cost Basis: $29,088.67
= ($296.53 - $5.65) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$564.33
= ($5.65 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on Oct. 10th, the business day prior to the Oct. 11th, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If GD stock assigned on the Oct. 18th, 2024 options expiration): +$142.00
= ($1.42 dividend per share x 100 shares)

(c) Capital Appreciation (If General Dynamic Call option is assigned early on October 11th): -$403.00
+($292.50 strike price - $296.53 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $292.50 strike price at option expiration): -$403.00
+($292.50 - $296.53) * 100 shares

1. Total Net Profit (If option exercised early): +$161.33

= (+$564.33 option income +$0.00 dividend income -$403.00 capital appreciation); or

2. Total Net Profit (If GD shares assigned at $292.50 at the Oct. 18th, 2024 expiration): +$303.33

= (+$564.33 option income +$142.00 dividend income -$403.00 capital appreciation)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 11th ex-dividend date]: +0.6%

= +$161.33/$29,088.67

Annualized Return-on-Investment (If option exercised early): +67.5%

= (+$161.33/$29,088.67) * (365/3 days); or

2. Absolute Return-on-Investment (If General Dynamics shares assigned on the Oct. 18th, 2024 options expiration date): +1.0%

= +$303.33/$29,088.67

Annualized Return-on-Investment (If shares assigned at $292.50 at the 10/18/2024 expiration date): +38.1%

= (+$303.33/$29,088.67) * (365/10 days)

Either outcome provides an attractive return-on-investment result for this General Dynamics Covered Call investment.  These returns will be achieved as long as the stock is above the $292.50 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $289.46 = ($296.53 stock price - $5.65 Call option price - $1.42 dividend) provides 2.4% downside protection below today's stock purchase price.

Established Covered Calls Position in Dell Technologies Inc.

A buy/write limit order in Dell Technologies Inc. (ticker DELL) was executed at the Covered Calls Advisor's net debit price of $107.80 per share. Three hundred shares were purchased at $118.56 and three November 1st, 2024 Call options were sold for $10.76 at the $110.00 strike price, a time value of $2.20 = [$10.76 options premium - ($118.56 stock price - $110.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here).  Dell has an upcoming quarterly ex-dividend of $.445 per share that goes ex-dividend on October 22nd, 2024 which is prior to the November 1st options expiration date. This is equivalent to an absolute annual dividend yield of 1.5% (at the current $118.56 stock price) and more importantly for this Covered Calls position, an equivalent annualized dividend yield of 5.5% = [($.445/$118.56) x (365/25 days-to-expiration)] for the 25 days duration of this position.  This dividend is included in the detailed potential return-on-investment calculations below.  Either an early assignment on the day prior to the ex-dividend date or on the November 1st, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive annualized return-on-investment upon assignment for either outcome.

As detailed on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met with this position.  The Covered Calls Advisor's current Overall Market Meter outlook is Neutral and an in-the-money strike price was used in this case.  The probability that this position will be in-the-money and therefore assigned on its November 1st, 2024 expiration date was 72.6% when this position was established this afternoon.  There are 19 analysts covering Dell and their average target price is $147.74 (+24.6% above today's purchase price).

As shown in my Quantitative Value (Value+Quality) stock screener results below, Dell meets all twenty-one filters: 

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

•  +2.0% absolute return (equivalent to +49.5% annualized return-on-investment for the next 15 days) if the stock is assigned early (business day prior to the October 22nd ex-dividend date); OR 

• +2.4% absolute return (equivalent to +35.7% annualized return over the next 25 days) if the stock is assigned on the November 1st options expiration date.

Dell Technologies Inc. (DELL) -- New Covered Calls Position
The simultaneous buy/write transaction was:
10/7/2024 Bought 300 Dell Technologies Inc. shares @ $118.56.
10/7/2024 Sold 3 DELL 11/01/2024 $110.00 Call options @ $10.76 per share.
Note: the Implied Volatility of the Call options was 43.2 when this position was established.
10/22/2024 Upcoming quarterly ex-dividend of $.445 per share.

Two possible overall performance results (including commissions) for this Dell Technologies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $32,342.01
= ($118.56 - $10.76) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$3,225.99
= ($10.76 * 300 shares) - $2.01 commission
(b) Dividend Income (If options exercised early on Oct. 21st, the business day prior to the Oct. 22nd, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Dell stock assigned on the Nov. 1st, 2024 options expiration): +$133.50
= ($.445 dividend per share x 300 shares)

(c) Capital Appreciation (If DELL Call options assigned early on October 22nd): -$2,568.00
+($110.00 - $118.56) * 300 shares; or
(c) Capital Appreciation (If shares assigned at $110.00 strike price at options expiration): -$2,568.00
+($110.00 - $118.56) * 300 shares

1. Total Net Profit (If options exercised early): +$657.99

= (+$3,225.99 options income +$0.00 dividend income -$2,568.00 capital appreciation); or

2. Total Net Profit (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +$791.49

= (+$3,225.99 +$133.50 -$2,568.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Oct. 22nd ex-dividend date]: +2.0%

= +$657.99/$32,342.01

Annualized Return-on-Investment (If option exercised early): +49.5%

= (+$657.99/$32,342.01) * (365/15 days); or

2. Absolute Return-on-Investment (If Dell shares assigned on the Nov. 1st, 2024 options expiration date): +2.4%

= +$791.49/$32,342.01

Annualized Return-on-Investment (If Dell shares assigned at $110.00 at the Nov. 1st, 2024 expiration): +35.7%

= (+$791.49/$32,342.01) * (365/25 days)

Either outcome provides an attractive return-on-investment result for this Dell Technologies Covered Calls investment.  These returns will be achieved as long as the stock is above the $110.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $107.355 = ($118.56 stock price - $10.76 Call options price - $.445 dividend) provides 9.5% 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 below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown in the chart below, all nine criteria are achieved for this Dell Technologies Covered Calls position.

October 4th, 2024 Option Expiration Results

The Covered Calls Advisor Portfolio had one Covered Calls position in Schlumberger (SLB) at the October 4th, 2024 weekly options expiration date and at the $42.00 strike price.  The position closed well in-the-money yesterday at $45.55 per share, so the Call option expired and the 800 SLB shares were sold at their $42.00 strike price with the following results:

SLB -- +1.4% absolute return (equivalent to +11.3% annualized return-on-investment) for the 45 days of this Covered Calls investment.  The most recent blog post history for this position is here. 

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Early Assignment of Covered Calls Position in Comcast Corporation

I was notified by Schwab early this morning that the five Oshkosh Corporation October 11th, 2024 Call options were exercised yesterday.  Because the Oshkosh stock price increased from $39.24 when this position was established to $41.70 at yesterday's market close, the original $.49 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so (with nine days remaining until the October 11th options expiration date), the owner of these Calls exercised their option to buy the 500 shares at the $38.00 strike price in order to receive today's $.31 per share ex-dividend. 

The post when this Comcast 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 15 days (equivalent to a +31.3% annualized return-on-investment).

Comcast Corporation (CMCSA) -- Covered Calls Position Closed by Early Assignment

The buy/write transaction was as follows:
09/17/2024 Bought 500 shares of Comcast Corporation @ $39.24 per share 
09/17/2024 Sold 5 Comcast October 11th, 2024 $38.00 Call options @ $1.73 per share.  The Implied Volatility of these Call options was 22.8 when this transaction was executed.
10/02/2024 Five CMCSA 10/11/2024 $38.00 Calls exercised early, so the Calls expired and the 500 CMCSA shares were sold at the $38.00 strike price.

The overall performance results (including commissions) was as follows:
Covered Calls Cost Basis: $18,758.35
= ($39.24 - $1.73) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$861.65
= ($1.73 * 500 shares) - $3.35 commission
(b) Dividend Income (Comcast shares assigned early on the day prior to the 10/2/2024 ex-dividend date): +$0.00
(c) Capital Appreciation: -$620.00
= ($38.00 strike price - $39.24 original stock purchase price) * 500 shares

Total Net Profit: +$241.65
= (+$861.65 options income +$0.00 dividend income -$620.00 capital appreciation)

Absolute Return-on-Investment: +1.3%
= +$241.65/$18,758.35
Equivalent Annualized Return-on-Investment: +31.3%
= (+$241.65/$18,758.35) * (365/15 days)