Covered Calls Positions Closed Out for Discover Financial Services and iShares 20+ Year Treasury Bond ETF

1. The Covered Calls Advisor Portfolio had a Covered Calls position in Discover Financial Services (DFS) at the November 29th, 2024 weekly options expiration date and at the $167.50 strike price.  The position closed well in-the-money yesterday at $182.43 per share, so the Call options expired and the 200 DFS shares were sold at their $167.50 strike price with the following results: +2.2% absolute return (equivalent to +50.6% annualized return-on-investment) for the 16 days of this Covered Calls investment.  The blog post history when this position was established is here.

2.  I was notified early this morning by Schwab that the three Call options in my iShares 20+ Year Treasury Bond ETF (ticker TLT) December 6th, 2024 Covered Calls position were exercised yesterday.  Because the iShares 20+ Year Treasury Bond ETF price increased from $90.54 when this position was established to $94.02 at yesterday's market close, the original $.45 time value in the Calls when the position was established had declined on yesterday's market close to $0.00.  So, with seven days remaining until the December 6th options expiration date, the owner of these Calls exercised their option to buy the 300 TLT shares at the $89.50 strike price in order to receive Monday's approximately $.31 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +18.2% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the current 4.6% yield of 30-year treasury bonds. The post when this TLT Covered Calls position was originally established is here.

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Covered Calls Established in Tyson Foods Inc.

Early in this morning's trading, my buy/write Covered Calls position was transacted in Tyson Foods Inc. (ticker TSN) at a net debit limit order price of $61.76 per share.  Three hundred shares were purchased at $63.24 and three December 20th, 2024 Call options were sold at the $62.50 strike price at $1.48 per share.  This provides a time value profit potential of $.74 per share [$1.43 Call options premium - ($63.24 stock purchase price - $62.50 strike price)].  There was a 61.7% probability of the stock closing in-the-money on the options expiration date when this position was established.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here).   Tyson Foods has an upcoming quarterly ex-dividend of $.50 per share (a 3.2% annual dividend yield) that goes ex-dividend on November 29th, 2024 (which is prior to the Dec. 20th options expiration date).  This dividend is included in the detailed potential return-on-investment calculations below.  Also as preferred, the next quarterly earnings report on February 3rd, 2025 is after the December 20th, 2024 options expiration date.  

As detailed below, a potential return-on-investment result is:  +2.0% absolute return (equivalent to +30.4% annualized return-on-investment over the next 24 days) if the stock is assigned on the December 20th, 2024 options expiration date.

Tyson Foods Inc. (TSN) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
11/26/2024 Bought 300 shares of Tyson Foods @ $63.24 per share.  
11/26/2024 Sold 3 TSN December 20th, 2024 $62.50 Call options @ $1.48 per share.  The Implied Volatility of these Call options was 15.3 today when this transaction was executed. 

A possible overall performance result (including commissions) if this stock is in-the-money (and therefore the stock is assigned (i.e. sold) at the $62.50 strike price) on the Dec. 20th options expiration date is as follows:
Covered Calls Net Investment: $18,530.01
= ($63.24 - $1.48) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$441.99
= ($1.48 * 300 shares) - $2.01 commission
(b) Dividend Income (If assigned on the 12/20/2024 options expiration date): +$150.00
= $.50 x 300 shares
(c) Capital Appreciation (If 300 Tyson Foods shares assigned at the $62.50 strike price): -$222.00
+($62.50 strike price - $63.24 stock purchase price) * 300 shares

Total Net Profit Potential (If 300 Tyson Foods Inc. shares assigned at the $62.50 strike price at the options expiration date): +$369.99
= (+$441.99 options income +$150.00 dividend income - $222.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.0%
= +$369.99/$18,530.01
Potential Annualized Return-on-Investment (if assigned on the 12/20/2024 options expiration date): +30.4%
= (+$369.99/$18,530.01) * (365/24 days)

Covered Calls Established in Netease Inc. ADR

This afternoon my buy/write Covered Calls position was transacted in Netease Inc. ADR (ticker NTES) at a net debit limit order price of $82.18 per share.  Two hundred shares were purchased at $85.61 and two December 6th, 2024 Call options were sold at the $83.00 strike price at $3.43 per share.  This provides a time value profit potential of $.82 per share [$3.43 Call options premium - ($85.61 stock purchase price - $83.00 strike price)].  There was a 71.3% probability of closing in-the-money on the options expiration date when this position was established.  

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Netease has an upcoming quarterly ex-dividend of $.435 per share (a 2.0% annual dividend yield) that goes ex-dividend on November 29th, 2024 which is prior to the Dec. 6th options expiration date.  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 December 6th, 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.  As preferred, the next quarterly earnings report on February 22nd, 2025 is after the December 6th options expiration date.  

Netease began as a Chinese internet portal in the late 1990s but has now become the second largest mobile gaming company in the world.  It owns one of the most well-known massively multiplayer franchises in China -- Fantasy Westward Journey.  The firm's other investments in music streaming, online education, and e-commerce also have long-term potential.  Although primarily in China, they also offer services worldwide including in Japan, U.S., Europe, and SE Asia.  

The fourteen analysts that cover Netease have an average target price of $111.70 (+30.5% above today's purchase price) and every analyst has either a Strong Buy or Buy rating on the company -- none have a Hold, Sell, or Strong Sell rating.  Netease also appeared today in my "Ratings Versus Peers" stock screener (see chart below) where it met all 14 screener filters.  I was also pleased to see that LSEG (Refinitiv) rates Netease as a 9 (out of 10) for both its Average Score and its Optimized Score, which puts it in the top 12% of companies monitored by Refinitiv.

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

•  +1.0% absolute return (equivalent to +90.3% annualized return-on-investment for the next 4 days) in the relatively unlikely event that the stock price moves substantially higher and is assigned early (the last business day prior to the November 29th ex-dividend date); OR 

• +1.5% absolute return (equivalent to +50.4% annualized return-on-investment over the next 11 days) if the stock is assigned on the December 6th options expiration date.

Netease Inc. ADR (NTES) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
11/25/2024 Bought 200 shares of Netease Inc. @ $85.61 per share.  
11/25/2024 Sold 2 NTES December 6th, 2024 $83.00 Call options @ $3.43 per share.  The Implied Volatility of these Call options was 29.3 today when this transaction was executed.
11/29/2024 Ex-dividend at $.435 per share. 

Two possible overall performance results (including commissions) for this Netease Inc. ADR Covered Calls position is as follows:
Covered Calls Net Investment: $16,437.34
= ($85.61 - $3.43) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$684.66
= ($3.43 * 200 shares) - $1.34 commission
(b) Dividend Income (If assigned early): +$0.00; OR
(b) Dividend Income (If assigned on the 12/6/2024 options expiration date): +$87.00
= $.435 x 200 shares
(c) Capital Appreciation (If 200 Netease Inc. shares assigned at $83.00 strike price): -$522.00
+($83.00 strike price - $85.61 stock purchase price) * 200 shares

1. Total Net Profit Potential (If 200 Netease Inc. shares assigned early prior to the ex-dividend date on 11/29): +162.66
= (+$684.66 options income +$0.00 dividend income - $522.00 capital appreciation); OR
2. Total Net Profit Potential (If 200 Netease Inc. shares assigned at $83.00 strike price at the options expiration date): +$249.66
= (+$684.66 options income +$87.00 dividend income - $522.00 capital appreciation)

1. Potential Absolute Return-on-Investment (if early assignment): +1.0%
= +$162.66/$16,437.34
Potential Annualized Return-on-Investment (if early assignment): +90.3%
= (+$162.66/$16,437.34) * (365/4 days); OR
2. Potential Absolute Return-on-Investment (if assigned on the 12/6/2024 options expiration date: +1.5%
= +$249.66/$16,437.34
Potential Annualized Return-on-Investment (if assigned on the 12/6/2024 options expiration date): +50.4%
= (+$249.66/$16,437.34) * (365/11 days)

Established Covered Calls Position in the iShares 20+ Year Treasury Bond ETF

Today a short-term in-the-money Covered Calls position was established in the iShares 20+ Year Treasury Bond ETF (ticker TLT) at the December 6th, 2024 weekly options expiration date and at the $89.50 strike price.  Three hundred TLT shares were purchased at $90.54 per share and three 12/6/2024 $89.50 Calls were sold at $1.49 per share. The corresponding potential time value profit is $.45 per share [$1.49 Call options premium - ($89.50 strike price - $90.54 ETF purchase price)].  The probability that these Calls will be in-the-money on the options expiration date was 70.1% when this position was established.  In addition to the potential time value profit of $.45 per share, there is an upcoming monthly ex-distribution on December 1st which will be approximately $.31 per share and which is prior to the December 6th options expiration date.  

As you know, I normally prefer to establish Covered Calls using individual stocks rather than broader indices such as ETFs.  The reasons for this is described in my prior post entitled "Exploiting Our Covered Calls Investing "Edges"' (see items #2 and #3 in the article here).  Many investors are satisfied with buying-and-holding T-Bonds, but we Covered Calls investors know we can do better than the 4.39% yield currently available buying 30-year T Bonds.  This is true not only for our usual Covered Calls positions using stocks as the underlying equity, but this TLT Covered Calls position demonstrates that it is also true for Covered Calls with this conservative Treasury Bond ETF (i.e. TLT), whose potential annualized-return-on-investment (aroi) result of +22.1% at the options expiration date, as detailed below, greatly exceeds the current yield from simply owning long-term Treasury Bonds. 

Two potential return-on-investment results are: (a) +0.5% absolute return (equivalent to +18.2% annualized return-on-investment for the next 10 days) if TLT is assigned early on the day prior to the Dec. 2nd, 2024 ex-distribution date; or (b) +0.8% absolute return (equivalent to +22.1% annualized return-on-investment for the next 14 days) if it is assigned at market close on the December 6th, 2024 options expiration date.  

iShares 20+ Year Treasury Bond ETF (TLT) -- New Covered Calls Position 

The simultaneous buy/write transaction was as follows:
11/22/2024 Bought 300 iShares 20+ Year Treasury Bond ETF shares at $90.54.

11/22/2024 Sold 3 TLT December 6th, 2024 $89.50 Call options @ $1.49 per share.
12/1/2023 Estimated ex-distribution of $.31 per share.

The overall performance results (including commissions) if TLT remains in-the-money at options expiration would be as follows:
Covered Calls Net Investment: $26,717.01
= ($90.54 - $1.49) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$444.99
= ($1.49 * 300 shares) - $2.01 commission

(b) Distribution Income [If TLT is assigned early on the last business day prior to the December 2nd ex-distribution date: +$0.00
(b) Distribution Income [If TLT price is in-the-money (i.e. above the $89.50 strike price) and the position is assigned (i.e. closed out) at options expiration on Dec. 6th]: +$93.00

= $.31 distribution per share x 300 TLT shares

(c) Capital Appreciation (If TLT is assigned at the $87.00 strike price either early or on the 5/10/2024 options expiration date): -$312.00

= ($89.50 strike price - $90.54 purchase price) * 300 shares

Total Net Profit:

1.  If TLT shares are assigned early on the day prior to the ex-distribution date: +$132.99
     = (+$444.99 options income +$0.00 distribution income -$312.00 capital appreciation)

2.  If TLT share price is in-the-money (i.e. above the $89.50 strike price) at options expiration: +$225.99
= (+$444.99 options income +$93.00 distribution income -$312.00 capital appreciation)

Potential Absolute Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +0.5%

    = +$132.99/$26,717.01

2. If TLT shares are above the $89.50 strike price at the Dec. 6th, 2024 options expiration): +0.8%

    = +$225.99/$26,717.01

Potential Annualized Return-on-Investment: 

1. If TLT shares are assigned early on the day prior to the ex-distribution date: +18.2% 

    = (+$132.99/$26,717.01) * (365/10 days)

2. If TLT shares are above the $89.50 strike price at the Dec. 6th, 2024 options expiration): +22.1%

    = (+$225.99/$26,717.01) * (365/14 days)

Covered Calls Position Closed in Target Corporation

Today I closed out my Covered Calls position in Target Corporation (TGT).  The position was unwound by selling-to-close the 200 shares and simultaneously buying-to-close the 2 November 29th, 2024 $145.00 Call options.  I am taking a substantial $3,137.34 net loss on this position since the stock declined sharply two days ago when they reported a trifecta miss on their quarterly earnings report -- missing analysts' estimates on revenue, earnings, and they also lowered estimates for their upcoming holiday quarter.  I decided to close out this position because Target's current performance is weaker than that of all their primary competitors, which includes Walmart, Costco, and Amazon.com, so Target's stock is likely to remain in the penalty box until they can demonstrate more positive results like that of their competitors.  This unsatisfactory result reinforces why I have long believed that stock positions should not be held on earnings reporting dates.  Unfortunately, I didn't follow my own rule in this instance and was burned as a result and therefore I'll be more diligent about not holding positions on their earnings reporting dates going forward.      

The transactions history for this Target Covered Calls position and its associated return-on-investment results are detailed below.

Target Corporation (TGT) -- Closed Covered Calls Position
The original buy/write transaction was:
11/14/2024 Bought 200 Target Corp. shares @ $154.41.
11/14/2024 Sold 2 Target 11/29/2024 $145.00 Call options @ $12.51 per share.
Note: The Implied Volatility of the Call options was 52.7 when this position was transacted.
11/20/2024 Quarterly ex-dividend of $1.12 per share.

The overall performance results (including commissions) for this Target Corporation Covered Calls position are as follows:
Covered Calls Cost Basis: $28,381.34
= ($154.41 - $12.51) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,490.66
= ($12.51 - $.05) * 200 shares - $1.34 commission
(b) Dividend Income: +$224.00
= ($1.12 dividend per share x 200 shares)

(c) Capital Appreciation (Target shares closed out by selling at $125.15): -$5,852.00
+($125.15 - $154.41) * 200 shares

Total Net Loss: -$3,137.34

= (+$2,490.66 +$224.00 -$5,852.00)

Absolute Return-on-Investment: -11.1%

= -$3,137.34/$28,381.34

Annualized Return-on-Investment: -504.3%

= (-$3,137.34/$28,381.34) * (365/8 days)

Established Covered Calls in Nvidia Corporation

Early this afternoon a Covered Calls position was established in Nvidia Corporation (ticker NVDA). Three hundred shares were purchased at $144.31 and three December 6th, 2024 weekly Call options were sold at the $140.00 strike price at $7.74 per share--a buy/write net debit amount of $136.57 per share which provides a $3.43 per share time value profit potential.  

As detailed below, a potential return-on-investment result is +2.5% absolute return-on-investment (equivalent to +61.0% annualized return-on-investment for the next 15 days) if the Nvidia share price is in-the-money (i.e. above the $140.00 strike price) and therefore assigned on its Dec. 6th, 2024 options expiration date.  The probability this outcome will be achieved was 62.0% when this position was established.

 
Nvidia Corporation (NVDA) -- New Covered Calls Position

The buy/write market order transaction was as follows:
11/21/2024 Bought 300 Nvidia Corporation shares at $144.31.

11/21/2024 Sold 3 NVDA 12/6/2024 $140.00 Call options @ $7.74 per share.  The Implied Volatility of the Calls was very high at 43.2 when these Calls were sold.

A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $40,973.01
= ($144.31 - $7.74) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$2,319.99
= ($7.74 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $140.00 strike price at expiration): -$1,293.00
+($140.00 - $144.31) * 300 shares

Total Net Profit Potential (If 300 Nvidia shares in-the-money and therefore assigned at the $140.00 strike price at the options expiration date): +$1,026.99
= (+$2,319.99 options income + $0.00 dividend income - $1,293.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.5%
= +$1,026.99/$40,973.01
Potential Annualized Return-on-Investment: +61.0%
= (+$1,026.99/$40,973.01) * (365/15 days)

Early Assignment of Covered Calls Position in Wheaton Precious Metals Corp.

I was notified early this morning by Schwab that the five Call options in my Wheaton Precious Metals Corp. (ticker WPM) November 29th, 2024 Covered Calls position were exercised yesterday.  Because the Wheaton Precious Metals stock price increased from $59.74 when this position was established to $62.96 at yesterday's market close, the original $.88 time value in the Calls when the position was established had declined on yesterday's market close to $0.00.  So, with eight days remaining until the November 29th options expiration date, the owner of these Calls exercised their option to buy the 500 WPM shares at the $58.00 strike price in order to receive today's $.155 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +62.0% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +38.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 29th, 2024 options expiration date.   

The post when this Wheaton Precious Metals Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Wheaton Precious Metals Covered Calls position was +1.5% absolute return in 8 days (equivalent to a +62.0% annualized return-on-investment).

Wheaton Precious Metals Corp. (WPM) -- Covered Calls Position Closed by Early Assignment
The simultaneous buy/write transaction was:
11/12/2024 Bought 500 Wheaton Precious Metals Corp. shares @ $59.74.
11/12/2024 Sold 5 WPM 11/29/2024 $58.00 Call options @ $2.62 per share.
Note: The Implied Volatility of the Call options was 27.7 when this position was transacted.
11/21/2024 Five WPM 11/29/2024 $58.00 Calls exercised early, so the Calls expired and the 500 Wheaton Precious Metals shares were sold at the $58.00 strike price.

The overall performance results (including commissions) for this Wheaton Precious Metals Covered Calls position are as follows:
Covered Calls Cost Basis: $28,563.35
= ($59.74 - $2.62) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,306.65
= ($2.62 * 500 shares) - $3.35 commission
(b) Dividend Income (WPM Call options exercised early on Nov. 20th, the business day prior to the Nov. 21st, 2024 ex-div date): +$0.00

(c) Capital Appreciation): -$870.00
+($58.00 strike price - $59.74 stock purchase price) * 500 shares

Total Net Profit (If options exercised early): +$436.65

= (+$1,306.65 options income +$0.00 dividend income -$870.00 capital appreciation)

Absolute Return-on-Investment: +1.5%

= +$436.65/$28,563.35

Annualized Return-on-Investment (If option exercised early): +62.0%

= (+$436.65/$28,563.35) * (365/9 days)

Early Assignment of Covered Calls Position in Marathon Petroleum Corporation

I was notified by Schwab early this morning that the two Marathon Petroleum Corporation (ticker MPC) November 29th, 2024 Call options were exercised yesterday.  Because the Marathon Petroleum stock price increased from $154.87 when this position was established to $158.80 at yesterday's market close, the original $1.54 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 November 29th options expiration date, the owner of these Calls exercised their option to buy the 200 shares at the $150.00 strike price in order to receive today's $.91 per share ex-dividend.  Although I will not receive todays' ex-dividend, I am pleased with the +53.9% annualized-return-on-investment (aroi) result achieved today by early assignment since it exceeds the maximum +37.6% aroi that might have been achieved if this position instead remained in-the-money and would therefore be assigned on its November 29th, 2024 options expiration date.   

The post when this Marathon Petroleum Corp. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this MPC Covered Calls position was +1.0% absolute return in 7 days (equivalent to a +53.9% annualized return-on-investment).

Marathon Petroleum Corp. (MPC) -- Covered Calls Position Closed by Early Assignment

The buy/write transaction was:
11/13/2024 Bought 200 Marathon Petroleum Corp. shares @ $154.87
11/13/2024 Sold 2 MPC 11/29/2024 $150.00 Call options @ $6.41 per share
Note: Two Marathon Petroleum Calls were exercised on the day prior to their November 20th, 2024 ex-dividend date, so the Calls expired and the 200 MPC shares were sold at the $150.00 strike price.

The overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Call Net Investment: $29,693.34
= ($154.87 - $6.41) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,280.66
= ($6.41 * 200 shares) - $1.34 commission
(b) Dividend Income (MPC Cal options exercised early on Nov. 19th, the last business day prior to the November 20th ex-div date): +$0.00
(c) Capital Appreciation: -$974.00
+($150.00 strike price - $154.87 stock price) * 200 shares

Total Net Profit: +$306.66

= (+$1,280.66 options income +$0.00 dividend income -$974.00 capital appreciation)

Absolute Return-on-Investment: +1.0%

= +$306.66/$29,693.34

Annualized Return-on-Investment: +53.9%

= (+$306.66/$29,693.34) * (365/7 days)

Established Covered Calls Position in Target Corporation

A buy/write limit order in Target Corporation (ticker TGT) was executed at the Covered Calls Advisor's net debit price of $141.90 per share.  Two hundred shares were purchased at $154.41 and two November 29th, 2024 weekly Call options were sold for $12.51 at the $145.00 strike price, a time value of $3.10 = [$12.51 options premium - ($154.41 stock price - $145.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Target has an upcoming quarterly ex-dividend of $1.12 per share (a 2.9% annual dividend yield) that goes ex-dividend on November 20th, 2024 which is prior to the November 29th options expiration date.  Importantly, they also announce their Q3 2025 earnings on November 20th.  I normally avoid holding Covered Calls positions during a company's earnings report, but given the very attractive Implied Volatility of 52.7 (and the accompanying high annualized return-on-investment potential) for this particular Call option, I feel the inflated volatility provided a reasonable risk/reward set-up.  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 29th, 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.

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

•  +2.2% absolute return (equivalent to +132.6% annualized return-on-investment for the next 6 days) in the relatively unlikely event that the stock price moves substantially higher and is assigned early (business day prior to the November 20th ex-dividend date); OR 

• +3.0% absolute return (equivalent to +72.2% annualized return-on-investment over the next 15 days) if the stock is assigned on the November 29th options expiration date.

Target Corporation (TGT) -- New Covered Calls Position
The simultaneous buy/write transaction was:
11/14/2024 Bought 200 Target Corp. shares @ $154.41.
11/14/2024 Sold 2 Target 11/29/2024 $145.00 Call options @ $12.51 per share.
Note: The Implied Volatility of the Call options was 52.7 when this position was transacted.
11/20/2024 Upcoming quarterly ex-dividend of $1.12 per share.

Two possible overall performance results (including commissions) for this Target Corporation Covered Calls position are as follows:
Covered Calls Cost Basis: $28,381.34
= ($154.41 - $12.51) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,500.66
= ($12.51 * 200 shares) - $1.34 commission
(b) Dividend Income (If options exercised early on Nov. 19th, the business day prior to the Nov. 20th, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Target's stock assigned on the Nov. 29th, 2024 options expiration): +$224.00
= ($1.12 dividend per share x 200 shares)

(c) Capital Appreciation (If TGT Call options assigned early on Nov. 19th): -$1,882.00
+($145.00 strike price - $154.41 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $145.00 strike price at options expiration): -$1,882.00
+($145.00 - $154.41) * 200 shares

1. Total Net Profit (If options exercised early): +$618.66

= (+$2,500.66 options income +$0.00 dividend income -$1,882.00 capital appreciation); or

2. Total Net Profit (If Target shares assigned at $145.00 at the Nov. 29th, 2024 expiration): +$842.66

= (+$2,500.66 +$224.00 -$1,882.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 20th ex-dividend date]: +2.2%

= +$618.66/$28,381.34

Annualized Return-on-Investment (If option exercised early): +132.6%

= (+$618.66/$28,381.34) * (365/6 days); or

2. Absolute Return-on-Investment (If Target shares assigned on the Nov. 29th, 2024 options expiration date): +3.0%

= +$842.66/$28,381.34

Annualized Return-on-Investment (If Target shares assigned at $145.00 at the Nov. 29th, 2024 expiration): +72.2%

= (+$842.66/$28,381.34) * (365/15 days)

Either outcome provides an exceptional return-on-investment result for this Target Corp. Covered Calls investment.  These returns will be achieved as long as the stock is above the $145.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $140.78 = ($154.41 stock price - $12.51 Call options price - $1.12 dividend) provides a substantial 8.8% downside protection below today's stock purchase price.

Established Covered Calls in Discover Financial Services

Today with less than an hour before the market close, a Covered Calls position was established in Discover Financial Services (ticker DFS) with a November 29th, 2024 options expiration date. Two hundred shares of Discover were purchased at $174.90 and two Call options were sold at $10.36 per share at the $167.50 strike price.  The potential time value profit was $2.96 per share [$167.50 strike price - ($174.90 share price - $10.36 Call options premium)] when this buy/write net debit limit order transaction was executed.  

Discover also has an upcoming ex-dividend date on November 21st (8 days from today) at $.70 per share (1.6% annual dividend yield), so this is included in the potential return-on-investment results detailed below.  This in-the-money Covered Calls position is consistent with my preference (with upcoming ex-dividends prior to the options expiration date) to use my Dividend Capture Strategy.  With this strategy it is possible to achieve an attractive annualized return-on-investment result if either the position is assigned on the options expiration date or if it is assigned early (normally on the day prior to the ex-dividend date).  Also, because of the volatility immediately after quarterly earnings reports are released, it is preferred that there be no quarterly earnings report prior to the options expiration date, and this is true for this Discover Financial position since the next earnings report is not until January 15th, 2025.  The approximate probability of assignment on the options expiration date was 69.1% when this position was established.

Discover's business is in digital banking (including the Discover brand credit cards) and payment services.  Capital One has made a bid to acquire Discover which helps to explain Discover's recent bullish price action, but resolution of this potential merger will likely take several months to work its way through regulatory channels.  

Two potential return-on-investment results are as follows: (a) +1.8% absolute return-on-investment (equivalent to +81.9% annualized roi) for 8 days if this Covered Calls position is assigned early on November 20th, 2024 (the last business day prior to the Nov. 21st ex-dividend date); OR  (b) +2.2% absolute return-on-investment (equivalent to +50.6% annualized roi) for 16 days if this Covered Calls position is in-the-money on the November 29th, 2024 weekly options expiration date.

Discover Financial Services (DFS) -- New Covered Calls Position Established
The simultaneous buy/write transaction was as follows:
11/13/2024 Bought 200 shares of Discover Financial Services @ $174.90 per share; and 
11/13/2024 Sold 2 DFS Nov. 29th, 2024 $167.50 Call options @ $10.36 per share.  The Implied Volatility of these Calls was 32.7 when this position was established.
11/21/2024 Upcoming ex-dividend of $.70 per share
 
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $32,909.34
= ($174.90 - $10.36) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,070.66
= ($10.36 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on the last business day prior to the ex-div date): +$0.00; or
(b) Dividend Income (If DFS shares assigned at the Nov. 29th, 2024 expiration): +$140.00
= ($.70 dividend per share x 200 shares)
(c) Capital Appreciation (If Discover shares assigned early): -$1,480.00
+($167.50 strike price - $174.90 stock purchase cost) * 200 shares; or
(c) Capital Appreciation (If DFS shares assigned at $167.50 strike price at options expiration): -$1,480.00
+($167.50 - $174.90) * 200 shares

1. Total Net Profit [If option exercised on Nov. 20th, 2024 (the last business day prior to the November 21st ex-dividend date)]: +$590.66

= (+$2,070.66 options income +$0.00 dividend income -$1,480.00 capital appreciation); or

2. Total Net Profit (If Discover Financial shares assigned at $167.50 strike price at the November 29th, 2024 options expiration): +$730.66

= (+$2,070.66 +$140.00 -$1,480.00)

1. Absolute Return-on-Investment (If DFS options exercised early on the last business day prior to the ex-dividend date): +1.8%

= +$590.66/$32,909.34

Annualized Return-on-Investment (If DFS Call options exercised early on Nov 21st, 2024): +81.9%

= (+$590.66/$32,909.34) * (365/8 days); or

2. Absolute Return-on-Investment (If DFS shares assigned at $167.50 at the Nov. 21st, 2024 options expiration date): +2.2%

= +$730.66/$32,909.34

Annualized Return-on-Investment (If DFS stock assigned at $167.50 at the Nov. 21st, 2024 options expiration date): +50.6%

= (+$730.66/$32,909.34) * (365/16 days)

Either outcome would provide a very good return-on-investment result.  These returns will be achieved as long as the stock is above the $167.50 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $163.84 ($174.90 - $10.36 - $.70) provides 6.3% downside protection below today's purchase price.

Established Covered Calls in Marathon Petroleum Corporation

This morning a Covered Calls position was established in the Marathon Petroleum Corporation (ticker symbol MPC) at a net debit buy/write limit order of $148.46.  Two hundred shares were purchased at $154.87 and two November 29th, 2024 Call options were sold at $6.41 per share at the $150.00 strike price.  This buy/write transaction occurred when there was a 71.6% probability that the stock would be in-the-money and therefore assigned at the $150.00 strike price on the options expiration date.  The potential time value profit is $1.54 per share [$6.41 Call options premium - ($154.87 stock purchase price - $150.00 strike price)].  

In addition to this $1.54 per share time value profit potential, there is an upcoming quarterly ex-dividend income potential per share of $.91 (annual dividend yield of 2.4%) on November 20th, 2024.  The $.91 dividend represents a 10.3% increase above the quarterly dividend level during the same quarter last year.  

Marathon Petroleum Corp.'s Q3 2024 earnings report eight days ago included both a substantial revenue and an earnings per share beat compared with analysts' estimates.  The stock has continued to react positively to this news during the past week.  The 19 analysts that cover Marathon Petroleum Corp. on average have a 'Buy' rating and an average Target Price of $172.00 (+11.1% above today's purchase price).     

Marathon is among the largest of U.S.-based refiners (along with Valero and Phillips 66).  Marathon has refining and marketing along with midstream operations located in the Gulf of Mexico, the Mid-Continent, and the West Coast.

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

•  +1.0% absolute return (equivalent to +53.9% annualized return-on-investment for the next 7 days) if the stock is assigned early (on the last business day prior to the November 20th, 2024 ex-dividend date); OR 

• +1.6% absolute return (equivalent to +37.6% annualized return-on-investment over the next 16 days) if the stock is assigned on the November 29th options expiration date.

Marathon Petroleum Corp. (MPC) -- New Covered Call Position

The buy/write transaction was:
11/13/2024 Bought 200 Marathon Petroleum Corp. shares @ $154.87
11/13/2024 Sold 2 MPC 11/29/2024 $150.00 Call options @ $6.41 per share
Note: the Implied Volatility of the Call options was 22.8 when this buy/write transaction was executed.  As preferred, this exceeds the Implied Volatility of the S&P 500 (i.e. SPY) which is currently 14.6.
11/20/2024 Upcoming quarterly ex-dividend of $.91 per share

Two possible overall performance results (including commissions) for this Covered Calls position are as follows:
Covered Call Net Investment: $29,693.34
= ($154.87 - $6.41) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,280.66
= ($6.41 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on Nov. 19th, the last business day prior to the November 20th ex-div date): +$0.00; or
(b) Dividend Income (If MPC stock assigned at the Nov. 29th, 2024 expiration): $182.00
= ($.91 dividend per share x 200 shares)
(c) Capital Appreciation (If Marathon Petroleum Call option is assigned early on Nov. 19th): -$974.00
+($150.00 strike price - $154.87 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $150.00 strike price at the Nov. 29th options expiration): -$974.00
+($150.00 - $154.87) * 200 shares

1. Total Net Profit [If option exercised early on the last business day prior to the Nov. 20th ex-dividend date)]: +$306.66

= (+$1,280.66 options income +$0.00 dividend income -$974.00 capital appreciation); or

2. Total Net Profit (If stock shares assigned at $150.00 strike price at the Nov. 29th, 2024 expiration): +$488.66

= (+$1,280.66 options income +$182.00 dividend income -$974.00 capital appreciation)

1. Absolute Return-on-Investment (If the Call option is exercised early on Nov. 20th): +1.0%

= +$306.66/$29,693.34

Annualized Return-on-Investment: +53.9%

= (+$306.66/$29,693.34) * (365/7 days); or

2. Absolute Return-on-Investment (If Marathon Petroleum Corp. shares assigned at $150.00 on the Nov. 29th, 2024 options expiration date): +1.6%

= +$488.66/$29,693.34

Annualized Return-on-Investment (If MPC shares assigned at the 11/29/2024 expiration date): +37.6%

= (+$488.66/$29,693.34) * (365/16 days)

Either outcome provides a very attractive return-on-investment result for this Marathon Petroleum investment.  These returns will be achieved as long as the stock is above the $150.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $147.55 ($154.87 - $6.41 - $.91) provides a 4.7% downside protection below today's purchase price.

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Marathon Petroleum Corp. position, all nine criteria were met.

Established Covered Calls Position in Wheaton Precious Metals Corp.

A buy/write limit order in Wheaton Precious Metals Corp. (ticker WPM) was executed at the Covered Calls Advisor's net debit price of $57.12 per share.  Five hundred shares were purchased at $59.74 and five November 29th, 2024 weekly Call options were sold for $2.62 at the $58.00 strike price, a time value of $.88 = [$2.62 options premium - ($59.74 stock price - $58.00 strike price)] per share. 

This position uses the Covered Calls Advisor's Dividend Capture Strategy.  Wheaton Precious Metals has an upcoming quarterly ex-dividend of $.155 per share that goes ex-dividend on November 21st, 2024 which is prior to the November 29th options expiration date. This is equivalent to an absolute annual dividend yield of 1.0% (at the current $59.74 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 November 21st ex-dividend date or on the November 29th, 2024 options expiration date would be desirable to the Covered Calls Advisor given the attractive potential annualized return-on-investment result for either outcome.

Wheaton Precious Metals appeared today in my newly created 'Ratings Versus Peers' stock screener.  It also has Refinitiv's highest possible average score of 10, and the 13 analysts covering the company have a mean target price of $71.70 (+20.0% above today's purchase price). 

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 29th, 2024 expiration date was 67.2% when this position was established.     

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

•  +1.5% absolute return (equivalent to +62.0% annualized return-on-investment for the next 9 days) if the stock is assigned early (business day prior to the November 21st ex-dividend date); OR 

• +1.8% absolute return (equivalent to +38.6% annualized return-on-investment over the next 17 days) if the stock is assigned on the November 29th options expiration date.

Wheaton Precious Metals Corp. (WPM) -- New Covered Calls Position
The simultaneous buy/write transaction was:
11/12/2024 Bought 500 Wheaton Precious Metals Corp. shares @ $59.74.
11/12/2024 Sold 5 WPM 11/29/2024 $58.00 Call options @ $2.62 per share.
Note: The Implied Volatility of the Call options was 27.7 when this position was transacted.
11/21/2024 Upcoming quarterly ex-dividend of $.155 per share.

Two possible overall performance results (including commissions) for this Wheaton Precious Metals Covered Calls position are as follows:
Covered Calls Cost Basis: $28,563.35
= ($59.74 - $2.62) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,306.65
= ($2.62 * 500 shares) - $3.35 commission
(b) Dividend Income (If options exercised early on Nov. 20th, the business day prior to the Nov. 21st, 2024 ex-div date): +$0.00; or
(b) Dividend Income (If Wheaton Precious Metals stock assigned on the Nov. 29th, 2024 options expiration): +$77.50
= ($.155 dividend per share x 500 shares)

(c) Capital Appreciation (If WPM Call options assigned early on Nov. 21st): -$870.00
+($58.00 strike price - $59.74 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $58.00 strike price at options expiration): -$870.00
+($58.00 - $59.74) * 500 shares

1. Total Net Profit (If options exercised early): +$436.65

= (+$1,306.65 options income +$0.00 dividend income -$870.00 capital appreciation); or

2. Total Net Profit (If WPM shares assigned at the $58.00 strike price at the Nov. 21st, 2024 expiration): +$514.15

= (+$1,306.65 +$77.50 -$870.00)

1. Absolute Return-on-Investment [If option exercised on business day prior to the Nov. 21st ex-dividend date]: +1.5%

= +$436.65/$28,563.35

Annualized Return-on-Investment (If option exercised early): +62.0%

= (+$436.65/$28,563.35) * (365/9 days); or

2. Absolute Return-on-Investment (If Wheaton Precious Metals shares assigned on the Nov. 29th, 2024 options expiration date): +1.8%

= +$514.15/$28,563.35

Annualized Return-on-Investment (If WPM shares assigned at $58.00 at the Nov. 29th, 2024 expiration): +38.6%

= (+$514.15/$28,563.35) * (365/17 days)

Either outcome provides a satisfactory return-on-investment result for this WPM Covered Calls investment.  These returns will be achieved as long as the stock is above the $58.00 strike price at assignment.  However, if the stock declines below the strike price, the breakeven price of $56.965 = ($59.74 stock price - $2.62 Call options price - $.155 dividend) provides 4.6% downside protection below today's stock purchase price.

Early Assignment of Covered Calls Position in Citigroup Inc.

My five Citigroup Inc. November 8th, 2024 Call options were exercised on Friday 11/01/2024.  Because Citi's stock price increased from $62.67 when this position was established to $63.71 at yesterday's market close, the original $.53 time value in the Calls when the position was established had declined on yesterday's market close to $0.00, so (with seven days remaining until the November 8th options expiration date), the owner of these Calls exercised their option to buy the 500 shares at the $60.00 strike price in order to receive Monday's $.56 per share ex-dividend. 

The post when this Citigroup Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Citigroup Covered Calls position was +0.9% absolute return-on-investment in 8 days (equivalent to a +40.1% annualized return-on-investment).

Citigroup Inc. (C) -- Covered Calls Position Closed by Early Assignment

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.
10/01/2024 Five C 11/08/2024 $60.00 Calls exercised early, so the Calls expired and the 500 Citigroup shares were sold at the $60.00 strike price.

The overall performance results (including commissions) for this Citigroup Inc. Covered Calls position were 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: +$0.00

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

Total Net Profit: +$261.65

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

Absolute Return-on-Investment: +0.9%

= +$261.65/$29,738.35

Annualized Return-on-Investment: +40.1%

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

This transaction means that I currently have no remaining Covered Calls positions in my Covered Calls Advisor Portfolio.  All available cash is in the Schwab Value Advantage Money Fund (SWVXX) whose current 7-day yield is 4.68%.  I will resume with new Covered Calls positions after Tuesday's election.