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 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)
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)
