One of the nice features of the Covered Calls investing strategy is that I can easily calculate the potential return-on-investment (roi) results if the stock price were to close on the options expiration date at any possible price. For example, I always make this calculation for the circumstance if the stock were to be in-the-money (i.e. above the Call option's strike price) on its options expiration date. For any option chain that I am considering, this calculation provides me with the maximum potential return-on-investment result for any Covered Calls position I am contemplating establishing, and it does this in advance (i.e. before) I enter the trade. Using Schwab's Think or Swim platform I also look at the real-time probability that any particular Call option chain I'm evaluating will be assigned (i.e. close in-the-money) on its options expiration date.
Knowing both the risk (probability %) and reward (return-on-investment) for any specific Covered Calls position prior to making a Covered Calls investment is invaluable for making decisions that are consistent with my personal risk tolerance profile.
The Covered Calls Advisor Portfolio had two Covered Calls positions with December 6th, 2024 weekly options expirations. Both positions closed on their options expiration date yesterday with their stock prices in-the-money, so the Calls expired with no remaining value and the Covered Calls were closed out with the stocks sold at their respective strike prices; and their maximum potential return-on-investment results were achieved on their options expiration dates. A summary of the return-on-investment results for each position is as follows:
1. Netease Inc. ADR (NTES) -- +1.5% absolute return-on-investment (equivalent to +50.4% annualized return-on-investment) for the 11 days of this investment. This NTES position had a $83.00 strike price and it closed at $91.29 yesterday. The blog post showing the details of this position on the day the position was originally established is here.
2. Nvidia Corporation (NVDA) -- +2.5% absolute return-on-investment (equivalent to +61.0% annualized return-on-investment) for the 15 days of this investment. This Nvidia position had a $140.00 strike price and it closed at $142.44 yesterday. The blog post showing the details of this position on the day the position was originally established is here.
As always, I welcome your comments or questions at the email address shown below on any topics related to the Covered Calls investing strategy.
Jeff Partlow
The Covered Calls Advisor
partlow@cox.net
