Established Covered Calls in Merck & Co. Inc.

Today, a Covered Calls position was established in Merck & Co. Inc. (ticker MRK) with the purchase of 200 shares at $103.02 per share and two December 27th, 2024 weekly Call options were sold for $2.90 per share at the $101.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 12/27/2024 options expiration date was 70.3%.  In addition to the $.88 potential time value decay profit at assignment for this position, Merck also goes ex-dividend at $.81 per share (3.1% dividend yield) on December 16th which is prior to the December 27th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on February 4th, 2025 is after the Dec. 27th options expiration date.

Of the 41 stocks that met all 22 criteria in my Quantitative Value (Value+Quality) stock screener, Merck ranked #1 with the highest total score.  The scores for each factor are shown in the image below.  You might notice there that the "Price to Consensus Target" is +29.0%.  Also, Merck appeared in two additional of my stock screeners, namely the StockRover Overall stock screener and the (Next Year EPS Growth > P/E Ratio and Future 5-Yr. PEG <1.2) screener.  

Two potential return-on-investment results are: (a) +0.9% absolute return-on-investment (equivalent to +32.1% annualized return-on-investment for the next 10 days) if the stock is assigned early on December 13th (the last trading day prior to the December 16th, 2024 ex-dividend date); OR (b) +1.7% absolute return (equivalent to +29.3% annualized return over the next 21 days) if the stock is assigned on the December 27th, 2024 options expiration date. 

Merck & Co. Inc. (MRK) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
12/6/2024 Bought 200 shares of Merck & Co. stock @ $103.02 per share.  
12/6/2024 Sold 2 MRK December 27th, 2024 $101.00 Call options @ $2.90 per share.
12/16/2024 Upcoming ex-dividend of $.81 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $20,025.34
= ($103.02 - $2.90) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$580.00
= ($2.90 * 200 shares)
(b) Dividend Income (If Merck shares assigned on 12/13/2024, the business day prior to the 12/16/2024 ex-dividend date): = +$0.00; or
(b) Dividend Income (If Merck shares assigned at the 12/27/2024 options expiration): +$162.00
= $.81 per share x 200 shares
(c) Capital Appreciation (If MRK shares assigned early on 12/16/2024): -$404.00
= ($101.00 strike price - $103.02 stock purchase price) * 200 shares; or
(c) Capital Appreciation (If MRK shares assigned with stock above the $101.00 strike price at the Dec. 27th options expiration date): -$404.00
= ($101.00 -$103.02) * 200 shares

1. Potential Net Profit (If Merck shares assigned on the Dec. 16th ex-dividend date): +$176.00
= (+$580.00 options income +$0.00 dividend income - $404.00 capital appreciation)
2. Potential Net Profit (If MRK price is above $101.00 strike price at the Dec 27th options expiration): +$338.00
= (+$580.00 options income +$162.00 dividend income - $404.00 capital appreciation)

1. Absolute Return-on-Investment (If Merck shares assigned early on the Dec. 16th, 2024 ex-dividend date): +0.9%
= +$176.00/$20,025.34
Equivalent Annualized Return-on-Investment (If assigned early): +32.1%
= (+$176.00/$20,025.34) * (365/10 days)

2. Absolute Return-on-Investment (If Merck price is above the $101.00 strike price at the December 27th options expiration): +1.7%
= +$338.00/$20,025.34
Equivalent Annualized Return-on-Investment (If assigned on the 12/27/2024 options expiration date): +29.3%
= (+$338.00/$20,025.34) * (365/21 days)