Boeing is one of the world's duopoly companies (along with Airbus) in the commercial airline industry and is also a top 5 U.S. Defense contractor. The company has struggled greatly in recent years from a series of aircraft groundings and mismanagement. Warren Buffett says to buy at maximum pessimism and that is what I'm hoping to be doing with this position. Boeing has a huge backlog of orders and beginning with this current quarter (Q1 2025) I expect them to begin reporting year-over-year quarterly increases in revenue and earnings.
Given my current cautious outlook, I have been out of the market (holding only money market cash) since the February monthly options expiration date. With today's Boeing position, I am beginning the process of dipping my toes back into the market albeit with moderately conservative in-the-money Covered Call positions. The probability that this Boeing Covered Call position will be in-the-money and therefore assigned on its March 28th expiration date was 67.1% when today's position was established. Importantly for me, the next quarterly earnings report on April 23rd, 2025 is after the March 28th, 2025 options expiration date.
As detailed below, potential return-on-investment results +2.5%
absolute return (equivalent to +51.3% annualized return-on-investment over the next 18 days) if the stock is assigned on the March 28th options expiration date.
Boeing Co. (BA) -- New Covered Call Position
The buy/write transaction was as follows:
3/10/2025 Bought 100 shares of Boeing Co. stock @ $147.74 per share.
3/10/2021 Sold 1 Boeing March 28th, 2025 $140.00 Call option @ $11.20 per share.
A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $13,654.67
= ($147.74 - $11.20) * 100 shares + $.67 commission
Net Profit Components:
(a) Option Income: +$1,119.33
= ($11.20 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BA stock is above the $140.00 strike price at the March 28th, 2025 expiration): -$774.00
= ($140.00 - $147.74) * 100 shares
Total Net Profit: +$345.33
= (+$1,119.33 Call option income + $0.00 dividend income - $774.00 capital appreciation)
Absolute Return-on-Investment: +2.5%
= +$345.33/$13,654.67
Equivalent Annualized Return-on-Investment: +51.3%
= (+$345.33/$13,654.67) * (365/18 days)
The
downside 'breakeven price' at expiration is at $136.54 ($147.74 - $11.20),
which is 7.6% below the current market price of $147.74.
