This morning Covered Calls were established in D.R. Horton Inc. (ticker DHI) and Las Vegas Sands Corporation (LVS). Short-term positions were selected for each position -- May 9th for D.R. Horton and May 16th for Las Vegas Sands. In each case before establishing these positions, I had established a net buy/write limit price slightly below the midpoint of the buy/write price that existed when I entered my limit order. In each case, my limit price was executed within an hour after I entered the orders.
For D.R. Horton, 200 shares were purchased at $125.39 and 2 May 9th, 2025 Call options were sold at $6.55 at the $120.00 strike price. For Las Vegas Sands, 500 shares were purchased at $35.98 and five May 16th, 2025 Call options were sold at $2.56 at the $34.00 strike price. Given my current "Neutral" Overall Market Meter outlook, moderately in-the-money Covered Calls positions were established. The probability that the stock will be in-the-money on the options expiration dates was 74.8% for the D.R. Horton position and 71.6% for the Las Vegas Sands position.
Both positions have an intervening ex-dividend date prior to their expiration dates, so the potential results detailed below includes the possibility of early exercise since the ex-dividends are prior to their respective options expiration dates. Also of importance, neither company has a quarterly earnings report prior to their respective options expiration dates.
Potential results for each position are detailed below.
1. D.R. Horton Inc. (DHI) -- New Covered Calls Position
The Buy/Write transaction was as follows:
4/28/2025 Bought 200 shares of D.R. Horton Co. stock @ $125.39 per share
4/28/2025 Sold 2 D.R. Horton May 9th, 2025 $120.00 Call options @ $6.55 per share
5/2/2025 Upcoming ex-dividend of $.40 per share
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Position Net Investment: $23,769.34
= ($125.39 stock purchase price - $6.55 Call options premium) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$1,310.00
= ($6.55 * 200 shares)
(b) Dividend Income (If option exercised early on May 1st, the last business day prior to the May 2nd ex-div date): +$0.00; or
(b) Dividend Income (If DHI stock assigned at the May 9th, 2025 options expiration date): $80.00 = ($.40 dividend per share x 200 shares)
(c) Capital Appreciation (If D.R. Horton Call options assigned early): -$1,078.00
+($120.00 strike price - $125.39 stock price) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $120.00 strike price at the May 9th options expiration): -$1,078.00
+($120.00 - $125.39) * 200 shares
1. Total Net Profit [If option exercised early on the last business day prior to the May 2nd ex-dividend date)]: +$232.00
= (+$1,310.00 options income +$0.00 dividend income -$1,078.00 capital appreciation); or
2. Total Net Profit (If stock shares assigned at $120.00 strike price at the May 9th, 2025 expiration): +$312.00
= (+$1,310.00 options income +$80.00 dividend income -$1,078.00 capital appreciation)
1. Potential Absolute Return-on-Investment (If option exercised early on May 1st): +1.0%
= +$232.00/$23,769.34
Annualized Return-on-Investment: +89.1%
= (+$232.00/$23,769.34) * (365/4 days); or
2. Potential Absolute Return-on-Investment (If D.R. Horton shares assigned at $120.00 at the May 9th, 2025 options expiration date): +1.3%
= +$312.00/$23,769.34
Annualized Return-on-Investment (If shares assigned at the 5/9/2025 expiration date): +43.6%
= (+$312.00/$23,769.34) * (365/11 days)
The buy/write transaction was:
4/28/2025 Bought 500 Las Vegas Sands shares @ $35.98
4/28/2025 Sold 5 LVS 5/16/2025 $34.00 Call options @ $2.56 per share.
Note: Implied Volatility (IV) of the Call options was 43.6 when this position was transacted which, as preferred, is above the current VIX of 25.8.
5/6/2025 Upcoming quarterly ex-dividend of $.25 per share.
Two possible overall performance results (including commissions) for this Las Vegas Sands Corp. Covered Calls position are as follows:
Covered Calls Net Investment: $16,713.35
= ($35.98 - $2.56) * 500 shares + $3.35 commission
Net Profit Components:
(a) Options Income: +$1,276.65
= ($2.56 * 500 shares) - $3.35 commission
(b) Dividend Income (If LVS Call options exercised early on May 5th, 2025, the last business day prior to the May 6th ex-div date): +$0.00; or
(b) Dividend Income (If LVS stock assigned at the May 16th, 2025 options expiration): +$125.00
= ($.50 dividend per share x 500 shares)
(c) Capital Appreciation (If Las Vegas Sand's Call options assigned early on May 5th): -$990.00
+($34.00 strike price - $35.98 stock purchase price) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $34.00 strike price at the 5/16/2025 options expiration): -$990.00
+($34.00 - $35.98) * 500 shares
1. Total Net Profit [If option exercised early (business day prior to the May 6th ex-dividend date)]: +$286.65
= (+$1,276.65 options income +$0.00 dividend income - $990.00 capital appreciation); or
2. Total Net Profit (If LVS's shares assigned at the $34.00 strike price at the May 16th, 2025 options expiration date): +$411.65
= (+$1,276.65 options income + $125.00 dividend income - $990.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to ex-dividend date]: +1.7%
= +$286.65/$16,713.35
Annualized Return (If option exercised early): +78.3%
= (+$286.65/$16,713.35) * (365/8 days); or
2. Potential Absolute Return-on-Investment (If LVS's shares assigned on the May 16th options expiration date): +2.5%
= +$411.65/$16,713.35
Annualized Return (If Las Vegas Sand's shares assigned at $34.00 at the 5/16/2025 options expiration date): +49.9%
= (+$411.65/$16,713.35) * (365/18 days)
