This position uses my Dividend Capture Strategy since Home Depot has an upcoming quarterly ex-dividend of $2.30 per share on June 5th which is prior to the June 13th options expiration. This is equivalent to an annualized dividend yield of 2.5% (at the $369.71 stock price) and an equivalent annualized dividend yield of 14.2% = [($2.30/$369.71) x (365/16 days to expiration)] for the 16 days duration of this position. This dividend is included in the detailed return-on-investment calculations shown below. Either an early assignment on the day prior to the ex-dividend date or on the June 13th options expiration date would be desirable given the potential annualized return-on-investment results for either outcome.
As shown on the table at the bottom of this post, all nine criteria of the Dividend Capture Strategy are met
with this position, and the probability that the position will be in-the-money at market close on the options expiration date was 67.9%.
As detailed below, two potential return-on-investment results are:
- +1.0% absolute return (equivalent to +44.4% annualized
return-on-investment for the 8 days) if the stock is assigned early (the last business day
prior to the June 5th ex-dividend date).
- +1.6% absolute return (equivalent to +36.8% annualized return-on-investment over the next 16 days) if the stock is assigned on the June 13th, 2023 options expiration date.
Home Depot Inc. (HD) -- New Covered Call Position
The buy/write transaction was:
5/28/2025 Bought 100 Home Depot shares @ $369.71
5/28/2025 Sold 1 Home Depot 6/13/2025 $362.50 Call option @ $10.71
Note: Implied Volatility (IV) of the Call option was at 20.2 when this position was established.
6/5/2025 Upcoming quarterly ex-dividend of $2.30 per share
Two possible overall performance results (including commissions) for this Home Depot Covered Call position are as follows:
Covered Calls Cost Basis: $35,900.67
= ($369.71 - $10.71) * 100 shares + $.67 commission
Net Profit Components:
(a) Option Income: +$1,070.33
= ($10.71 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on June 4th, 2025, the business day prior to the June 5th ex-div date): +$0.00; or
(b) Dividend Income (If Home Depot stock assigned at the June 13th, 2025 options expiration date): +$230.00
= ($2.30 dividend per share x 100 shares)
+($362.50 strike price - $369.71 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $362.50 strike price at options expiration): -$721.00
+($362.50 - $369.71) * 100 shares
As shown in items 8 and 9 in the table below, either outcome provides a satisfactory return-on-investment result for this Home Depot investment. These returns will be achieved as long as the stock is above the $280.00 strike price at assignment. However, if the stock declines below the strike price, the breakeven price of $276.16 ($291.33 -$13.08 -$2.09) provides 5.2% downside protection below today's stock purchase price.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, all nine criteria are achieved for this Home Depot Inc. Covered Call position.
