Covered Call Established in Applied Materials Inc.

A short-term Covered Call position was established this afternoon in Applied Materials Inc. (ticker AMAT) with a June 27th, 2025 options expiration date.   A buy/write transaction entered at a net debit of $165.70 was executed by purchasing 100 shares of AMAT at $175.08 and simultaneously selling one June 27th, 2025 Call option at the $167.50 strike price at $9.38 per share. The time value when this Covered Call position was established was $1.80 per share = [$9.38 Call option price - ($175.08 stock price - $167.50 strike price)].  Given the Covered Calls Advisor's current cautious outlook, a moderately in-the-money Covered Call position was established.  The probability that the Call option will be in-the-money on the options expiration date was 74.4% when this transaction was executed. The Implied Volatility of this Call was 39.5 when this transaction was executed. There is no ex-dividend and no earnings report prior to the options expiration date.

Just prior to entering this order, I checked to see if the time value in the Call option was greater or less than that for the comparable Put option.  Since the time value in the Call was higher, I entered a Covered Call net debit limit order (instead of its comparable Cash-Secured Put), and about 20 minutes later it was executed.  When this transaction occurred, the maximum time value profit potential in the Call of $1.80 per share was established and the value then for the comparable Put option was only $1.56 at its bid/ask price midpoint.  

Applied Materials is a leader in the wafer fabrication equipment industry -- balanced between logic/foundry and memory markets.  The London Stock Exchange Group rates it as an 8 for their Average Score and 10 for their Optimized Score (on a scale of 1 to 10).   As shown in the table below, Applied Materials also passed every criteria in my StockRover Overall stock screener:

As shown below, a potential return-on-investment result for this Applied Materials Inc. Covered Call position is +1.1% absolute return-on-investment in 10 days (equivalent to a +39.5% annualized return-on-investment if the position is assigned on the June 27th, 2025 options expiration.

  

Applied Materials Inc. -- New Covered Call Position Established

The $165.70 net debit buy/write limit order was transacted as follows:
6/17/2025 Bought 100 AMAT shares @ $175.08
6/17/2025 Sold 1 AMAT June 27th, 2025 $167.50 Call option @ $9.38 per share.
Note: as is often the case, these Call options were transacted slightly below the midpoint of the $9.25/$9.60 bid/ask spread.

A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $16,570.67
= ($175.08 - $9.38) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$937.33
= ($9.38 * 100 shares) - $.67 commission
(b) Dividend Income (If AMAT stock assigned on the June 27th, 2025 options expiration date): $0.00
(c) Capital Appreciation (If AMAT stock is above $167.50 strike price and therefore assigned on the June 27th options expiration): -$758.00
= ($167.50 - $175.08) * 100 shares

Total Net Profit (If stock assigned on the 6/27/2025 options expiration date): +$179.33
= (+$937.33 option income + $0.00 dividend income - $758.00 capital appreciation)

Potential Absolute Return-on-Investment (If stock assigned on June 27th, 2025 options expiration date): +1.1%
= +$179.33/$16,570.67
Potential Equivalent Annualized Return-on-Investment: +39.5%
= (+$179.33/$16,570.67) *(365/10 days)

These returns will be achieved as long as the stock is above the $167.50 strike price on the June 27th options expiration date.  If the stock declines below the strike price, the breakeven price of $165.70 ($175.08 - $9.38) provides 5.4% downside protection below today's stock purchase price.