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Tuesday, June 3, 2025

Covered Call Position Established in Amazon.com Inc.

Today my short-term buy/write net debit limit order was executed at a price of $198.20 when 100 shares of Amazon.com Inc. (ticker symbol AMZN) stock were purchased at $206.84 and 1 June 13th, 2025 $200.00 Call option was sold at $8.64 per share.  So, the potential time value profit if the stock is in-the-money and therefore closed out by assignment on the options expiration date is $1.80 per share [$8.64 Call option premium - ($206.84 stock purchase price - $200.00 strike price)].  The probability that the Call option will be above the $200.00 strike price on the June 13th options expiration date when this Covered Call position was established was 74.3%.

Amazon is the leading company in the Consumer Discretionary sector that in Technology is also the world's #1 cloud computing platform.  There are 52 Wall Street analysts that cover it and their average target price is $239.52 (+15.8% above today's stock purchase price).   The London Stock Exchange Group rates it as an 8 for their Average Score and 9 for Optimized Score (on a scale of 1 to 10).   As shown in the table below, Amazon also passed every criteria in my Quality+Value+Growth+Momentum stock screener:
Amazon.com Inc. (AMZN) -- New Covered Call Position
The net debit buy/write limit order was executed as follows:
6/3/2025 Bought 100 shares of Amazon.com stock @ $206.84 per share.  
6/3/2025 Sold 1 AMZN June 13th, 2025 $200.00 Call option @ $8.64 per share.
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Call was 31.0 when this position was established which, as preferred, is well above the current VIX of 17.8.  

A possible overall performance result (including commissions) if this position is assigned on its 6/13/2025 options expiration date is as follows:
Amazon.com Covered Call Net Investment: $19,820.67
= ($206.84 - $8.64) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$863.33
= ($8.64 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Amazon.com stock is above the $200.00 strike price at the June 13th, 2025 options expiration date): -$684.00
= ($200.00 strike price - $206.84 stock purchase price) * 100 shares

Total Net Profit Potential (If AMZN is in-the-money and therefore assigned at the $200.00 strike price on its 6/13/2025 options expiration date): +$179.33
= (+$863.33 options income + $0.00 dividend income - $684.00 capital appreciation)

Potential Absolute Return-on-Investment: +0.9%
= +$179.33/$19,820.67
Potential Equivalent Annualized-Return-on-Investment: +33.0%
= (
+$179.33/$19,820.67) * (365/10 days)