This position uses the Covered Calls Advisor's Dividend Capture Strategy (see details here) since Lowe's has an upcoming quarterly ex-dividend of $1.20 per share on July 23rd, 2025 which is prior to the August 1st options expiration date. This is equivalent to an absolute annual dividend yield of 2.2% and an equivalent annualized dividend yield of 11.0% = [($1.20/$220.78) x (365/18 days to expiration)]. This dividend is included in the detailed return-on-investment calculations below. Either an early assignment on the day prior to the ex-dividend date or on the August 1st expiration date would be desirable given the potential annualized return on investments for either outcome. Importantly to the Covered Calls Advisor, there is no quarterly earnings report (which increases the volatility of the stock price on the day earnings are reported) prior to the options expiration date since the next earnings report on August 19th is after the August 1st options expiration date.
Lowe's Companies Inc. (LOW) -- New Covered Calls Position
The buy/write transaction was:
7/14/2025 Bought 100 Lowe's Companies Inc. shares @ $220.78
7/14/2025 Sold 1 Lowe's 8/1/2025 $215.00 Call option @ $7.98 per share.
Note: Implied Volatility (IV) of the Call option was at 22.8 when this position was transacted which, as preferred, is above the current VIX of 17.0.
7/23/2025 Upcoming quarterly ex-dividend of $1.20 per share.
Two possible overall performance results (including commissions) for this Lowe's Companies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $21,280.67
= ($220.78 - $7.98) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$797.33
= ($7.98 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on July 22nd, 2025, the business day prior to the July 23rd ex-div date): +$0.00; or
(b) Dividend Income (If Lowe's stock assigned at the August 1st, 2025 options expiration): +$120.00
= ($1.20 dividend per share x 100 shares)
(c) Capital Appreciation (If shares assigned at $215.00 strike price at options expiration): -$578.00
+($215.00 - $220.78) * 100 shares
Either outcome provides an attractive return-on-investment result for this Lowe's Companies Inc. investment. These returns will be achieved as long as the stock is above the $215.00 strike price at assignment. However, if the stock declines below the strike price, the breakeven price of $211.60 ($220.78 - $7.98 - $1.20) provides 4.2% 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 Lowe's Companies Inc. Covered Call position.
As shown on the table at the bottom of this post, all nine criteria of my Dividend Capture Strategy are met
with this position. Even if Lowe's stock market declines somewhat during the next 18 days until the options expiration date, if the stock closes above the $215.00 strike price, then a very satisfactory annualized-return-on-investment of +32.3% will be achieved, and the probability that this will occur was 70.5% when this position was established.
As detailed below, two potential return-on-investment results are:
- +1.0% absolute return (equivalent to +41.8% annualized
return-on-investment for the next 9 days) if the stock is assigned early (on the business day
prior to the July 23rd ex-dividend date).
- +1.6% absolute return (equivalent to +32.3% annualized return-on-investment over the next 21 days) if the stock is assigned on the August 1st, 2025 options expiration date.
Lowe's Companies Inc. (LOW) -- New Covered Calls PositionThe buy/write transaction was:
7/14/2025 Bought 100 Lowe's Companies Inc. shares @ $220.78
7/14/2025 Sold 1 Lowe's 8/1/2025 $215.00 Call option @ $7.98 per share.
Note: Implied Volatility (IV) of the Call option was at 22.8 when this position was transacted which, as preferred, is above the current VIX of 17.0.
7/23/2025 Upcoming quarterly ex-dividend of $1.20 per share.
Two possible overall performance results (including commissions) for this Lowe's Companies Inc. Covered Calls position are as follows:
Covered Calls Cost Basis: $21,280.67
= ($220.78 - $7.98) * 100 shares + $.67 commission
Net Profit Components:
(a) Options Income: +$797.33
= ($7.98 * 100 shares) - $.67 commission
(b) Dividend Income (If option exercised early on July 22nd, 2025, the business day prior to the July 23rd ex-div date): +$0.00; or
(b) Dividend Income (If Lowe's stock assigned at the August 1st, 2025 options expiration): +$120.00
= ($1.20 dividend per share x 100 shares)
(c) Capital Appreciation (If Lowe's Call option assigned early on July 22nd, 2025): -$578.00
+($215.00 strike price - $220.78 stock purchase price) * 100 shares; or(c) Capital Appreciation (If shares assigned at $215.00 strike price at options expiration): -$578.00
+($215.00 - $220.78) * 100 shares
1. Total Net Profit [If option exercised early (business day prior to the July 23rd ex-dividend date)]: +$219.33
= (+$797.33 option income + $0.00 dividend income - $578.00 capital appreciation); or
2. Total Net Profit (If Lowe's shares assigned at the $215.00 strike price at the August 1st, 2025 options expiration date): +$339.33
= (+$797.33 + $120.00 dividend income - $578.00)
1. Potential Absolute Return-on-Investment (If option exercised on business day prior to ex-dividend date): +1.0%
= +$219.33/$21,280.67
Potential Annualized Return-on-Investment (If option exercised early): +41.8%
= (+$219.33/$21,280.67) * (365/9 days); or
2. Potential Absolute Return-on-Investment (If Lowe's shares assigned on August 1st options expiration date): +1.6%
= +$339.33/$21,280.67
Potential Annualized Return-on-Investment (If Lowe's shares assigned at the $215.00 strike price on the August 1st, 2025 options expiration date): +32.3%
= (+$339.33/$21,280.67) * (365/18 days)
Either outcome provides an attractive return-on-investment result for this Lowe's Companies Inc. investment. These returns will be achieved as long as the stock is above the $215.00 strike price at assignment. However, if the stock declines below the strike price, the breakeven price of $211.60 ($220.78 - $7.98 - $1.20) provides 4.2% 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 Lowe's Companies Inc. Covered Call position.
