1. IBM Corporation (IBM) -- +1.6% absolute return-on-investment (equivalent to +71.7% annualized return-on-investment) for the 8 days of this investment. This IBM Covered Call position had a $200.00 strike price and it closed at $214.19 yesterday. The original blog post showing the details of this position is here.
2. NVIDIA Corporation (NVDA) -- +2.3% absolute return-on-investment (equivalent to +84.3% annualized return-on-investment) for the 10 days of this investment. This NVIDIA Covered Calls position had a $202.50 strike price and it closed at $206.84 yesterday. The original blog post showing the details of this position is here.
There are two primary reasons why these annualized returns are so high: (1) these were short-term (i.e. 8 days and 10 days duration), and the rate of time value decay in the price of options increases (so the potential annualized roi normally also increases) as the duration of the initial position decreases; and (2) both positions also benefited from temporary upward spikes in the Implied Volatility of the Calls when the positions were established. The IBM position was established on the day after it reported disappointing earnings and the stock was plummeting by an intraday record of more than 25%. The NVIDIA position was established when its prior day closing price was $212.50 and the stock was purchased the following day when the price had declined to $207.61.
Send your questions/comments to the email address shown below on any topics related to the Covered Calls investing strategy.
Jeff Partlow
The Covered Calls Advisor
partlow@cox.net
