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.

June 13th, 2025 Weekly Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with a June 13th, 2025 options expiration date.  All three positions (Amazon.com Inc., Merck & Co. Inc., and Nvidia Corporation) were closed out so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  Each of these positions were established at moderately in-the-money strike prices and were also of short-term durations.   

A summary of the results for each of these three positions are as follows:

1. Amazon.com Inc. (AMZN) -- +0.9% absolute return (equivalent to +33.0% annualized return-on-investment) for the 10 days of this investment.  This Covered Call position was assigned at the $200.00 strike price yesterday on its 6/13/2025 options expiration date since the stock closed in-the-money at $212.10 per share.  The original post detailing this Covered Calls position is here. 

2. Merck & Co. Inc. (MRK) -- +1.1% absolute return (equivalent to +55.5% annualized return-on-investment) for the 7 days of this investment.  This Merck Covered Calls position was assigned early on the last business day prior to its ex-dividend date (which is next Monday).  The stock price had increased from its original purchase price of $79.20 to $81.71 at yesterday's market close and the extrinsic value (i.e. time value) remaining in the Call options had declined from their original $.80 per share value to $0.00 yesterday.  So, the Calls options owner decided to exercise their Calls in order to purchase the stock at the $76.00 strike price.  The original post detailing this Covered Calls position is here. 

3. Nvidia Corporation (NVDA) -- +1.9% absolute return (equivalent to +46.5% annualized return-on-investment) for the 15 days of this investment.  This Covered Calls position was assigned at the $133.00 strike price on its June 13th options expiration date since it closed in-the-money yesterday at $141.97 per share.  The original post detailing this Covered Calls position is here. 

I welcome your feedback at my email address shown below with your questions on topics related to anything related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Established Covered Calls in Nvidia Corporation

This afternoon a Covered Calls position was established in Nvidia Corporation (ticker NVDA).  My net buy/write limit order at $134.08 was executed by simultaneously purchasing three hundred shares at $141.99 and selling three June 27th, 2025 weekly Call options at the $136.00 strike price at $7.91 per share, which provides a $1.92 per share = [$7.91 Call options premium received - ($141.99 stock purchase price - $136.00 options strike price)] time value profit potential.  A moderately in-the-money Covered Calls positions was established with the probability that the stock will close in-the-money on the options expiration date was 71.3%.  As preferred, the next earnings report on August 27th, 2025 is after the June 27th options expiration date. 

Nvidia continues to be the leading AI-focused semiconductor company and their innovations continue.  Nvidia is my top-ranked megacap technology company since their primary customers are other IT behemoths such as Microsoft, Alphabet, Amazon, and Meta, each of whom is continuing with substantial annual increases in their capital expenditure purchases with Nvidia.  Nvidia is the primary revenue beneficiary from the huge expenditures of these megacap brethren.  

So, because of my continuing bullish outlook for Nvidia's potential growth in both revenue and earnings, this position continues my recent practice of establishing short-term in-the-money Covered Calls positions in Nvidia.  Note: I have one other Nvidia Covered Calls position expiring today which will be assigned and another Nvidia CC position that will expire next Friday. I prefer short-term (less than 30 days duration) positions since: (1) the potential annualized return-on-investment is higher for shorter-duration positions; and (2) short-term positions provide us a more frequent opportunity to re-evaluate the existing positions, so we can react quickly if news causes a substantial stock price volatility decline -- whether bullish or bearish. 

 

As detailed below, a potential return-on-investment result is +1.4% absolute return-on-investment (equivalent to +37.2% annualized return-on-investment for the next 14 days) if the Nvidia share price is in-the-money (i.e. above the $136.00 strike price) and therefore assigned on its June 27th, 2025 options expiration date.  

Nvidia Corporation (NVDA) -- New Covered Calls Position

Today's buy/write net limit order transaction was as follows:
6/13/2025 Bought 300 Nvidia Corporation shares at $141.99.

6/13/2025 Sold 3 NVDA 6/27/2025 $136.00 Call options @ $7.91 per share.  The Implied Volatility of these Calls was 37.8% when this position was established.  

A possible overall performance result (including commissions) for this Nvidia Corporation Covered Calls position is as follows:
Covered Calls Net Investment: $40,226.01
= ($141.99 - $7.91) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$2,370.99
= ($7.91 * 300 shares) - $2.01 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 300 Nvidia shares assigned at the $136.00 strike price at expiration): -$1,797.00
+($136.00 strike price - $141.99 stock purchase price) * 300 shares

Total Net Profit Potential (If 300 Nvidia shares in-the-money and therefore assigned at the $136.00 strike price at the options expiration date): +$573.99
= (+$2,370.99 options income + $0.00 dividend income - $1,797.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.4%
= +$573.99/$40,226.01
Potential Annualized Return-on-Investment: +37.2%
= (+$573.99/$40,226.01) * (365/14 days)

Established Covered Calls in Merck & Co. Inc.

This afternoon a Covered Calls position was established in Merck & Co. Inc. (ticker MRK) with the purchase of 300 shares at $79.20 per share and three June 27th, 2025 weekly Call options were sold for $4.00 per share at the $76.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 6/27/2025 options expiration date was 73.2%.  

In addition to the $.80 potential time value decay profit at assignment for this position, Merck also goes ex-dividend at $.81 per share (4.1% dividend yield) on June 16th which is prior to the June 27th options expiration date -- so this dividend is included in the potential return-on-investment results detailed below.  As I prefer, the next quarterly earnings report on July 29th, 2025 is after the June 27th options expiration date.

Merck met all criteria in my Key Metrics stock screener as shown below: 

 
Two potential return-on-investment results are: (a) +1.1% absolute return-on-investment (equivalent to +55.5% annualized return-on-investment for the next 7 days) if the stock is assigned early this Friday (on June 13th which is the last trading day prior to the June 16th, 2025 ex-dividend date); OR (b) +2.1% absolute return-on-investment (equivalent to +43.4% annualized return-on-investment over the next 18 days) if the stock is assigned on the June 27th, 2025 options expiration date. 

Merck & Co. Inc. (MRK) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
6/9/2025 Bought 300 shares of Merck & Co. stock @ $79.20 per share.  
6/9/2025 Sold 3 MRK June 27th, 2025 $76.00 Call options @ $4.00 per share.
6/16/2025 Upcoming ex-dividend of $.81 per share.  The Implied Volatility of these Calls was 28.6 when this transaction was executed.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $22,562.01
= ($79.20 - $4.00) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,200.00
= ($4.00 * 300 shares)
(b) Dividend Income (If Merck shares assigned on 6/13/2025, the business day prior to the 6/19/2025 ex-dividend date): = +$0.00; or
(b) Dividend Income (If Merck shares assigned at the 6/27/2025 options expiration): +$243.00
= $.81 per share x 300 shares
(c) Capital Appreciation (If MRK shares assigned early on 12/16/2024): -$960.00
= ($76.00 strike price - $79.20 stock purchase price) * 300 shares; or
(c) Capital Appreciation (If MRK shares assigned with stock above the $76.00 strike price at the June 27th options expiration date): -$960.00
= ($76.00 - $79.20) * 300 shares

1. Potential Net Profit (If Merck shares assigned on the June 16th ex-dividend date): +$240.00
= (+$1,200.00 options income + $0.00 dividend income - $960.00 capital appreciation)
2. Potential Net Profit (If MRK price is above $76.00 strike price at the June 27th options expiration): +$483.00
= (+$1,200.00 options income + $243.00 dividend income - $960.00 capital appreciation)

1. Absolute Return-on-Investment (If Merck shares assigned early on the June 16th, 2025 ex-dividend date): +1.1%
= +$240.00/$22,562.01
Equivalent Annualized Return-on-Investment (If assigned early): +55.5%
= (+$240.00/$22,562.01) * (365/7 days)

2. Absolute Return-on-Investment (If Merck price is above the $76.00 strike price at the June 27th options expiration): +2.1%
= +$483.00/$22,562.01
Equivalent Annualized Return-on-Investment (If assigned on the 6/27/2025 options expiration date): +43.4%
= (+$483.00/$22,562.01) * (365/18 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below for this Merck &Co. Inc. position, all nine criteria are met.