Closed Postion in Citigroup Inc.

Last Friday, the November 16th, 2018 Covered Calls position in Citigroup Inc. (ticker symbol C) expired with the stock price at $64.95, below the $65.00 strike price -- so the Call options expired and the 500 shares were retained in the Covered Calls Advisor's Portfolio.  The stock moved higher today and the position was closed out by selling the 500 shares at $65.22.

This position demonstrates the trifecta that can sometimes be achieved using a Covered Calls dividend capture strategy with profits being obtained from all three sources: (1) Call options income; (2) Dividend income; and (3) Capital Appreciation of the underlying stock. 

As detailed below, this Citigroup Inc. position achieved a return-on-investment result of +4.3% absolute return in 20 days (equivalent to a +78.2% annualized return-on-investment).


Citigroup Inc. (C) -- Covered Calls Position Closed
The transactions were as follows:
10/30/2018 Bought 500 shares of Citigroup Inc. stock @ $64.48 per share 
10/30/2018 Sold 5 Citi Nov 16th, 2018 $65.00 Call options @ $1.52 per share
Note: this was a simultaneous Buy/Write transaction
11/02/2018 Ex-dividend of $225.00 = 500 shares x $.45 per share
11/16/2018 Call options expired with closing stock price of $64.95 below the $65.00 strike price
11/19/2018 Sold 500 shares Citi stock at $65.22

The overall performance result (including commissions) is as follows:
Covered Calls Cost Basis: $31,488.30
= ($64.48 - $1.52)* 500 shares + $8.30 commissions

Net Profit Components:
(a) Options Income: +$760.00
= ($1.52 * 500 shares)
(b) Dividend Income: +$225.00
 = $.45 per share x 500 shares 
(c) Capital Appreciation: +$365.05
= ($65.22 -$64.48)* 500 shares - $4.95 commission

Total Profit: +$1,350.05
=$760.00 options income + $225.00 dividend income + $365.05 capital appreciation

Absolute Return-On-Investment: +4.3%
= +$1,350.05/$31,488.30
Equivalent Annualized Return: +78.2%
= (+$1,350.05/$31,488.30)*(365/20 days)

November 16th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had four positions [Alibaba Group Holding Ltd.(2 positions), Alphabet Inc., and Citigroup Inc.] with November 16th, 2018 options expirations.  Each of these Covered Calls positions closed with their stock prices below the strike prices, so their respective Call options expired and their underlying shares remain in the Covered Calls Advisor Portfolio.  Decisions will be made for each position to either: (1) Sell Call options against the long stock position to re-establish another Covered Calls position at the December 21, 2018 options expiration date; or (2) Sell the stock to close out the position.  As always, all transactions will be posted on this blog on the same day they occur. 

So far in 2018, thirty-eight of forty-four (86.4%) positions have been closed at a profit.  This far exceeds the Covered Calls Advisor's overall long-term goal of having at least two-thirds (67%) of positions closed out at a profit.  None of the remaining six positions [Alibaba Group Holding Ltd. (two positions), Alphabet Inc., Citigroup Inc., Lam Research Inc., and U.S. Steel Corp.] have yet to be closed out, but instead are currently held as open long stock positions in the Covered Calls Advisor Portfolio.   

For the thirty-eight positions closed out so far in 2018, the average annualized return-on-investment is +28.8%.  In comparison, the annualized return-on-investment so far in 2018 for the S&P 500 benchmark is +4.5%.     

Established Covered Calls in Las Vegas Sands Corp.

Today, a Covered Calls position was established in Las Vegas Sands Corp. (ticker symbol LVS) with a December 21st, 2018 expiration and at the $50.00 strike price.  This position has an expected upcoming quarterly ex-dividend on December 17th of $.75 per share, so the potential return for this position includes the ex-dividend since it goes ex-dividend prior to the December 21st options expiration date.  Quarterly earnings were reported recently, so the next earnings report will not be until January 23rd, 2019.  Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, a slightly in-the-money Covered Calls position was established. 

As detailed below, a potential return-on-investment result is +4.6% absolute return (equivalent to +46.5% annualized return for the next 36 days) if the stock is assigned on the December 21st options expiration date.  These potential returns are high because of the recent decline in LVS stock and also the stock market in general.  The Implied Volatility of the options has increased to the high level of 45.5 when this Covered Calls transactions was executed.

Las Vegas Sands Corp. (LVS) -- New Covered Calls Position
The transactions were:
11/16/2018 Bought 300 Las Vegas Sands shares @ $52.90
11/16/2018 Sold 3 LVS 12/21/2018 $50.00 Call options @ $4.40
Note: a simultaneous buy/write transaction was executed, and the Open Interest in these Call options was 328 contracts.
12/17/2018 Upcoming quarterly ex-dividend of $.75 per share

A possible overall performance result (including commissions) for this Las Vegas Sands Covered Calls position is as follows:
Covered Calls Cost Basis: $14,554.95
= ($52.90 - $4.40) *300 + $4.95 commission

Net Profit Components:
(a) Options Income: +$1,317.99
= ($4.40*300 shares) - $2.01 commissions
(b) Dividend Income (If Las Vegas Sands shares assigned at Dec 21st, 2018 expiration): +$225.00
= ($.75 dividend per share x 300 shares)

(c) Capital Appreciation (If LVS assigned at $50.00 strike price at options expiration): -$874.95
+($50.00-$52.90)*300 shares - $4.95 commissions

Total Net Profit (If Las Vegas Sands shares assigned at $50.00 at Dec 21, 2018 options expiration): +$668.04

= (+$1,317.99 +$225.00 -$874.95)

Absolute Return (If Las Vegas Sands shares assigned at $50.00 at Dec 21, 2018 options expiration): +4.6%

= +$668.04/$14,554.95

Annualized Return (If LVS stock assigned at $50.00 at Dec 21, 2018 expiration): +46.5%

= (+$668.04/$14,554.95)*(365/36 days)

These returns will be achieved as long as the stock is above the $50.00 strike price at the Dec. 21st options expiration date.  If the stock declines below the strike price, the breakeven price of $47.75 ($52.90 -$4.40 -$.75) provides 9.7% downside protection below today's purchase price.

Established Covered Calls in Blackstone Group L.P.

Today, a new Covered Calls positions was entered in Blackstone Group L.P. (ticker BX) for the December 21st, 2018 options expiration and at the $34.00 strike price when the stock was at $33.61.  

As detailed below, two potential return-on-investment results are:

+3.5% absolute return in 39 days (equivalent to a +32.8% annualized return-on-investment) if the price of BX is unchanged upon the Dec 21st options expiration; OR

+4.7% absolute return in 39 days (equivalent to a +43.6% annualized return-on-investment) if the price of BX increases above the $34.00 strike price on the expiration date 

Blackstone Group L.P. (BX) -- New Covered Calls Position

The transactions were as follows:
11/13/2018 Bought 300 shares of Blackstone Group @ $33.61 
11/13/2018 Sold 3 BX Dec 21st, 2018 $34.00 Call options @ $1.14 per share
Note: this was a simultaneous Buy/Write transaction.  There is good liquidity with 2,565 Open Interest contracts and the Implied Volatility of these Call options was 31.0 when this transaction was executed. 

Two possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $9,747.96
= ($33.61 - $1.14)* 300 shares + $6.96 commission

Net Profit Components:
(a) Options Income: +$342.00
= ($1.14* 300 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If BX is unchanged at $33.61 purchase price at Dec 21st expiration): +$0.00
= ($33.61 -$33.61)* 300 shares; OR
(c) Capital Appreciation (If BX is above $34.00 strike price at Dec 21st expiration): +$112.05
= ($34.00 -$33.61)* 300 shares - $4.95 commission

(a) Total Net Profit (If BX price unchanged at $33.61 at expiration): +$342.00
= (+$342.00 options income +$0.00 dividend income -$0.00 capital appreciation); OR
(b) Total Net Profit (If BX shares assigned at expiration): +$454.05
= (+$342.00 options income +$0.00 dividend income +$112.05 capital appreciation)

(a) Absolute Return (If BX price unchanged at expiration): +3.5%
= +$342.00/$9,747.96
Equivalent Annualized Return: +32.8%
= (+$342.00/$9,747.96)*(365/39 days); OR
(b) Absolute Return (If BX shares assigned at expiration): +4.7%
= +$454.05/$9,747.96
Equivalent Annualized Return: +43.6%
= (+$454.05/$9,747.96)*(365/39 days)

The downside 'breakeven price' at expiration is at $32.47 ($33.61 - $1.14), which is 3.4% below the current market price of $33.61.

The 'crossover price' at expiration is $34.75 ($33.61 + $1.14).  This is the price above which it would have been more profitable to buy-and-hold Blackstone Group stock until the December 21st, 2018 options expiration date.