October 8th, 2021 Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions (Nucor Corporation and Micron Technology Inc.) with October 8th, 2021 options expirations.  Both positions closed in-the-money with the following results:

• Nucor Corporation (NUE) -- +1.3% absolute return (equivalent to +32.8% annualized return-on-investment) for the 15 days of this investment
• Micron Technology Inc. (MU) -- +0.9% absolute return (equivalent to +32.1% annualized roi) for the 10 days of this investment
  

The results from both of these positions shows how hedging stocks by establishing in-the-money Covered Calls can provide nice returns despite experiencing a decline in the stock price.  As detailed below, the original purchase price for Nucor was $101.14 and the stock closed today at $97.79 and the purchase price for Micron was $70.69 and its stock price closed today at $70.12.  

The cash now available from the assignment (i.e. closing) of these two in-the-money positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Given the Covered Calls Advisor's current cautious Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at moderately in-the-money strike prices with good downside protection. 

The detailed transactions and results for these two closed positions are as follows:

1.  Nucor Corporation (NUE) -- Covered Calls Position Closed by Assignment at Options Expiration
The simultaneous buy/write transaction today was as follows:
09/24/2021 Bought 200 Nucor shares @ $101.14
09/24/2021 Sold 2 Nucor 10/08/2021 $95.00 Call options @ $7.01
Note: the Implied Volatility of the Calls was 36.4 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 17.7.
09/29/2021 Quarterly ex-dividend of $.405 per share
10/08/2021 Two NUE Call options expired in-the-money so 200 shares of Nucor stock were assigned (i.e. sold) at the $95.00 strike price.

The overall performance results (including commissions) for this Nucor Covered Calls position were as follows:
Covered Calls Cost Basis: $18,827.34
= ($101.14 - $7.01) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$1,400.66
= ($7.01 * 200 shares) - $1.34 commissions
(b) Dividend Income (Nucor shares assigned at the Oct. 8th, 2021 options expiration): +$81.00
= ($.405 dividend per share x 200 shares)
(c) Capital Appreciation (Nucor shares assigned at $95.00 strike price at options expiration): -$1,228.00
+($95.00 - $101.14) * 200 shares

Total Net Profit (Nucor shares assigned at $95.00 strike price on the Oct. 8th, 2021 expiration): +$253.66

= (+$1,400.66 + $81.00 - $1,228.00)
 

Absolute Return-on-Investment: +1.3%

= +$253.66/$18,827.34

Annualized Return-on-Investment: +32.8%

= (+$253.66/$18,827.34) *(365/15 days)

2.  Micron Technology Inc. (MU) -- Covered Calls Position Closed by Assignment at Options Expiration

The Market Order Buy/Write transaction was as follows:
09/29/2021 Bought 300 shares of Micron Technology Inc. stock @ $70.69 per share 
09/29/2021 Sold 3 Micron Oct. 8th, 2021 $68.00 Call options @ $3.19 per share
10/08/2021 Three MU Call options expired in-the-money so 300 shares of Micron stock were assigned (i.e. sold) at the $68.00 strike price.

The overall performance result (including commissions) for this Micron Technology Inc. Covered Calls position was as follows:
Stock Purchase Cost: $20,252.01
= ($70.69 - $3.19) *300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$954.99
= ($3.19 *300 shares) - $2.01 commission
(b) Dividend Income: +$30.00 = $.10 per share X 300 shares

(c) Capital Appreciation (300 Micron shares assigned at $68.00 strike price at 10/08/2021 options expiration): -$807.00
+($68.00 -$70.69) * 300 shares

Total Net Profit (300 Micron shares assigned at $68.00 strike price at expiration): +$177.99 = (+$954.99 options income +$30.00 dividend income -$807.00) capital appreciation

 

Absolute Return-on-Investment: +0.9%

= +$177.99/$20,252.01

Annualized Return-on-Investment: +32.1%

= (+$177.99/$20,252.01) * (365/10 days)

Established Covered Calls in Abercrombie & Fitch Co.

This morning a short-term Covered Calls position was established in Abercrombie & Fitch Co. (ticker ANF) with an October 15th, 2021 options expiration date.   A market order buy/write transaction was executed when 300 shares of Abercrombie were purchased at $38.32 and three October 15th, 2021 Call options at the $36.00 strike price were sold at $2.80 per share.  The time value was $.48 = [$2.80 Call options premium - ($38.32 stock price - $36.00 strike price)].  The Implied Volatility of these Calls was 51.4 when this transaction was executed and the Delta was 76.1 which approximates a 76.1% probability of the Call options being in-the-money at the options expiration date.  The next earnings report on November 23rd is after the October 15th options expiration date. 

Abercrombie & Fitch currently is currently priced at a very reasonable valuation with an estimated current Fiscal Year P/E of 8.6.  They have done a good job of implementing and increasing their digital platform sales to 44% during the most recent quarter.  Analysts' target price is $52.13 (+36.0% above today's purchase price).  

As detailed below, a potential return-on-investment result is +1.3% absolute return (equivalent to +48.6% annualized return for the next 10 days) if the stock price is in-the-money (i.e. above the $36.00 strike price) and therefore assigned on the October 15th options expiration date.

Abercrombie & Fitch Co. (ANF) -- New Covered Calls Position

The Buy/Write limit order was executed as follows:
10/06/2021 Bought 300 shares of Abercrombie & Fitch Co. stock @ $38.32 per share 
10/06/2021 Sold 3 A&F Oct. 15th, 2021 $36.00 Call options @ $2.80 per share

A possible overall performance result (including commissions) for this Abercrombie & Fitch Co. Covered Calls position is as follows:
Stock Purchase Cost: $10,658.01
= ($38.32 - $2.80) *300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$837.99
= ($2.80 *300 shares) - $2.01 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (If 300 ANF shares assigned at $36.00 strike price at expiration): -$696.00
+($36.00 -$38.32) * 300 shares

Total Net Profit (If 300 Abercrombie shares assigned at $36.00 strike price at expiration): +$141.99 = (+$837.99 options income +$0.00 dividend income -$696.00) capital appreciation

 

Absolute Return-on-Investment: +1.3%

= +$141.99/$10,658.01

Annualized Return-on-Investment: +48.6%

= (+$141.99/$10,658.01) * (365/10 days)

Closed Covered Calls Position in JPMorgan Chase & Co.

Last Thursday, a Covered Calls position was established in JPMorgan Chase & Co. (JPM) with an October 15th, 2021 options expiration date. Today, JPM went ex-dividend at $1.00 per share so the Covered Calls Advisor Portfolio captured this dividend. In addition, JPMorgan's stock price has increased from a purchase price of $165.29 to $170.04 today when I decided to close the Covered Calls position via an unwind transaction of Selling-to-Close the 200 shares @ $170.04 and simultaneously Buying-to-Close two October 15th, 2021 $160.00 Call options @ $10.84 per share. Since the Covered Calls Advisor prefers to avoid holding positions on quarterly earnings reporting dates and JPM's next report is on October 13th which is prior to the October 15th options expiration date, I decided to close out the position today at an annualized return-on-investment (aroi) of +66.5% rather than waiting for a potential maximum aroi of +32.4% if the position were to instead be assigned on the Oct. 15th options expiration date.

The details of today's results are as follows:

JPMorgan Chase & Co. (JPM) -- Covered Calls Position Closed

The original JPMorgan buy/write transaction was as follows:
9/30/2021 Bought 200 shares of JPMorgan Chase & Co. @ $170.04 per share 
9/30/2021 Sold 2 JPM Oct. 15th, 2021 $160.00 Call options @ $10.84 per share
10/05/2021 Ex-dividend of $1.00 per share
10/05/2021 Unwound the JPM Covered Calls position by simultaneously selling-to-close 200 JPM shares at $170.04 per share and buying-to-close 2 JPM Oct. 15th $160.00 Calls @ $10.84 per share.

The overall performance results (including commissions) for this JPM Covered Calls position was as follows:
Stock Purchase Cost: $31,749.34
= ($165.29 - $6.55) *200 shares + $1.34 commission

Net Profit:
(a) Options Income: -$860.68
= ($6.55 -$10.84) *200 shares - $2.68 commission
(b) Dividend Income: +$200.00
= ($1.00 dividend per share x 200 shares)
(c) Capital Appreciation (Sold-to-Close 200 JPM shares at $170.04 per share): +$950.00
+($170.04 -$165.29) * 200 shares

Total Net Profit: +$289.32

= (-$860.68 options income +$200.00 dividend income +$950.00 capital appreciation)
 

Absolute Return-on-Investment: +0.9%

= +$289.32/$31,749.34

Annualized Return-on-Investment: +66.5%

= (+$289.32/$31,749.34)*(365/5 days)

October 1st, 2021 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions (Boeing Co., Seagate Technology Holdings PLC, and Wynn Resorts Ltd.) with October 1st, 2021 options expirations.  All three positions closed in-the-money with the following results:

• Boeing Co. (BA) -- +3.5% absolute return (equivalent to +36.9% annualized return-on-investment) for the 35 days of this investment
• Seagate Technology Holdings PLC (STX) -- +2.2% absolute return (equivalent to +45.3% annualized roi) for the 18 days of this investment
• Wynn Resorts Ltd. (WYNN) -- +1.9% absolute return (equivalent to +64.6% annualized roi) for the 11 days of this investment

The cash now available from the assignment (i.e. closing) of these in-the-money positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Given the Covered Calls Advisor's currently cautious Overall Market outlook, new positions will be hedged by continuing to establish Covered Calls at moderately in-the-money strike prices with good downside protection. 

The detailed transactions and results for these three closed positions are as follows:

1. Boeing Co. (BA) -- Covered Call Position Assigned at the Options Expiration Date

The buy/write transaction was as follows:
8/27/2021 Bought 100 shares of Boeing Co. stock @ $218.59 per share 
8/27/2021 Sold 1 Boeing Sept 17th, 2021 $215.00 Call option @ $8.53 per share
9/17/2021 Boeing Call option expired out-of-the-money so 100 BA shares remain in the Covered Calls Advisor Portfolio.
9/20/2021 Sold 1 Boeing October 1st, 2021 $212.50 Call option @ $5.00 per share when the stock was trading at $212.10.
Note: the Implied Volatility was 32.5 when this Call option was sold.
10/01/2021 Covered Call position closed out -- 1 BA Call option expired in-the-money, so 100 shares were sold at the $112.50 strike price. Note: the stock price was well in-the-money at $226.00 per share at options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $21,006.67
= ($218.59 - $8.53) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$1,351.66
= ($8.53 + $5.00) * 100 shares - $1.34 commission
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BA stock above $212.50 strike price at the Oct. 1st, 2021 expiration): -$609.00
= ($212.50 - $218.59) * 100 shares

Total Net Profit (BA stock was above $212.50 strike price at the Oct. 1st, 2021 expiration): +$742.66
= (+$1,351.66 Call option income +$0.00 dividend income -$609.00 capital appreciation)

Absolute Return-on-Investment : +3.5%
= +$742.66/$21,006.67
Equivalent Annualized Return-on-Investment: +36.9%
= (+$742.66/$21,006.67)*(365/35 days)

 

2. Seagate Technology Holdings PLC (STX) -- Covered Calls Position Assigned at the Options Expiration Date
The simultaneous buy/write transaction today was as follows:
09/14/2021 Bought 200 Seagate Technology Holdings PLC shares @ $82.25
09/14/2021 Sold 2 Seagate 10/01/2021 $80.00 Call options @ $3.35
Note: the Implied Volatility of the Calls was 27.2 and the comparable Puts was 34.1 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 19.5.
09/21/2021 Upcoming quarterly ex-dividend of $.67 per share
10/01/2021 Covered Calls position closed out -- 2 STX Call options expired in-the-money, so 200 shares were sold at the $80.00 strike price. Note: the stock price was well in-the-money at $84.41 per share at options expiration.

The overall performance results (including commissions) for this Seagate Technology Covered Calls position was as follows:
Covered Calls Cost Basis: $15,781.34
= ($82.25 - $3.35) * 200 shares + $1.34 commissions

Net Profit Components:
(a) Options Income: +$668.66
= ($3.35 * 200 shares) - $1.34 commissions
(b) Dividend Income (Seagate shares assigned at Oct. 1st, 2021 options expiration): +$134.00
= ($.67 dividend per share x 200 shares)
(c) Capital Appreciation (Seagate shares assigned at $80.00 strike price at options expiration): -$450.00
+($80.00 - $82.25) * 200 shares

Total Net Profit (STX shares assigned at $80.00 strike price at the Oct. 1st, 2021 expiration): +$352.66

= (+$668.66 + $134.00 - $450.00)
 

Absolute Return-on-Investment: +2.2%

= +$352.66/$15,781.34

Annualized Return-on-Investment: +45.3%

= (+$352.66/$15,781.34) *(365/18 days)

3. Wynn Resorts Ltd.(WYNN) -- Covered Calls Position  Closed by Assignment at Options Expiration

The Buy/Write transaction was as follows:
09/21/2021 Bought 300 shares of Wynn Resorts Ltd. shares @ $79.71 per share 
09/21/2021 Sold 3 WYNN October 1st, 2021 $75.00 Call options @ $6.15 per share
10/01/2021 Covered Calls position closed out -- 3 WYNN Call options expired in-the-money, so 300 shares were sold at the $75.00 strike price. Note: the stock price was deep in-the-money at $87.21 per share at options expiration.

The overall performance result (including commissions) for this Wynn Resorts Ltd. Covered Calls position was as follows:
Stock Purchase Cost: $22,070.01
= ($79.71 - $6.15) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,842.99
= ($6.15 * 300 shares) - $3.35 commission
(b) Dividend Income: +$0.00

(c) Capital Appreciation (300 Wynn Resorts shares assigned at $75.00 strike price at expiration): -$1,413.00
+($75.00 - $79.71) * 300 shares

Total Net Profit: +$429.99

= (+$1,842.99 options income +$0.00 dividend income -$1,413.00 capital appreciation)

 

Absolute Return-on-Investment: +1.9%

= +$429.99/$22,070.01

Annualized Return-on-Investment: +64.6%

= (+$429.99/$22,070.01) * (365/11 days)