The Covered Calls Advisor Portfolio held a total of six Covered Calls positions with September 30th, 2022 expirations. Despite hedging all these positions by establishing in-the-money strike prices, all six stocks declined to below their strike prices (i.e. were out-of-the-money) as of yesterday afternoon on their options expiration date.
- Two positions (Energy Select Sector ETF and Medtronic Inc.) were rolled-down-and-out to the October 21st monthly options expiration date. I continue with my original bullish outlook for these equities and by rolling them out am attempting to repair them back toward profitability.
- Two positions (Applied Materials Inc. and Best Buy Inc.) were closed out at a loss. Both the Semiconductor industry and the Consumer Discretionary sector continue to be hit harder than most during this bear market; so I chose to exit both these positions at a loss.
- Two positions (Cleveland-Cliffs Inc. and Meta Platforms Inc.) had their Call options expire out-of-the-money at yesterday's options expiration. In each case, the shares remain in the Covered Calls
Advisor Portfolio. Early next week,
decisions will
be made to
either sell these shares or
to continue
these Covered Calls positions by selling future Call options
against
the shares currently held.
Detailed results for the two rollout and two closed-out positions are as follows:
1. Energy Select Sector SPDR Fund ETF (XLE) -- Rolled-Down-and-Out Covered Calls Position
The buy/write transaction today was as follows:
9/13/2022 Bought 300 Energy Select Sector SPDR Fund ETF shares @ $80.31 per share
9/13/2022 Sold 3 XLE 9/30/2022 $76.00 Call options @ $4.91 per share
9/19/2022 Quarterly ex-distribution at $.8462 per share
9/30/2022 Bought-to-Close 3 XLE Sept 30th, 2022 $76.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 3 XLE October 21st, 2022 $74.00 Calls @ $2.22 per
share.
The overall performance results (including commissions) for
this Energy Select Sector SPDR Fund ETF Covered Call position if assigned on the October 21st options expiration date are as
follows:
Covered Call Net Investment: $22,622.01
= ($80.31 - $4.91) * 300 shares + $2.01 commissions
Net Profit Components:
(a) Options Income: +$2,130.99
= ($4.91+$2.22-$.01) * 300 shares - $5.01 commissions
(b) Dividend Income: +$240.00
= ($.8462 dividend per share x 300 shares)
(c) Capital Appreciation (If shares assigned at $74.00 strike price at options expiration): -$1,893.00
+($74.00 - $80.31) * 300 shares
Total Net Profit (If XLE shares assigned at $74.00 strike price at the October 21st, 2022 expiration): +$491.85
= (+$2,130.99 options income + $253.86.00 distribution income - $1,893.00 capital appreciation)
Absolute Return-on-Investment (If XLE shares assigned at $74.00 strike price on October 21st, 2022 expiration): +2.2%
= +$491.85/$22,622.01
Annualized Return-on-Investment (If XLE shares assigned at $74.00 at Oct. 21st, 2022 expiration): +20.9%
= (+$491.85/$22,622.01) *(365/38 days)
2. Medtronic PLC (MDT) -- Rolled-Down-and-Out Covered Calls Position
The buy/write transaction was:
09/19/2022 Bought 200 Medtronic PLC shares @ $88.19
09/19/2022 Sold 2 MDT 9/30/2022 $86.00 Call options @ $2.77
Note 1: the Implied Volatility of the Calls was 23.2 when this transaction executed.
Note 2: the Time Value (aka Extrinsic Value) in the Call options was $.58 per share = [$2.77 Call options premium - ($88.19 stock price - $86.00 strike price)]
09/22/2022 Upcoming quarterly ex-dividend of $.68 per share
9/30/2022 Bought-to-Close 2 MDT Sept 30th, 2022 $86.00 Call Options @ $.01 per
share and simultaneously Sold-to-Open 2 MDT October 21st, 2022 $84.00 Calls @ $1.16 per
share.
The overall performance results (including commissions) for this Medtronic Covered Calls position if assigned on the October 21st options expiration date are as follows:
Covered Calls Net Investment: $17,085.34
= ($88.19 - $2.77) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$784.00
= ($2.77 + $1.16 - $.01) * 200 shares
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MDT shares assigned at $84.00 strike price at options expiration): -$838.00= +($84.00 - $88.19) * 200 shares
Total Net Profit (If Medtronic shares assigned at $84.00 strike price at Oct 21st, 2022 expiration): -$54.00
= (+$784.00 options income +$0.00 dividend income -$838.00 capital appreciation)
Absolute Return-on-Investment (If Medtronic shares assigned at $84.00 at Oct 21st, 2022 options expiration): -0.3%
= -$54.00/$17,085.34
Annualized Return-on-Investment (If MDT shares assigned at $84.00 at the Oct 21st, 2022 expiration): -3.6%
= (-$54.00/$17,085.34) * (365/32 days)
3. Applied Materials Inc. (AMAT) -- Covered Calls Position Closed Out
The original $94.06 net debit buy/write limit order was transacted as follows:
08/24/2022 Bought 200 AMAT shares @ $100.76
08/24/2022 Sold 2 AMAT Sept. 2nd, 2022 $95.00 Call options @ $6.70 per share.
Note: as is often the case, these Call options were transacted slightly below the midpoint of the $6.65/$6.80 bid/ask spread.
9/2/2022 AMAT shares closed at $91.35, well below the $95.00 strike price, so the Calls expired and 200 AMAT shares remain in the Covered Calls Advisor Portfolio.
9/7/2022 Continued Applied Materials Covered Calls position by selling two Sept 16th, 2022 $92.50 Call options @ $2.30 per share. The stock price was $91.42 when this transaction was executed.
9/16/2022 Two AMAT Call options expired out-of-the-money and 200 AMAT shares remain in the Covered Calls Advisor Portfolio.
9/19/2022 Continued Applied Materials Covered Calls position by selling two Sept 30th, 2022 $91.00 Call options @ $2.42 per share.
9/30/2022 Bought-to-Close 2 AMAT Sept 30th, 2022 $91.00 Call Options @ $.02 per
share and simultaneously Sold-to-Close 200 Applied Materials shares @ $82.72 per
share.
The overall performance result (including commissions) was as follows:
Covered Calls Net Investment: $18,813.34
= ($100.76 - $6.70) * 200 shares + $1.34 commission
Net Profit Components:
(a) Options Income: +$2,275.98
= ($6.70 + $2.30 + $2.42 - $.02) * 200 shares - $4.02 commission
(b) Dividend Income: $0.00
(c) Capital Appreciation: -$3,608.00
= ($82.72 -$100.76) * 200 shares
Total Net Profit (If stock assigned on the September 30th options expiration date): -$1,332.02
= (+$2,279.98 options income +$0.00 dividend income -$3,608.00 capital appreciation)
Absolute Return-on-Investment: -7.1%
= -$1,332.02/$18,813.34
Equivalent Annualized Return-on-Investment: -69.8%
= (-$1,332.02/$18,813.34) * (365/37 days)
4. Best Buy Inc. (BBY) -- Covered Calls Position Closed Out
The buy/write transaction was:
9/13/2022 Bought 200 shares of Best Buy shares @ $74.90 per share
9/13/2022 Sold 2 Best Buy September 30th, 2022 $71.00 Call options @ $4.64 per share
Note: this was a $70.26 net debit limit Buy/Write transaction
09/19/2022 Upcoming quarterly ex-dividend of $.88 per share
9/30/2022 Bought-to-Close 2 Best Buy Sept 30th, 2022 $71.00 Call Options @ $.02 per
share and simultaneously Sold-to-Close 200 BBY shares @ $63.95 per
share.
The overall performance results (including commissions) for this Best Buy Covered Calls position was as follows:
Covered Calls Net Investment: $14,053.34
= ($74.90 - $4.64) * 200 shares + $1.34 commissions
Net Profit Components:
(a) Options Income: +$922.66
= ($4.64 - $.02) x 200 shares - $1.34 commissions
(b) Dividend Income: +$176.00
= ($.88 dividend per share x 200 shares)
(c) Capital Appreciation (200 Best Buy shares sold at $63.95 per share): -$2,190.00
+($63.95 - $74.90) * 200 shares
Total Net Profit: -$1,087.34
= (+$926.66 options income +$176.00 dividend income - $2,190.00 capital appreciation)
Absolute Return-on-Investment: -7.7%
= -$1,087.34/$14,053.34
Annualized Return-on-Investment (If Best Buy stock assigned at $71.00 at the 9/30/2022 expiration): -156.9%
= (-$1,087.34/$14,053.34) *(365/18 days)
Jeff Partlow
Covered Calls Advisor
partlow@cox.net
