Established Covered Calls in Exxon Mobil Corporation

Early in this morning's trading, I entered a Covered Calls simultaneous buy/write net debit limit order in Exxon Mobil Corporation (ticker XOM) for the November 24th, 2023 expiration and at the $101.00 strike price and at a net debit limit price of $100.18 per share.  I thought it unlikely that this order would be executed today, but with only 3 minutes remaining until the market close my order was executed.  Two hundred shares were purchased at $102.97 and two 11/24/2023 Call options were sold at the $101.00 strike price for $2.79 per share.  So, the potential time value profit from the Call options is $.82 per share [$101.00 strike price - ($102.97 stock purchase price - $2.79 Call options price)], and the Implied Volatility of these Call options was 19.9 when this transaction was executed.  

In addition to the potential time value profit of $.82 per share, there is an upcoming quarterly ex-dividend of $.95 per share (3.7% annual dividend yield) on November 14th which is included in the potential return-on-investment calculations detailed below.  When this in-the-money Covered Calls position was transacted this afternoon it had a probability of assignment on the options expiration date of 67.2%. 

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

•  +0.8% absolute return-on-investment (equivalent to +49.4% annualized roi for the next 6 days) if the stock is assigned early (the last business day prior to the November 14th, 2023 ex-dividend date); OR 

• +1.8% absolute return-on-investment (equivalent to +40.2% annualized roi over the next 16 days) if the stock is assigned on the November 24th, 2023 options expiration date.

These returns will be achieved as long as Exxon Mobil's stock price is above the $101.00 strike price when assigned.  If the stock declines below the strike price, the breakeven price of $99.23 per share ($102.97 stock purchase price - $2.79 Call options selling price - $.95 ex-dividend amount) provides a 3.6% downside breakeven protection if assigned on the options expiration date.
 

Exxon Mobil Corporation (XOM) -- New Covered Calls Position

If the stock price increases to the point where the current time value (i.e. extrinsic value) of $.82 remaining in the short Call options decays substantially (down to approximately $.15 or less) before market close on Monday, November 13th, 2023 (the last business day prior to the 11/14/2023 ex-dividend date), there is a possibility that the Call options owner would exercise early and therefore call the 200 Exxon Mobil shares away to capture the dividend payment.  As detailed in the Dividend Capture spreadsheet below, early assignment would be a desirable outcome since its +49.4% annualized-return-on-investment (aroi) exceeds the +40.2% aroi that would be achieved if the assignment occurred instead on the November 24th options expiration date.

The simultaneous buy/write transaction was:
11/8/2023 Bought 200 Exxon Mobil shares @ $102.97
11/8/2023 Sold 2 Exxon Mobil November 24th, 2023 $101.00 Call options @ $2.79 per share
11/14/2023 Upcoming Exxon quarterly ex-dividend at $.95 per share

Two possible overall performance results (including commissions) for this Exxon Mobil Covered Calls position are as follows:
Covered Calls Net Investment: $20,037.34
= ($102.97 - $2.79) * 200 shares + $1.34 commission

Net Profit:
(a) Options Income: +$556.66
= ($2.79 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on Monday, Nov. 13th, the last business day prior to the November 14th ex-div date): +$0.00; or
(b) Dividend Income (If Exxon Mobil's shares assigned at the Nov. 24th, 2023 options expiration date): +$190.00
= ($.95 dividend per share x 200 shares)

(c) Capital Appreciation (If Exxon Mobil's stock assigned early): -$394.00
+($101.00 -$102.97) * 200 shares; or
(c) Capital Appreciation (If Exxon Mobil shares assigned at $101.00 strike price at options expiration): -$394.00
+($101.00 -$102.97) * 200 shares

1. Total Net Profit (If option exercised early): +$162.66

= (+$556.66 options income +$0.00 dividend income -$394.00 capital appreciation); or

2. Total Net Profit (If Exxon Mobil stock assigned at $101.00 at the 11/24/2023 expiration): +$352.66

= (+$556.66 options income +$190.00 dividend income -$394.00 capital appreciation)

1. Absolute Return-on-Investment (If option exercised on the last business day prior to the 11/14/2023 ex-dividend date): +0.8%

= +$162.66/$20,037.34

Annualized Return-on-Investment (If option exercised early): +49.4%

= (+$162.66/$20,037.34) * (365/6 days); or

2. Absolute Return-on-Investment (If Exxon Mobil stock assigned at $101.00 at the Nov. 24th options expiration date): +1.8%

= +$352.66/$20,037.34

Annualized Return-on-Investment (If Exxon Mobil shares assigned at $101.00 at the 11/24/2023 options expiration date): +40.2%

= (+$352.66/$20,037.34) * (365/16 days)

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy.  As shown below, all nine criteria are achieved for this Exxon Mobil Corp. position.

Continuation of Covered Calls Positions in Halozyme Therapeutics Inc.

Today the Covered Calls position in Halozyme Therapeutics Inc. (ticker HALO) was continued by selling four December 15th, 2023 $40.00 Calls at $1.72 per share.  After several recent weeks of decline, the stock price spiked higher today after its positive quarterly earnings report.  The transactions-to-date as well as potential return-on-investment results if assigned on the December 15th, 2023 options expiration date are detailed below.

Halozyme Therapeutics Inc. (HALO) -- Continuation of Covered Calls Position

The net debit buy/write limit order was executed as follows:

8/25/2023 Bought 400 shares of Halozyme Therapeutics stock @ $42.62 per share.  
8/25/2023 Sold 4 HALO September 15th, 2023 $40.00 Call options @ $3.36 per share.
Note: the Implied Volatility of the Calls was 38.8 when this position was established. 

9/15/2023 Continued this Halozyme Covered Calls position by selling 4 HALO October 20th, 2023 Call options at the $40.00 strike price for $2.00 per share.  The Halozyme share price was $40.22 when these Calls were sold and their Implied Volatility was 37.6.
10/20/2023 Four Calls expired out-of-the-money with the stock price below the $40.00 strike price, so 400 HALO shares remain in the Covered Calls Advisor Portfolio.

11/7/2023 Continued this Halozyme Covered Calls position by selling 4 HALO December 15th, 2023 Call options at the $40.00 strike price for $1.72 per share.  The Halozyme share price was $39.14 when these Calls were sold and their Implied Volatility was 41.0.

A possible overall performance result (including commissions) if this position is assigned on its 12/15/2023 options expiration date is follows:
Halozyme Covered Calls Net Investment: $15,706.68
= ($42.62 - $3.36) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$2,823.96
= ($3.36 + $2.00 + $1.72) * 400 shares - $8.04 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Halozyme stock is above the $40.00 strike price on the December 15th expiration): -$1,048.00
= ($40.00 - $42.62) * 400 shares

Potential Total Net Profit (If assigned at expiration): +$1,775.96
= (+$2,823.96 options income + $0.00 dividend income - $1,048.00 capital appreciation)

Potential Absolute Return-on-Investment: +11.3%
= +$1,775.96/$15,706.68
Potential Equivalent Annualized-Return-on-Investment: +36.8%
= (+$1,775.96/$15,706.68) * (365/112 days)

November 3rd, 2023 Options Expiration Results

The Covered Calls Advisor Portfolio had three Covered Calls positions with November 3rd, 2023 options expirations.  Two positions (Lowe's Companies Inc. and Uber Technologies Inc.) closed in-the-money so their Calls expired and the shares were called away (i.e. sold) at their respective strike prices.  The third position in iShares China Large-Cap ETF closed out-of-the-money so the Calls expired and the 1,000 iShares China Large-Cap ETF shares remain in the Covered Calls Advisor Portfolio.  A summary of the results for each of these three positions are as follows:

1. Lowe's Companies Inc. -- +1.8% absolute return (equivalent to +31.0% annualized return-on-investment) for the 21 days of this investment.  This Covered Call position was assigned at the $90.00 strike price on its 11/3/2023 options expiration date since Lowe's stock closed in-the-money at $194.94 per share.  The original post detailing the history of this Covered Calls position is here. 

2. Uber Technologies Inc. (UBER) -- +2.4% absolute return (equivalent to +61.9% annualized return-on-investment) for the 14 days of this investment.  This Covered Calls position was assigned at the $42.00 strike price on its Nov. 3rd options expiration date since Uber closed in-the-money yesterday at $47.75 per share.  The most recent post detailing this Covered Calls position is here.  

3. iShares China Large-Cap ETF (FXI) -- This Covered Calls position closed yesterday at $26.35 which was below its $27.00 strike price, so the ten 11/3/20233 iShares China Large-Cap ETF Call options expired and 1,000 FXI shares now remain in the Covered Calls Advisor Portfolio.  Early next week a decision will be made to either close out the position by selling the shares or continuing with this Covered Calls position by selling ten FXI Calls against the 1,000 shares currently owned.  As always, I will post the transactions-to-date for this position when my next transaction is executed.

I welcome your feedback, at my email address shown below with your questions or topics related to this blog post specifically or anything related to the Covered Calls investing strategy.

Best Wishes,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Early Assignment of Covered Calls Position in Citigroup Inc.

Early this morning I was notified by my broker's email that the five Citigroup Inc. (ticker C) November 10th, 2023 $37.50 Call options were exercised yesterday.  Citigroup stock has increased from its purchase price of $38.55 on Wednesday last week when this Covered Calls position was established to $41.35 at the market close yesterday.  

The post when this Citigroup Inc. Covered Calls position was originally established is here.  As detailed below, the return-on-investment result for this Citigroup Covered Calls position was +1.1% absolute return in 9 days (equivalent to a +42.6% annualized return-on-investment).  

Citigroup Inc. (C) -- Covered Calls Position Closed by Early Assignment
The transactions were:
10/25/2023 Bought 500 Citigroup shares @ $38.55
10/25/2023 Sold 5 Citigroup 11/10/2023 $37.50 Call options @ $1.44 per share.
Note: the Implied Volatility of these Call options was 27.1 when this position was established.
11/3/2023 Citigroup Call options owner exercised their five Call options, so the Covered Calls position was closed out early. The five Citigroup Call options expired worthless and the 500 shares were sold at the $37.50 strike price.

The overall performance results (including commissions) for this Citigroup Covered Calls position are as follows:
Covered Calls Net Investment: $18,558.35
= ($38.55 - $1.44) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$720.00
= ($1.44 * 500 shares)
(b) Dividend Income (Five Call options exercised early on the business day prior to the ex-div date): +$0.00
(c) Capital Appreciation (Citi shares assigned early on the last trading day prior to the ex-div date): -$525.00
+($37.50- $38.55) * 500 shares

Total Net Profit [Call options exercised on November 2nd, 2023 (the last business day prior to the November 3rd ex-dividend date)]: +$195.00

= (+$720.00 options income +$0.00 dividend income -$525.00 capital appreciation)

Absolute Return-on-Investment: +1.1%

= +$195.00/$18,558.35

Annualized Return-on-Investment: +42.6%

= (+$195.00/$18,558.35) * (365/9 days)