Today Covered Calls were established in Mondelez International (ticker symbol MDLZ) and U.S. Bancorp (ticker USB) when the Covered Calls Advisor's buy/write limit orders were executed. For Mondelez, 300 shares were purchased at $66.04 and 3 July 5th, 2024 Call options were sold at $1.47 at the $65.00 strike price. For U.S. Bancorp, 400 shares were purchased at $39.11 and 4 July 12th, 2024 Call options were sold at $1.55 at the $38.00 strike price.
Given the Covered Calls Advisor's current "Neutral" Overall Market Meter outlook, moderately in-the-money Covered Calls positions were established. The probability that the stock will be in-the-money on the options expiration dates was 71.5% for the Mondelez position and 71.6% for the U.S. Bancorp position. Both positions have an intervening ex-dividend date, so the potential results detailed below includes the possibility of early exercise since the ex-dividends are prior to their respective options expiration dates.
1. Mondelez International Inc. (MDLZ) -- New Covered Calls Position
The buy/write transaction was:
6/18/2024 Bought 300 Mondelez shares @ $66.04
6/18/2024 Sold 3 MDLZ 7/5/2024 $65.00 Call options @ $1.47 per share
. The Implied Volatility of these Calls was 13.2 when this position was established.
Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $19,373.01
= ($66.04 - $1.47) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$438.99
= ($1.47 * 300 shares) - $2.01 commission
(b) Dividend Income (If Mondelez shares assigned on the business day prior to the June 28th ex-dividend date): = +$0.00; or
(b) Dividend Income (If MDLZ shares assigned at the 7/5/2024 options expiration date): +$127.50
= $.425 per share x 300 shares
(c) Capital Appreciation (If Mondelez shares assigned early): -$312.00
= ($65.00 strike price -$66.04 stock purchase price) * 300 shares; or
(c) Capital Appreciation (If MDLZ shares assigned with stock above the $65.00 strike price at the July 5th options expiration): -$312.00
= ($65.00 -$66.04) * 300 shares
1. Potential Net Profit (If Mondelez shares assigned on 6/27/2024, the day prior to the June 28th ex-dividend date): +$126.99
= (+$438.99 options income +$0.00 dividend income - $312.00 capital appreciation)
2. Potential Net Profit (If Mondelez price is above $65.00 strike price at the July 5th options expiration): +$254.49
= (+$438.99 options income +$127.50 dividend income - $312.00 capital appreciation)
1. Absolute Return-on-Investment (If Mondelez shares assigned early on June 27th, 2024, the day prior to the ex-dividend date): +0.7%
= +$126.99/$19,373.01
Equivalent Annualized Return-on-Investment (If assigned early on day prior to ex-div date): +23.9%
= (+$126.99/$19,373.01) * (365/10 days)
2. Absolute Return-on-Investment (If MDLZ price is above the $65.00 strike price at the July 5th options expiration date): +1.3%
= +$254.49/$19,373.01
Equivalent Annualized Return-on-Investment (If assigned on the 7/5/2024 options expiration date): +28.2%
= (+$254.49/$19,373.01) * (365/17 days)
2. U.S. Bancorp (USB) -- New Covered Calls Position
The buy/write transaction was:
6/18/2024 Bought 400 U.S. Bancorp shares @ $39.11.
6/18/2024 Sold 4 USB 7/12/2024 $38.00 Call options @ $1.55 per share.
Note: Implied Volatility (IV) of the Call options was at 21.1 when this position was transacted which, as I prefer, is above the current VIX of 12.4.
6/27/2024 Upcoming quarterly ex-dividend of $.49 per share.
Two possible overall performance results (including commissions) for this U.S. Bancorp Covered Calls position are as follows:
Covered Calls Net Investment: $15,026.68
= ($39.11 - $1.55) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$617.32
= ($1.55 * 400 shares) - $2.68 commission
(b) Dividend Income (If U.S. Bancorp Call options exercised early on June 26th, 2024, the last business day prior to the June 27th ex-div date): +$0.00; or
(b) Dividend Income (If U.S. Bancorp stock assigned at the July 12th, 2024 options expiration): +$196.00
= ($.49 dividends per share x 400 shares)
(c) Capital Appreciation (If U.S. Bancorp's Call options assigned early on June 26th): -$444.00
+($38.00 strike price - $39.11 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $38.00 strike price at the 7/12/2024 options expiration): -$444.00
+($38.00 - $39.11) * 400 shares
1. Total Net Profit [If option exercised early (business day prior to the June 27th ex-dividend date)]: +$173.32
= (+$617.32 options income +$0.00 dividend income -$444.00 capital appreciation); or
2. Total Net Profit (If 400 U.S. Bancorp shares assigned at the $38.00 strike price at the July 12th, 2024 expiration): +$369.32
= (+$617.32 options income +$196.00 dividend income -$444.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 6/27/2024 ex-dividend date]: +1.2%
= +$173.32/$15,026.68
Potential Annualized Return-on-Investment (If option exercised early): +46.8%
= (+$173.32/$15,026.68) * (365/9 days); or
2. Potential Absolute Return-on-Investment (If U.S. Bancorp's shares assigned on the July 12th options expiration date): +2.5%
= +$369.32/$15,026.68
Potential Annualized Return-on-Investment (If 400 U.S. Bancorp shares assigned at $38.00 at the July 12th, 2024 expiration): +37.4%
= (+$369.32/$15,026.68) * (365/24 days)
