Continuation of GoHealth Inc. Covered Calls

At the November 20th, 2020 options expiration date, the Covered Calls position in GoHealth Inc. (ticker symbol GOCO) expired with the stock price at $11.63, well below the $15.00 strike price.  So, the October monthly Call options expired and the 400 shares of GoHealth Inc. stock were retained in the Covered Calls Advisor Portfolio.  Today, with the GoHealth stock price at $11.62, a sell-to-open order was executed to sell 4 December 18th, 2020 Call options at the $12.50 strike price for $.30 per share to continue this Covered Calls position.  This stock has declined substantially (by 22.5%) since it was bought; but by receiving good income by selling Calls each month, this ongoing Covered Calls position is currently only at a small net loss of $252.00.  Despite this stock decline, the Covered Calls Advisor remains bullish on its current business.  GoHealth is experiencing a large sales growth this quarter versus the same quarter last year because of their expansion of both insurance providers and geographies compounded by the growth in Medicare Advantage policies and the growing reliance by both providers and consumers on e-brokers such as GoHealth.  By continuing with this Covered Calls position by selling the December monthly Calls, the Covered Calls Advisor is attempting to repair this position back to a small net profit.

As detailed below, two potential return-on-investment results for this GoHealth Inc. position are: (1) -3.8% absolute return in 117 days (equivalent to a -11.8% annualized return-on-investment) if the stock price is unchanged at $11.62 at the December 18th, 2020 options expiration; or (2) +2.5% absolute return in 117 days (equivalent to a +7.8% annualized return-on-investment) if the stock closes above the $12.50 strike price.

GoHealth Inc. (GOCO) -- Continuation of Covered Calls Position
The Buy/Write transaction was as follows:
08/24/2020 Bought 400 shares of GoHealth Inc. stock @ $15.00 per share 
08/24/2020 Sold 4 GoHealth Sept 18th, 2020 $15.00 Call options @ $1.05 per share
Note: the Implied Volatility of these Calls was very high at 61.6 today when this transaction was made.
09/18/2020 GOCO Call options expired since stock closed below the strike price
09/23/2020 Sold 4 GOCO Oct 16th, 2020 $15.00 Call options at $.80 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $14.54 today when these Call options were sold.
10/16/2020 GOCO Call options expired since stock closed below the strike price
11/04/2020 Sold 4 GOCO Nov. 20th, 2020 $12.50 Call options at $.70 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $11.82 today when these Call options were sold.
11/20/2020 GOCO Call options expired since stock closed below the strike price
12/04/2020 Sold 4 GOCO Dec. 18th, 2020 $12.50 Call options at $.30 against the 400 shares of GoHealth stock to continue the GoHealth Covered Calls position.
Note: the price of GOCO was $11.62 today when these Call options were sold.

Two possible overall performance results (including commissions) are as follows:
Covered Call Cost Basis: $5,582.68
= ($15.00 - $1.05) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,140.00
= ($1.05 + $.80 + $.70 + $.30) * 400 shares
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If GoHealth stock is unchanged at $11.62 at Dec 18th expiration): -$1,352.00
= ($11.62 - $15.00) * 400 shares; OR
(c) Capital Appreciation (If GoHealth stock is above $12.50 strike price at Dec. 18th expiration): -$1,000.00
= ($12.50 - $15.00) * 400 shares

1. Total Net Profit (If GOCO stock unchanged at $11.62 at options expiration): -$212.00
= (+$1,140.00 options income +$0.00 dividend income -$1,352.00 capital appreciation)
2. Total Net Profit (If GOCO stock closes above $12.50 at Dec. 18th options expiration): +$140.00
= (+$1,140.00 options income +$0.00 dividend income -$1,000.00 capital appreciation)

1. Absolute Return (If GoHealth stock unchanged): -3.8%
= -$212.00/$5,582.68
Equivalent Annualized Return: -11.8%
= (-$212.00/$5,582.68)*(365/117 days)
2. Absolute Return (If stock closes above $12.50 strike price at options expiration): +2.5%
= +$140.00/$5,582.68
Equivalent Annualized Return: +7.8%
= (+$140.00/$5,582.68)*(365/117 days)

Established Covered Call in Salesforce.Com Inc.

Today, a buy/write limit order in Salesforce.Com Inc. (ticker CRM) was executed at the Covered Calls Advisors' net debit price of $204.70 per share. One hundred shares were purchased at $217.15 and one December 18th, 2020 Call option was sold for $12.45 at the $210.00 strike price, therefore a time value of $5.30 per share = [$12.45 option premium - ($217.15 stock price - $210.00 strike price)]. Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Calls position was established -- the Delta was 65.0 which closely approximates the probability that the Call options will be in-the-money on the options expiration date.

As detailed below, the potential return-on-investment result is +2.6% absolute return in 17 days (equivalent to a +55.6% annualized return-on-investment).

The Implied Volatility of the Call options sold was very high at 46.1 compared with the current S&P 500 Volatility Index (VIX) value of 21.0.  This elevated level reflects the fact that their just announced acquisition of Slack has been poorly received by some Salesforce investors.  The stock has declined precipitously by 18.0% since this time last week despite its good quarterly earnings report  -- 20% revenue growth and 132% earnings per share growth versus the same quarter last year.  As an investor, it is very difficult to occasionally buy into sharply declining stocks, but it can sometimes be worthwhile if supported by both the potential for a likely outstanding annualized return-on-investment as well as a stock target price potential exceeding +20%, which is the case with this Salesforce Covered Call position.      

 

Salesforce.Com Inc. (CRM) -- New Covered Call Position

The Buy/Write transaction was as follows:
12/02/2020 Bought 100 shares of Salesforce.Com Inc. stock @ $217.15 per share 
12/02/2020 Sold 1 Salesforce December 18th, 2020 $210.00 Call option @ $12.45 per share

A possible overall performance result (including commissions) if the stock price is above the $210.00 strike price at expiration would be as follows:
Covered Call Cost Basis: $20,470.67
= ($217.15 - $12.45) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$1,245.00
= ($12.45 * 100 shares)
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (If Salesforce stock is above $210.00 strike price at the December 18th expiration): -$715.00
= ($210.00 - $217.15) * 100 shares

Total Net Profit: +$530.00
= (+$1,245.00 options income +$0.00 dividend income -$715.00 capital appreciation)

Absolute Return: +2.6%
= +$530.00/$20,470.67
Equivalent Annualized Return: +55.6%
= (+$530.00/$20,470.67)*(365/17 days)

The downside 'breakeven price' at expiration is at $204.70 ($217.15 - $12.45), which is 5.7% below the current market price of $217.15.

Covered Calls Position Established in D.R. Horton Inc.

A Covered Calls position was established early this afternoon in D.R. Horton Inc. (ticker DHI), with a December 11th, 2020 options expiration date.  Four hundred shares of D.R. Horton stock were purchased at $72.26 and two Call options were sold at $3.10 at the $70.00 strike price.  The Delta was 69.8 when this transaction was executed -- a moderately in-the-money position which is consistent with the Covered Calls Advisor's current cautious market outlook.  As preferred, the next earnings report on January 25th, 2021 is after the December 11th, 2020 options expiration date.

D.R. Horton is the largest homebuilder in America by market cap. Importantly, it is considered the best-in-class operator in its industry and has good exposure to the critically important entry-level buyers, lowest debt leverage, and least on-balance sheet land risk.  The future is bright for the housing industry which is in an especially strong position at present.  The current U.S. demand for new houses is at an all-time high (since statistics began to be captured in 1953) relative to the currently available inventory of only 3.3 months.  D.R. Horton was originally identified by the Covered Calls Advisor when it recently appeared in the top 2% of companies identified by my Acquirers Multiple stock screener, a good indication of its current relative valuation.

There is an ex-dividend date this Thursday (12/03) of $.20 per share (1.1% annual dividend yield), so capturing this dividend is included in the potential return-on-investment result detailed below.  The time value obtained when this position was established was $.84 per share [$3.10 Call options premium - ($72.26 stock price - $70.00 strike price)].       

As detailed below, a potential return-on-investment result if this position closes in-the-money at the December 11th options expiration date is +1.5% absolute return in 11 days (equivalent to a +49.9% annualized return-on-investment).  

D.R. Horton Inc. (DHI) -- New Covered Calls Position

The buy/write transaction was executed as follows:
12/01/2020 Bought 400 shares of D.R. Horton Inc. @ $72.26 per share 
12/01/2020 Sold 4 D.R. Horton Dec 11th, 2020 $70.00 Call options @ $3.10 per share
Note: the Implied Volatility of the Call options was 32.9 when this Covered Calls position was executed.
12/03/2020 Ex-dividend at $.20 per share

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $27,666.68
= ($72.26 - $3.10) * 400 shares + $2.68 commission

Net Profit Components:
(a) Options Income: +$1,240.00
= ($3.10 * 400 shares)
(b) Dividend Income: +$80.00
= $.20 per share x 400 shares 
(c) Capital Appreciation (If DHI stock price is above $70.00 strike price at the Dec 11th options expiration date): -$904.00
= ($70.00 -$72.26) * 400 shares

Total Net Profit: +$416.00
= (+$1,240.00 options income +$80.00 dividend income -$904.00 capital appreciation)

Absolute Return: +1.5%
= +$416.00/$27,666.68

Equivalent Annualized Return: +49.9%
= (+$416.00/$27,666.68)*(365/11 days)

These returns will be achieved if the D.R. Horton stock is above the $70.00 strike price at the market closing on the December 11th, 2020 options expiration date.  If the stock declines below the strike price, the breakeven price of $68.96 ($72.26 -$3.10 -$.20) provides 4.6% downside breakeven protection below today's stock purchase price.

Best Wishes and Godspeed,

Jeff Partlow

Covered Call Position Established in Anthem Inc.

A Covered Call position was established this morning in Anthem Inc. (ticker ANTM), with a December 18th, 2020 options expiration date.  One hundred shares of Anthem Inc. stock were purchased at $311.36 and one Call option was sold at $15.18 per share at the $300.00 strike price.  Important to the Covered Calls Advisor, there is no intervening earnings prior to the options expiration date as Anthem's next quarterly earnings report is scheduled for January 21st, 2021.

There is an ex-dividend date this Friday (12/04) of $.95 per share (1.2% annual dividend yield), so capturing this dividend is included in the potential return-on-investment results detailed below.  The time value obtained when this position was established was $3.82 per share [$15.18 Call option premium - ($311.36 stock price - $300.00 strike price)].       

As detailed below, a potential return-on-investment result if this position closes in-the-money at the December 18th options expiration date is +1.6% absolute return in 19 days (equivalent to a +30.9% annualized return-on-investment).  

Anthem Inc. (ANTM) -- New Covered Call Position
The buy/write transactions was as follows:
11/30/2020 Bought 100 shares of Anthem Inc. @ $311.36 per share 
11/30/2020 Sold 1 Anthem Dec 18th, 2020 $300.00 Call option @ $15.18 per share
12/04/2020 Ex-dividend at $.95 per share

A possible overall performance result (including commissions) would be as follows:
Covered Call Cost Basis: $29,618.67
= ($311.36 - $15.18) * 100 shares + $.67 commission

Net Profit Components:
(a) Options Income: +$1,518.00
= ($15.18 * 100 shares)
(b) Dividend Income: +$95.00
= $.95 per share x 100 shares 
(c) Capital Appreciation (If Anthem stock is above $300.00 strike price at the Dec 18th options expiration date): -$1,136.00
= ($300.00 -$311.36) * 100 shares

Total Net Profit: +$477.00
= (+$1,518.00 options income +$95.00 dividend income -$1,136.00 capital appreciation)

Absolute Return: +1.6%
= +$477.00/$29,618.67
Equivalent Annualized Return: +30.9%
= (+$477.00/$29,618.67)*(365/19 days)

These returns will be achieved if the Anthem stock is above the $300.00 strike price at the market closing on the December 18th, 2020 options expiration date.  If the stock declines below the strike price, the breakeven price of $295.23 ($311.36 -$15.18 -$.95) provides 5.2% downside breakeven protection below today's stock purchase price.

Email me at partlow@cox.net if you have any questions related to this post or to anything else related to Covered Calls investing.

Jeff Partlow