Rollout to Continue Covered Calls in General Motors Corporation and Uber Technologies Inc.

Covered Calls positions in General Motors Corporation (ticker GM) and Uber Technologies Inc. (UBER) with March 4th, 2022 (last Friday) options expiration dates expired out-of-the-money.  Today, both Covered Calls positions were continued by selling March 18th, 2022 Call options against the shares held. The share prices of both stocks have declined by more than 10% from their original purchase price, but the Covered Calls Advisor's evaluation of these companies is unchanged, so these positions are being continued in an effort to repair the current losses in these positions.

GM has a Strong Buy rating by the 19 analysts covering the company.  Seventeen analysts rate it as either Buy or Outperform, 2 rate it Neutral, and none rate it as either Underperform or Strong Sell.  Their current average target price is $75.44 which is +82.4% above today's $41.35 stock price when the March 18th, 2018 $42.50 Call options were sold.  GM's valuation is attractive with a current P/E ratio of only 5.8 and their 2022 earnings per share are expected to be approximately even with their 2021 results.   

Uber is also rated as a Strong Buy by the forty analysts now covering it.  Their average current target price is $59.91 (+93.7% above today's $30.93 price when the 3/18/2022 $32.00 Calls were sold).  Just yesterday, they announced a 22% increase in their Q1 2022 EBITDA guidance range to $130 to $150 million.  In February, their ride-sharing volume was up 25% on a month-to-month basis.  And for their delivery business, they reported their first profitable quarter ever in Q4 2021 and their annual run rate through February 2022 is continuing to trend higher still.

The details-to-date of both of these Covered Calls positions to-date are provided below.

1. General Motors Corporation (GM) -- Continuation of Covered Calls Position
The original buy/write transaction was as follows:
2/15/2022 Bought 300 shares of GM stock @ $49.24 per share 
2/15/2022 Sold 3 GM March 4th, 2022 $46.00 Call options @ $3.98 per share
Note: The Implied Volatility of these Calls was 43.8
3/4/2018 Three GM Calls expired out-of-the-money and the 300 GM shares were retained in the Covered Calls Advisor Portfolio.
3/08/2022 Rolled Down-and-Out the GM Covered Calls position by selling 3 GM March 18th, 2022 $42.50 Call options at $1.15 per share.  Note: the GM stock price was $41.35 when this transaction was executed.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $13,580.01
= ($49.24 - $3.98) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,534.98
= ($3.98 + $1.15) * 300 shares - $4.02 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GM share price unchanged at $41.35 on 3/18/2022 expiration date): -$2,367.00
= ($41.35 -$49.24) * 300 shares; or
(c) Capital Appreciation (If shares above $42.50 strike price at the March 18th options expiration): -$2,022.00
= ($42.50 -$49.24) * 300 shares

1. Potential Net Profit (If GM share price unchanged at $41.35 on 3/18/2022 expiration date): -$802.02
= (+$1,534.98 options income +$0.00 dividend income - $2,367.00 capital appreciation)
2. Potential Net Profit (If GM price is above the $42.50 strike price at the March 18th options expiration): -$487.02
= (+$1,534.98 options income +$0.00 dividend income - $2,022.00 capital appreciation)

1. Absolute Return-on-Investment (If GM share price unchanged at $41.35 on 3/18/2022 expiration date): -5.9%
= -$802.02/$13,580.01
Equivalent Annualized Return-on-Investment (If GM price unchanged at options expiration): -67.4%
= (-$802.02/$13,580.01) * (365/32 days)
2. Absolute Return-on-Investment (If GM price is above $42.50 strike price at the March 18th options expiration): -3.6%
= -$487.02/$13,580.01
Equivalent Annualized Return-on-Investment (If assigned on the March 18th, 2022 options expiration date): -40.9%
= (-$487.02/$13,580.01)*(365/32 days)

2.  Uber Technologies Inc. (UBER) -- Continuation of the Covered Calls Position
The original net debit buy/write limit order was executed as follows:
2/14/2022 Bought 300 shares of Uber Technologies Inc. stock @ $34.58 per share 
2/14/2022 Sold 3 Uber March 4th, 2022 $32.00 Call options @ $3.47 per share
Note: this was a simultaneous Buy/Write transaction
3/4/2018 Three Uber Calls expired out-of-the-money and the 300 Uber Technologies shares were retained in the Covered Calls Advisor Portfolio.
3/08/2022 Rolled Out the Uber Covered Calls position by selling 3 Uber March 18th, 2022 $32.00 Call options at $1.12 per share.  Note: Uber's stock price was $30.93 when this transaction was executed.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $9,335.01
= ($34.58 - $3.47) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$1,038.99
= ($3.47 + $1.12) * 300 shares - $4.02 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is unchanged at $30.93 on the March 18th expiration): -$1,095.00
= ($30.93 -$34.58) * 300 shares; OR
(c) Capital Appreciation (If Uber stock is assigned at the $32.00 strike price on the March 18th options expiration date): -$774.00.00
= ($32.00 -$34.58) * 300 shares

1. Potential Total Net Profit (If Uber stock is unchanged at $30.93 on the March 18th options expiration date): -$56.01
= (+$1,038.99 options income +$0.00 dividend income -$1,095.00 capital appreciation); OR
2. Potential Total Net Profit (If Uber stock is assigned at the $32.00 strike price on the March 18th options expiration date): +$264.99
= (+$1,038.99 options income +$0.00 dividend income -$774.00 capital appreciation)
 

1. Absolute Return-on-Investment (If Uber stock is unchanged at $30.93 on the March 18th options expiration date): -0.6%
= -$56.01/$9,335.01
Equivalent Annualized Return-on-Investment (If Uber stock is unchanged at $30.93 on the March 18th expiration): -6.6%
= (-$56.01/$9,335.01)*(365/33 days); OR
2. Absolute Return-on-Investment (If Uber stock is assigned at the $32.00 strike price on the March 18th options expiration date): +2.8%
= +$264.99/$9,335.01
Equivalent Annualized Return-on-Investment  (If Uber stock is assigned at the $32.00 strike price on the March 18th options expiration date): +31.4%
= (+$264.99/$9,335.01)*(365/33 days)

Established Covered Calls in Devon Energy Corp.

Today, a Covered Calls position was established in Devon Energy Corp.(ticker DVN) when the Covered Calls Advisor's buy/write limit order for the March 18th, 2022 $54.00 Call options executed at a net debit price of $53.38.  Two hundred Devon shares were purchased at $58.90 and 2 March 18th, 2022 $54.00 Calls were sold at $5.52 per share.  So, the corresponding time value (aka extrinsic value) was $.62 per share = [$5.52 Call options premium - ($58.90 stock purchase price - $54.00 strike price)].  Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, an in-the-money Covered Calls position was established--the Delta was 79.7, which closely approximates the probability that the Call options will be in-the-money on the options expiration date.  In addition, the Implied Volatility of the Calls was significantly higher than normal for Devon at 58.0 when the position was established. This elevated I.V. mirrored the substantially higher VIX, which was below 20 at the beginning of the year and today was trading at 35.0. 

Devon goes ex-dividend at $1.00 per share (6.8% annualized dividend yield at the current stock price) this Friday, so this dividend is included in the potential return-on-investment results shown below. 

A potential return-on-investment result is +3.0% absolute return in 12 days (equivalent to a +91.9% annualized return-on-investment) if Devon stock is in-the-money and therefore assigned (i.e. sold) at the $54.00 strike price on the March 18th options expiration date.

Devon Energy Corp. (DVN) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
03/07/2022 Bought 200 shares of Devon Energy stock @ $58.90 per share 
03/07/2022 Sold 2 DVN March 18th, 2022 $54.00 Call options @ $5.52 per share
03/11/2022 Upcoming ex-dividend at $1.00 per share

The overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $10,677.34
= ($58.90 - $5.52) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$1,102.66
= ($5.52 * 200 shares) - $1.34 commission
(b) Dividend Income (If Devon stock assigned on March 18th options expiration date): $200.00
= $1.00 dividend per share x 200 shares
(c) Capital Appreciation (If Devon stock is above $54.00 strike price at the March 18th expiration): -$980.00
= ($54.00 - $58.90) * 200 shares

Total Net Profit (If stock assigned on March 18th options expiration date): +$322.66
= (+$1,102.66 options income +$200.00 dividend income - $980.00 capital appreciation)

Absolute Return-on-Investment: +3.0%
= +$322.66/$10,677.34
Equivalent Annualized Return: +91.9%
= (+$322.66/$10,677.34)*(365/12 days)

March 4th, 2022 Options Expiration Results

The Covered Calls Advisor Portfolio had four Covered Calls positions with March 4th, 2022 options expirations with the following results:

1. Three positions in General Motors Corporation, iShares China Large-Cap ETF, and Uber Technologies Inc. closed out-of-the-money (i.e. stock price below the strike price), so the Call options expired and stocks remain in the Covered Calls Advisor Portfolio (as shown in the current positions list in the right sidebar of this blog).  Decisions for each of these three positions will be made early next week to either sell these shares or to attempt to repair these losing positions by continuing these Covered Calls positions by selling future Call options against the shares currently held.  As always, whatever transactions are made for these three positions, details will be posted on this blog on the same day that they occur.

2. One position in Nucor Corporation was in-the-money, and shortly before market close yesterday (on options expiration Friday), a decision was made to continue to repair this Covered Calls position back to profitability.  I am continuing this repair strategy since I remain as bullish on Nucor as when I originally established this position on January 5th, 2022.  A narrative summary of the history of this Nucor position is as follows:

On January 5th, 2022 the Covered Calls Advisor established a Covered Calls position in Nucor Corporation (ticker NUE) at the January 21st, 2022 options expiration date at the $115.00 strike price.  The stock price declined precipitously to the low $90s largely because of the decline in the spot steel price.  At that time (on January 24th) Nucor out-of-the-money February 18th, 2022 $97.50 Call options were sold to begin an attempt to repair this losing Covered Calls position.  Prices had bounced back to $110.34 on January 21st when I decided to roll up $12.50 from the $97.50 strike price to the $110.00 strike price and at the same February 18th, 2022 options expiration date.  Then, on February 11th, Nucor had continued to increase further to the $118 range when I rolled up again to the same Feb 18th expiration but at the $119.00 strike price.  In mid-afternoon of the Feb 18th expiration, Nucor's stock price had continued its rise to $123.245 and I continued my position repair approach and rolled-up-and-out to the $124.00 strike price for two weeks more to the March 4th expiration date.  Late in the trading day of the March 4th (yesterday) options expiration, Nucor's stock had continued its increase further to $137.28 when I decided to continue my position repair approach once again and rolled-up-and-out to the $130.00 strike price for two more weeks to the March 18th, 2022 options expiration date.   A vertical debit spread transaction was executed at a net debit of $2.75 ($13.55 - $10.80) per share -- so $3.25 time value per share ($130.00 new strike price - $124.00 old strike price - $2.75 net debit) was added to this Covered Calls position.  

As detailed below, a potential return-on-investment result for this Nucor Corporation Covered Calls position is now +0.6% absolute return in 72 days (equivalent to a +2.8% annualized return-on-investment) if the stock price closes above the $130.00 strike price on the March 18th, 2022 options expiration date. 

Nucor Corporation (NUE) -- Continuation of Covered Calls Position
The original simultaneous buy/write transaction was as follows:
1/5/2022 Bought 300 Nucor shares @ $121.94
1/5/2022 Sold 3 Nucor 1/21/2022 $115.00 Call options @ $8.55
Note: the Implied Volatility of the Calls was 37.5 when this transaction was executed, well above the S&P 500 Volatility Index (VIX) of 16.7.
1/21/2022 Three Nucor Call options expired out-of-the-money and 300 shares of Nucor retained in the Covered Calls Advisor Portfolio.
1/24/2022 Continued the Nucor Covered Calls position by rolling it out to the February 18th, 2022 $97.50 strike by selling 3 NUE Calls at $3.05 per share.
2/02/2022 Rolled-Up the NUE Covered Calls position by the following debit spread transaction:  Simultaneously Bought-to-Close the three Feb. 18th $97.50 Calls @ $13.20 per share and Sold-to-Open three Feb. 18th $110.00 Calls @ $4.50 per share.
2/11/2022 Rolled-Up the NUE Covered Calls position by the following debit spread transaction:  Simultaneously Bought-to-Close the three Feb. 18th $110. Calls @ $10.08 per share and Sold-to-Open three Feb. 18th $119.00 Calls @ $3.38 per share.
2/18/2022 Rolled-Up-and-Out the NUE Covered Calls position by the following debit spread transaction:  Simultaneously Bought-to-Close the three Feb. 18th $119.00 Calls @ $4.37 per share and Sold-to-Open three March 4th $124.00 Calls @ $4.03 per share.
3/04/2022 Rolled-Up-and-Out the NUE Covered Calls position by the following debit spread transaction:  Simultaneously Bought-to-Close the three March 4th $124.00 Calls @ $13.55 per share and Sold-to-Open three March 18th $130.00 Calls @ $10.80 per share.

A possible overall performance result (including commissions) for this Nucor Corporation Covered Calls position is as follows:

Covered Calls Cost Basis: $34,019.01
= ($121.94 - $8.55) * 300 shares + $2.01 commissions

Net Profit Components:
(a) Options Income: -$2,229.06
= ($8.55 + $3.05 - $13.70 + $4.50 +3.38 - $10.08 -$4.37 +$4.03 -$13.55 + $10.80) * 300 shares - $12.06 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Nucor shares assigned at $130.00 strike price at options expiration): +$2,418.00
+($130.00 - $121.94) * 300 shares

Total Net Profit (If Nucor shares assigned at the $130.00 strike price at the March 18th, 2022 expiration): +$188.94 = (-$2,229.06 options income + $0.00 dividend income + $2,418.00 capital appreciation)  

Absolute Return-on-Investment (If Nucor shares assigned at $130.00 strike price on the March 18th, 2022 options expiration date): +0.6%   = +$188.94/$34,019.01

Annualized Return-on-Investment (If Nucor stock assigned at $130.00 at the March 18th, 2022 expiration): +2.8%

= (+$188.94/$34,019.01) *(365/72 days)

 

 

I encourage you to email me at the address shown below with any questions/etc. related to Covered Calls (or their equivalent Cash-Secured Puts).

Have a Great Weekend,

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Covered Call Established in Salesforce.Com Inc.

Today a Covered Call position was established in Salesforce.Com Inc. (ticker symbol CRM) when the Covered Calls Advisor's buy/write limit order was executed -- 100 shares were purchased at $200.01 and 1 March 18th, 2022 Call option was sold at $13.63 at the $190.00 strike price.  Given the Covered Calls Advisor's current cautious Overall Market Meter outlook, a moderately in-the-money Covered Call position was established -- the Delta was 71.7, which closely approximates the probability that the Call option will be in-the-money on the options expiration date.  In addition, the Implied Volatility of the Call was 46.9 when the position was established, well above the current VIX of 33.4.  There is no quarterly earnings report or ex-dividend date prior to the options expiration date.

According to Reuters Research, Salesforce has a Strong Buy rating by the 42 analysts covering the company.  Thirty-three analysts rate it as either Buy or Outperform, nine rate it Neutral, and none rate it as either Underperform or Strong Sell.  Their current average target price is $295.95 which is +48.0% above today's $200.01 purchase price. 

Some key numbers for this Salesforce.Com Covered Call position are:
Covered Call Cost Basis: $18,638.67
Profit if Assigned on Expiration Date: $361.33
Days Until Expiration: 15
Absolute Return-on-Investment: +1.9%
Annualized Return-on-Investment: +47.2%

As always, I encourage your email questions related to the Covered Calls strategy.

Regards and Godspeed,

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net