As preferred by the Covered Calls Advisor, Cigna's next quarterly earnings report on August 4th, 2022 will be after the June 17th options expiration date. Given the Covered Calls Advisor's current Overall Market Meter indicator of Slightly Bearish, an in-the-money Covered Call position was established with a Delta of 75.8 and the Implied Volatility of the Call option was approximately 28.5 when the buy/write limit order was executed.
Cigna stock has an attractive valuation since its current fiscal year P/E Ratio is estimated to be 12.0 which would be a year-over-year earnings growth of 10.8%. The most recent quarterly earnings report was 17% above analysts' average eps estimate. In addition, Cigna is one of only 5 companies in the Healthcare Sector to appear in my Large-Cap Value+Profitability+Growth stock screener.
As detailed below, a potential return-on-investment result is +1.0% absolute return (equivalent to +49.7% annualized
return for the next 7 days) if the stock is assigned early on June 6th (the last business day
prior to the June 7th ex-date); OR +1.4%
absolute return (equivalent to +28.1% annualized return over the next 18
days) if the stock is assigned on the June 17th, 2022 options expiration date.
Cigna Corporation (CI) -- New Covered Calls PositionThe buy/write transaction today was as follows:
5/31/2022 Bought 100 Cigna Corp. shares @ $271.73
5/31/2022 Sold 1 Cigna 6/17/2022 $260.00 Call option @ $14.19
6/07/2022 Upcoming quarterly ex-dividend of $1.12 per share
Two possible overall performance results (including commissions) for this Cigna Covered Call position are as follows:
Covered Call Cost Basis: $25,754.67
= ($271.73 - $14.19) * 100 shares + $.67 commissions
Net Profit Components:
(a) Options Income: +$1,418.33
= ($14.19 * 100 shares) - $.67 commissions
(b) Dividend Income (If option exercised early on the business day prior to the Dec. 6th ex-div date): +$0.00; or
(b) Dividend Income (If Cigna shares assigned at Dec. 17th, 2022 options expiration): +$112.00
= ($1.12 dividend per share x 100 shares)
(c) Capital Appreciation (If CI shares assigned early on June 6th): -$1,173.00
+($260.00 - $271.73) * 100 shares ;or
(c) Capital Appreciation (If Cigna shares assigned at $260.00 strike price at options expiration): -$1,173.00
+($260.00 - $271.73) * 100 shares
These returns will be achieved as long as the stock is above the $260.00 strike price at assignment. If the stock declines below the strike price, the breakeven price of $256.42 ($271.73 -$14.19 -$1.12) provides 5.6% downside protection below today's purchase price.
The Covered Calls Advisor has established a set of nine criteria to evaluate potential Covered Calls using a Dividend Capture Strategy. The minimum threshold desired to establish a position is that at least eight of these nine criteria must be achieved. As shown in the table below, all nine criteria are met for this Cigna Corporation Covered Call position.
