A Covered Calls position was established in Match Group Inc. (MTCH) when the Covered Calls Advisor's buy/write limit order at a net debit limit price of $31.72 was executed. Four hundred shares were purchased at $34.17 and four June 16th, 2023 Call options were sold at $2.45 at the $32.50 strike price. The time value was $.78 per share = [$32.50 strike price - ($34.17 stock purchase price - $2.45 Call options price)]. Given my current cautious stock market outlook, a moderately in-the-money Covered Call position was established with a Delta of 69.6 which approximates a 69.6% probability this position will be in-the-money and therefore assigned on the June 16th, 2023 options expiration date. As desired, there is no earnings report prior to the options expiration date.
The Match Group is the leading online dating services company worldwide including several brands that include Tinder, Match, and Hinge. Their stock price has plummeted by 57% in the past year and it is now near its lowest price of the past 5 years. Importantly, Match is profitable and their earnings per share are likely to be at an inflection point where they can begin to obtain regular quarterly revenue and profit increases based on their worldwide presence and their growth opportunities (especially in Asia but also in Europe). Importantly, as part of their Q1 2023 earnings report, they announced a new $1.0 billion stock buyback authorization (10%+ of the current market cap) which will be implemented over the next two to three years using about half of their free cash flow resources. The primary catalyst for this increasing optimism stems primarily from the dynamism of Match's relatively new CEO, Bernard Kim, who has been in his new position for only one year now but who demonstrated outstanding performance in his prior CEO role at Zynga. Match's current FY 2023 EPS estimates are at $1.97 per share (+60% above FY 2022) and a further +21% increase to about $2.38 is estimated for FY2024. Wall Street analysts are also becoming increasingly bullish on Match Group's near-term prospects -- twenty-three analysts follow the company and their average price target is currently at $52.36 (fully +53.2% above today's purchase price).
As detailed below, the potential return-on-investment results for this Match Group Inc. Covered Calls position is +2.4% absolute return (equivalent to +49.4% annualized
return-on-investment for the next 18 days) if the stock is assigned on the June 16th options expiration date.
Match Group Inc. (MTCH) -- New Covered Calls Position
The buy/write transaction was:
5/30/2023 Bought 400 Match Group Inc. shares @ $34.17
5/30/2023 Sold 4 MTCH 6/16/2023 $32.50 Call options @ $2.45 per share
.A possible overall performance result (including commissions) for this Match Group Covered Calls position is as follows:
Covered Call Net Investment: $12,690.68
= ($34.17 - $2.45) * 400 shares + $2.68 commission
Net Profit:
(a) Options Income: +$977.32
= ($2.45 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
= ($0.00 dividends per share x 400 shares)
(c) Capital Appreciation (If MTCH shares assigned at $32.50 strike price at expiration): -$668.00
+($32.50 - $34.17) * 400 shares
Total Net Profit (If options exercised on the 6/16/2023 options expiration date): +$309.32
= (+$977.32 options income +$0.00 dividend income -$668.00 capital appreciation)
Potential Absolute Return-on-Investment (If the Match Group Inc. shares are assigned at the $32.50 strike price at the June 16th, 2023 options expiration date): +2.4%
= +$309.32/$12,690.68
Potential Annualized Return-on-Investment (If 400 Match Group shares assigned at $32.50 at the June 16th, 2023 options expiration): +49.4%
= ($309.32/$12,690.68) * (365/18 days)
