Established Covered Calls Position in iShares China Large-Cap ETF

A second Covered Calls position was established in iShares China Large-Cap ETF (FXI). The first position expires tomorrow and is likely to be called away since it is well in-the-money. I want to maintain an ongoing Covered Calls position in iShares China Large-Cap ETF so this second position has an expiration on the monthly August 18th, 2023 options expiration date.  This is consistent with my intention to establish approximately bi-weekly Covered Calls in FXI in upcoming weeks this year.  Finally, the fact that investing in China-based companies improves the diversification of the Covered Calls Advisor Portfolio appeals to me.  In short, it serves as a counterbalance to my normal home country bias.  

FXI is very attractive from a valuation perspective since its current P/E of 8.6 and P/Book of 1.1 is less than one-half of the S&P 500 P/E of 19 and P/Book of 3.9.  One thousand shares of iShares China Large-Cap ETF were purchased at $28.77 and ten August 18th, 2023 Call options were sold at the $27.85 strike price at $1.37 per share--a net debit transaction of $27.40 per share which provides a $.60 per share time value profit potential.  

As detailed below, a potential return-on-investment result is +1.6% absolute return (equivalent to +34.7% annualized return-on-investment for the next 17 days) if the iShares China Large-Cap ETF share price is in-the-money (i.e. above the $27.85 strike price) and therefore assigned on the August 18th, 2023 options expiration date.

 
iShares China Large-Cap ETF (FXI) -- New Covered Calls Position 
The Buy/Write transaction was as follows:
8/2/2023 Bought 1,000 shares of iShares China Large-Cap ETF @ $28.77 per share.  
8/2/2023 Sold 10 FXI August 18th, 2023 $27.85 Call options @ $1.37 per share.  

A possible overall performance result (including commissions) for this iShares China Large-Cap ETF Covered Calls position is as follows:
FXI Covered Calls Net Investment: $27,406.70
= ($28.77 - $1.37) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$1,363.30
= ($1.37 * 1,000 shares) - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 iShares China Large-Cap ETF shares assigned at $27.85 strike price at expiration): -$920.00
+($27.85 - $28.77) * 1,000 shares

Total Net Profit Potential (If 1,000 iShares China Large-Cap ETF shares assigned at $27.85 strike price at expiration): +$443.30
= (+$1,363.30 options income +$0.00 dividend income -$920.00 capital appreciation)
Potential Absolute Return-on-Investment: +1.6%
= +$443.30/$27,406.70
Potential Annualized Return-on-Investment: +34.7%
= (+$443.30/$27,406.70) * (365/17 days)

Covered Calls Established in Uber Technologies Inc.

Today my buy/write net debit limit order was executed and 500 shares of Uber Technologies Inc.(ticker symbol UBER) stock were purchased at $46.43 and 5 August 18th, 2023 $44.00 Call options were sold at $3.13 per share -- a net debit of $43.30 per share -- so the potential time value profit if the stock is in-the-money and therefore closed out by assignment at expiration is $.70 per share [$3.13 Call options premium - ($46.43 stock purchase price - $44.00 strike price)].  

This is a repeat of seven similar Covered Calls positions in Uber during the past four months and all were successfully assigned on their respective options expiration dates.  I remain bullish on Uber despite the negative reaction so far to today's quarterly earnings report.  Their earnings report was very good and I am hopeful that today's 6+% decline so far is just profit taking from some investors who have made substantial profits this year in Uber.  Like the prior Uber positions, today's new position was established at a moderately in-the-money strike price with an approximate probability when this position was established that the stock will be in-the-money and therefore assigned on the options expiration date of 73.0%.

As detailed below, a potential outcome for this Uber Technologies investment is +1.6% absolute return-on-investment for the next 18 days (equivalent to +32.5% annualized-return-on-investment) if the stock closes above the $44.00 strike price on the August 18th, 2023 options expiration date.

Uber Technologies Inc. (UBER) -- New Covered Calls Position

The net debit buy/write limit order was executed as follows:
8/1/2023 Bought 500 shares of Uber Technologies Inc. stock @ $46.43 per share 
8/1/2023 Sold 5 Uber August 18th, 2023 $44.00 Call options @ $3.13 per share
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Calls was 39.8 when this position was established.  

A possible overall performance result (including commissions) if this position is assigned on its 8/18/2023 options expiration date is follows:
Covered Calls Net Investment: $21,653.35
= ($46.43 - $3.13) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$1,561.65
= ($3.13 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Uber stock is above the $44.00 strike price at the August 18th expiration): -$1,215.00
= ($44.00 - $46.43) * 500 shares

Potential Total Net Profit (If assigned at expiration): +$346.65
= (+$1,561.65 options income + $0.00 dividend income - $1,215.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.6%
= +$346.65/$21,653.35
Potential Equivalent Annualized-Return-on-Investment: +32.5%
= (+$346.65/$21,653.35) * (365/18 days)

Established Covered Calls Position in Honeywell International Inc.

Late in this afternoon's trading session, a Covered Calls position was established in Honeywell International Inc. (ticker symbol HON) when the Covered Calls Advisor's buy/write limit order at $188.52 was executed.  Two hundred shares were purchased at $193.51 and 2 August 18th, 2023 Call options were sold at $4.99 at the $190.00 strike price.  The corresponding extrinsic value (i.e. time value) was $1.48 per share [$4.99 Call options premium - ($193.51 stock purchase price - $190.00 strike price)], all of which will be profit if the stock is assigned (either by early assignment on the last business day prior to the August 10th ex-dividend date or at the August 18th options expiration date).

At today's purchase price, the upcoming ex-dividend of $1.03 on August 10th has a 2.1% annualized dividend yield.  The Implied Volatility of the Call options was 16.9 which (as preferred by the Covered Calls Advisor) is above the current 13.6 of the S&P 500 Volatility Index (i.e. VIX) and the Delta was 68.0 which approximates a 68.0% probability that this position will be in-the-money on the 8/18/2023 options expiration date.

This relatively short-term (only 19 days until options expiration) position is established to take advantage of the potential to achieve a satisfactory annualized return-on-investment in a position that meets eight of the nine criteria of the Covered Calls Advisor's Dividend Capture Strategy (see table below at the end of this post).  

As detailed below, two potential return-on-investment results are: 

•  +0.8% absolute return (equivalent to +28.5% annualized return for the next 10 days) if the stock is assigned early on the last business day prior to the August 10th ex-dividend date); OR 

• +1.3% absolute return (equivalent to +25.5% annualized return over the next 19 days) if the stock is assigned on the August 18th options expiration date.

Honeywell International Inc. (HON) -- New Covered Calls Position

The buy/write transaction was:
7/31/2023 Bought 200 Honeywell shares @ $193.51
7/31/2023 Sold 2 Honeywell 8/18/2023 $190.00 Call options @ $4.99
8/10/2023 Upcoming quarterly ex-dividend of $1.03 per share

Two possible overall performance results (including commissions) for this Honeywell Covered Calls position are as follows:
Covered Calls Cost Basis: $37,705.34
= ($193.51 - $4.99) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$996.66
= ($4.99 * 200 shares) - $1.34 commission
(b) Dividend Income (If option exercised early on August 9th, the last business day prior to the August 10th ex-div date): +$0.00; or
(b) Dividend Income (If Honeywell stock assigned at the August 18th, 2023 options expiration date, in which case the $1.03 dividend is captured): +$206.00
= ($1.03 dividend per share x 200 shares)

(c) Capital Appreciation (If HON Call options assigned early on 8/9/2023): -$702.00
+($190.00 - $193.51) * 200 shares; or
(c) Capital Appreciation (If shares assigned at $190.00 strike price at the 8/18/2023 options expiration date): -$715.00
+($190.00 - $193.51) * 200 shares

1. Total Net Profit [If option exercised on 8/9/2023 (business day prior to the 8/10/2023 ex-dividend date)]: +$294.66

= (+$996.66 options income +$0.00 dividend income -$702.00 capital appreciation); or

2. Total Net Profit (If Honeywell shares assigned at $190.00 on the August 18th, 2023 options expiration date): +$500.66

= (+$996.66 +$206.00 -$702.00)

1. Absolute Return-on-Investment [If option exercised on Aug. 9th (business day prior to the ex-dividend date)]: +0.8%

= +$294.66/$37,705.34

Annualized Return-on-Investment (If option exercised early): +28.5%

= (+$294.66/$37,705.34) * (365/10 days); or

2. Absolute Return-on-Investment (If Honeywell shares assigned at $190.00 at the 8/18/2023 options expiration date): +1.3%

= +$500.66/$37,705.34

Annualized Return-on-Investment (If HON shares assigned at $190.00 at the August 18th, 2023 expiration): +25.5%

= (+$500.66/$37,705.34) * (365/19 days)

These returns will be achieved as long as the stock is above the $190.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $187.49 ($193.51 -$4.99 -$1.03) provides a 3.1% downside protection below today's stock purchase price.

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Honeywell position, eight of the nine criteria are achieved.

Established Covered Calls Position in Baker Hughes Company

A Covered Calls position was established in Baker Hughes Company (ticker symbol BKR) today when the Covered Calls Advisor's buy/write limit order at $33.72 was executed.  Five hundred shares were purchased at $35.43 and 5 August 18th, 2023 Call options were sold at $1.71 at the $34.00 strike price.  The corresponding extrinsic value (i.e. time value) was $.28 per share [$1.71 Call options premium - ($35.43 stock purchase price - $34.00 strike price)], all of which will be profit if the stock is assigned (either by early assignment this Friday on the last business day prior to next Monday's August 7th ex-dividend date or at the August 18th options expiration date).

At today's purchase price, the upcoming ex-dividend of $.20 on August 7th has a 2.3% annualized dividend yield.  The Implied Volatility of the Call options was 23.4 which (as preferred by the Covered Calls Advisor) is above the current 14.0 of the S&P 500 Volatility Index (i.e. VIX) and the Delta was 75.0 which approximates a 75.0% probability that this position will be in-the-money on the 8/18/2023 options expiration date.

This relatively short-term (only 19 days until options expiration) position is established to take advantage of the potential to achieve a high annualized return-on-investment in a position that meets all nine criteria of the Covered Calls Advisor's Dividend Capture Strategy (see table below at the end of this post).  Baker Hughes is among several attractively priced companies at present in the Oil and Gas Equipment and Services industry.  It appeared in my Future 5-Year Growth stock screener and Wall Street analysts have a current average target price of $39.54 (+11.6% above today's purchase price.

As detailed below, two potential return-on-investment results are: 

•  +0.8% absolute return (equivalent to +42.3% annualized return for the next 7 days) if the stock is assigned early this Friday (the last business day prior to the August 7th ex-dividend date); OR 

• +1.4% absolute return (equivalent to +27.0% annualized return over the next 19 days) if the stock is assigned on the August 18th options expiration date.

Baker Hughes Company (BKR) -- New Covered Calls Position

The buy/write transaction was:
7/31/2023 Bought 500 Baker Hughes shares @ $35.43
7/31/2023 Sold 5 BKR 8/18/2023 $34.00 Call options @ $1.71
8/7/2023 Upcoming quarterly ex-dividend of $.20 per share

Two possible overall performance results (including commissions) for this Baker Hughes Company Covered Calls position are as follows:
Covered Calls Cost Basis: $16,863.35
= ($35.43 - $1.71) * 500 shares + $3.35 commission

Net Profit Components:
(a) Options Income: +$851.65
= ($1.71 * 500 shares) - $3.35 commission
(b) Dividend Income (If option exercised early on August 4th, the last business day prior to the August 7th ex-div date): +$0.00; or
(b) Dividend Income (If Baker Hughes stock assigned at the August 18th, 2023 options expiration date, in which case the $.20 dividend is captured): +$100.00
= ($.20 dividend per share x 500 shares)

(c) Capital Appreciation (If BKR Call options assigned early on 8/4/2023): -$715.00
+($34.00 - $35.43) * 500 shares; or
(c) Capital Appreciation (If shares assigned at $34.00 strike price at the 8/18/2023 options expiration date): -$715.00
+($34.00 - $35.43) * 500 shares

1. Total Net Profit [If option exercised on 8/4/2023 (business day prior to the 8/7/2023 ex-dividend date)]: +$136.65

= (+$851.65 options income +$0.00 dividend income -$715.00 capital appreciation); or

2. Total Net Profit (If Baker Hughes shares assigned at $34.00 on the August 18th, 2023 options expiration date): +$236.65

= (+$851.65 +$100.00 -$715.00)

1. Absolute Return-on-Investment [If option exercised on Aug. 4th (business day prior to the ex-dividend date)]: +0.8%

= +$136.65/$16,863.35

Annualized Return-on-Investment (If option exercised early): +42.3%

= (+$136.65/$16,863.35) * (365/7 days); or

2. Absolute Return-on-Investment (If Baker Hughes shares assigned at $34.00 at the 8/18/2023 options expiration date): +1.4%

= +$236.65/$16,863.35

Annualized Return-on-Investment (If BKR shares assigned at $34.00 at the August 18th, 2023 expiration): +27.0%

= (+$381.65/$16,863.35) * (365/19 days)

Either outcome provides an attractive return-on-investment result for this Baker Hughes Company investment.  These returns will be achieved as long as the stock is above the $34.00 strike price at assignment.  If the stock declines below the strike price, the breakeven price of $33.52 ($35.43 -$1.71 -$.20) provides a 5.4% downside protection below today's stock purchase price.

At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet must be 'YES' prior to establishing a position.  As shown below with this Baker Hughes position, all nine criteria are achieved.