August 31st, 2024 Weekly Options Expiration Results

The Covered Calls Advisor Portfolio had two Covered Calls positions with August 31st, 2024 weekly options expirations.  Both positions closed on their options expiration date yesterday with their stock prices in-the-money, so the Calls expired with no remaining value and the Covered Calls were closed out with the stocks sold at their respective strike prices.  The original position and associated return-on-investment details for each position is as follows:

1. iShares KraneShares CSI China Internet ETF (KWEB) -- +1.1% absolute return-on-investment (equivalent to +41.0% annualized return-on-investment) for the 10 days of this investment.  This KWEB position had a $25.50 strike price and it closed at $25.69 yesterday.  The blog post showing the details of this position is here. 

2. Skyworks Solutions Inc. (SWKS) -- +1.3% absolute return-on-investment (equivalent to +44.8% annualized return-on-investment) for the 11 days of this investment.  This Skyworks position had a $104.00 strike price and it closed at $109.59 yesterday.  The original position details are here.

As always, I welcome your questions at the email address shown below on any topics related to the Covered Calls investing strategy. 

Jeff Partlow
The Covered Calls Advisor
partlow@cox.net

Covered Calls Position Established in Global Payments Inc.

Today a Covered Calls position was established in Global Payments Inc. (ticker GPN) at the September 20th, 2024 options expiration date and at the $105.00 strike price.  Three hundred shares were purchased at $109.22 per share and three September 20th, 2024 $105.00 Calls were sold at $5.58 per share. The corresponding potential time value profit was $1.36 per share [$5.58 Call options premium + ($105.00 strike price - $109.22 stock purchase price)]. 

In addition to the potential time value profit of $1.36 per share, there is an upcoming quarterly ex-dividend prior to the Sept. 20th options expiration date of $.25 per share (0.9% annual dividend yield) on September 13th.  The Implied Volatility of these Call options was 24.8 when this position was established.  Establishing positions in companies when the Implied Volatility of their options is greater than that of the S&P 500 Volatility Index (which is currently at 16.6), is strongly preferred by the Covered Calls Advisor.  This preference is the fifth of the twelve Covered Calls investing "edges" (see here).  Since quarterly earnings reports increase volatility, it is also important to me that there is no earnings report prior to the next earnings report, which is true in this instance since Global Payments' next report is scheduled for October 31st, 2024.  

Global Payments is an information technology company (in the Financial Sector).  They provide payment technology and software solutions for card, electronic, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific and they operate through three segments: Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions.

As shown in my GARP (Growth at a Reasonable Price) stock screener results below, Global Payments meets all nineteen filters. 

Global Payments Inc. (GPN) -- New Covered Calls Position 

The buy/write transaction was as follows:
8/28/2024 Bought 300 Global Payments Inc. shares at $109.22.

8/28/2024 Sold 3 GPN Sept 20th, 2024 $105.00 Call options @ $5.58 per share.
9/13/2024 Upcoming ex-dividend of $.25 per share.

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $31,094.01
= ($109.22 - $5.58) * 300 shares + $2.01 commission

Net Profit:
(a) Options Income: +$1,671.99
= ($5.58 * 300 shares) - $2.01 commission
(b) Dividend Income (If GPN stock price is assigned early on the day before the 9/13/2024 ex-dividend date): +$0.00; OR
(b) Dividend Income (If Global Payments stock is above the $105.00 strike price at the September 20th, 2024 options expiration date): +$75.00

= $.25 dividend x 300 shares

(c) Capital Appreciation (If GPN stock price is assigned early on the day before the 9/13/2024 ex-dividend date): -$1,266.00

= ($105.00 strike price - $109.22 stock purchase price) * 300 shares; OR 

(c) Capital Appreciation (If Global Payments stock is above the $105.00 strike price at the September 20th, 2024 options expiration date): -$1,266.00
= ($105.00 strike price - $109.22 stock purchase price) * 300 shares

1. Total Net Profit (If GPN stock price is assigned early on the day before the 9/13/2024 ex-dividend date): +$405.99

= (+$1,671.99 options income +$0.00 dividend income -$1,266.00 capital appreciation); OR
2. Total Net Profit [If Global Payments stock price is in-of-the-money (i.e. above $105.00 strike price) at options expiration]: +$480.99
= (+$1,671.99 options income +$75.00 dividend income -$1,266.00 capital appreciation)

1. Absolute Return-on-Investment: (If early assignment): +1.3%

= +$405.99/$31,094.01
Annualized Return-on-Investment: +29.8%
= (+$405.99/$31,094.01) * (365/16 days); OR 

2. Absolute Return-on-Investment: (If stock is above $105.00 strike price at the options expiration date) : +1.5%
= +$480.99/$31,094.01
Annualized Return-on-Investment: +24.5%
= (+$480.99/$31,094.01) * (365/23 days)

Established Covered Calls in Merck & Co. Inc.

Today, a Covered Calls position was established in Merck & Co. Inc. (ticker MRK) with the purchase of 300 shares at $115.64 per share and three September 20th, 2024 Call options were sold for $3.24 per share at the $114.00 strike price.  A moderately in-the-money Covered Calls positions was established with the probability that the Calls will expire in-the-money on the 9/20/2024 options expiration date was 62.8%.  Merck goes ex-dividend at $.77 per share (2.7% dividend yield at the current stock price) on September 16th which is prior to the September 20th options expiration date -- so this dividend is included in the potential return-on-investment results shown below.  As I prefer, the next quarterly earnings report on October 31st is after the September 20th options expiration date.

As shown in my Quality+Growth stock screener results below, Merck meets all twenty filters including scores in the 90s for both the Quality Score and the Growth Score filters.  It also met all filters in 3 of my other stock screeners: Analysts Picks, StockRover Overall, and Dividend Growth.

Two potential return-on-investment results are: (a) +1.4% absolute return-on-investment (equivalent to +26.0% annualized return-on-investment for the next 20 days) if the stock is assigned early on Sept. 13th (the last trading day prior to the September 16th, 2024 ex-dividend date); OR (b) +2.1% absolute return (equivalent to +32.1% annualized return over the next 24 days) if the stock is assigned on the September 20th options expiration date. 

Merck & Co. Inc. (MRK) -- New Covered Calls Position
The simultaneous buy/write transaction was as follows:
8/27/2024 Bought 300 shares of Merck & Co. stock @ $115.64 per share.  
8/27/2024 Sold 3 MRK September 20th, 2024 $114.00 Call options @ $3.24 per share.
9/16/2024 Upcoming ex-dividend of $.77 per share

Two possible overall performance results (including commissions) would be as follows:
Covered Calls Net Investment: $33,722.01
= ($115.64 - $3.24) * 300 shares + $2.01 commission

Net Profit Components:
(a) Options Income: +$972.00
= ($3.24 * 300 shares)
(b) Dividend Income (If Merck shares assigned on 9/13/2024, the business day prior to the 9/16/2024 ex-dividend date): = +$0.00; or
(b) Dividend Income (If Merck shares assigned at 9/20/2024 options expiration): +$231.00
= $.77 per share x 300 shares
(c) Capital Appreciation (If MRK shares assigned early on 9/16/2024): -$492.00
= ($114.00 strike price -$115.64 stock purchase price) * 300 shares; or
(c) Capital Appreciation (If MRK shares assigned with stock above the $114.00 strike price at the Sept. 20th options expiration date): -$492.00
= ($114.00 -$115.64) * 300 shares

1. Potential Net Profit (If Merck shares assigned on the Sept. 16th ex-dividend date): +$480.00
= (+$972.00 options income +$0.00 dividend income - $492.00 capital appreciation)
2. Potential Net Profit (If MRK price is above $114.00 strike price at the Sept. 20th options expiration): +$711.00
= (+$972.00 options income +$231.00 dividend income - $492.00 capital appreciation)

1. Absolute Return-on-Investment (If Merck shares assigned early on the Sept 16th, 2024 ex-dividend date): +1.4%
= +$480.00/$33,722.01
Equivalent Annualized Return-on-Investment (If assigned early): +26.0%
= (+$480.00/$33,722.01) * (365/20 days)

2. Absolute Return-on-Investment (If Merck price is above the $114.00 strike price at the Sept. 20th options expiration): +2.1%
= +$711.00/$33,722.01
Equivalent Annualized Return-on-Investment (If assigned on the 9/20/2024 options expiration date): +32.1%
= (+$306.00/$24,049.34) * (365/15 days)

Covered Calls Position Established in Taiwan Semiconductor ADR

This afternoon near the market close, my net debit limit order was executed and a Covered Calls position was established in Taiwan Semiconductor ADR (ticker TSM) when the Covered Calls Advisor's buy/write limit order for the September 20th, 2024 $160.00s executed at a net debit price of $155.07. Two hundred Taiwan Semi shares were purchased at $166.72 and 2 Sept 20th, 2024 $160.00 Calls were sold at $11.65 per share. So, the corresponding time value (aka extrinsic value) was $4.93 per share = [$11.65 Call options premium - ($166.72 stock purchase price - $160.00 strike price)]. Given the Covered Calls Advisor's current Neutral Overall Market Meter outlook, a slightly in-the-money Covered Calls position was established--the probability that the position will close in-the-money and therefore by assigned on the 9/20/2024 options expiration date was 62.8% when this position was established. In addition, the Implied Volatility of the Calls was 39.5 which, as desired, was above the VIX which is now 17.5. 

Taiwan Semi goes ex-dividend at $.6158 (a 1.5% annualized dividend yield) at today's stock purchase price. This dividend is included in the potential return-on-investment results shown below. Also, as preferred, there is no earnings report prior to the options expiration date and analysts' current stock target price is $204.66 per share (+22.8% above today's purchase price).

 
As shown in my Quality+Growth stock screener results below, TSM meets all twenty filters including scores in the 90s for both the Quality Score and the Growth Score.  

As detailed below, two potential return-on-investment results for this Taiwan Semi Covered Calls position are: (a) +3.2% absolute return-on-investment (equivalent to +55.2% annualized return-on-investment for the next 21 days) if the stock is assigned early [i.e. on September 11th which is the last trading day prior to the September 12th ex-dividend date]; OR (b) +3.6% absolute return (equivalent to +45.0% annualized return over the next 29 days) if the stock is assigned on the September 20th, 2024 options expiration date.

Taiwan Semiconductor ADR (TSM) -- New Covered Calls Position
The simultaneous buy/write transactions was as follows:
8/22/2024 Bought 200 shares of Taiwan Semiconductor stock @ $166.72 per share 
8/22/2024 Sold 2 Taiwan Semi September 20th, 2024 $160.00 Call options @ $11.65 per share
9/12/2024 Upcoming ex-dividend at $.6158 per share

Two potential overall performance results (including commissions) would be as follows:
Covered Calls Cost Basis: $31,015.34
= ($166.72 - $11.65) * 200 shares + $1.34 commission

Net Profit Components:
(a) Options Income: +$2,328.66
= ($11.65 * 200 shares) - $1.34 commission
(b) Dividend Income (If Taiwan Semi stock assigned on the day prior to the Sept. 12th ex-dividend date): $0.00
(b) Dividend Income (If TSM stock assigned on the Sept.20th options expiration date): +$123.16
= $.6158 dividend per share x 200 shares
(c) Capital Appreciation (If Taiwan Semi stock assigned on the Sept. 12th ex-dividend date): -$1,344.00
= ($160.00 strike price - $166.72 stock purchase price) * 200 shares
(c) Capital Appreciation (If TSM stock is above the $160.00 strike price and therefore assigned at the Sept. 20th expiration date): -$1,344.00
= ($160.00 - $166.72) * 200 shares

1. Potential Net Profit (If TSM shares assigned on 9/11/2024, the day prior to the Sept. 12th ex-dividend date): +$984.66
= (+$2,328.66 options income +$0.00 dividend income - $1,344.00 capital appreciation)
2. Potential Net Profit (If stock price is above $160.00 strike price at the 9/20/2024 options expiration): +$1,107.82
= (+$2,328.66 options income +$123.16 dividend income - $1,344.00 capital appreciation)

1. Absolute Return-on-Investment (If Taiwan Semi shares assigned early): +3.2%
= +$984.66/$31,015.34
Equivalent Annualized Return-on-Investment (If assigned early): +55.2%
= (+$984.66/$31,015.34) * (365/21 days)

2. Absolute Return-on-Investment (If Taiwan Semi price is above the $160.00 strike price and therefore assigned at the 9/20/2024 options expiration): +3.6%
= +$1,107.82/$31,015.34
Equivalent Annualized Return-on-Investment (If assigned on the 9/20/2024 options expiration date): +45.0%
= (+$1,107.82/$31,015.34) * (365/29 days)