Friday, November 17, 2017

Established Covered Calls Position in Coca Cola Company

Today, a Covered Calls position was established in Coca Cola Company (ticker KO) at the $45.00 strike price and the December 15th, 2017 options expiration date.


As detailed below, a potential return-on-investment is +1.4% absolute return in 29 days (equivalent to a +17.7% annualized return-on-investment).  This return includes a $.37 per share quarterly ex-dividend on November 30th. 



Coca Cola Company (KO) -- New Covered Calls Position
The transactions were as follows:
11/17/2017 Bought 400 shares of Coca Cola Company stock @ $45.42 per share 
11/17/2017 Sold 4 Coca Cola Dec 15th, 2017 $45.00 Call options @ $.69 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $17,899.63
= ($45.42 - $.69)* 400 shares + $7.63 commission

Net Profit Components:
(a) Options Income: +$276.00
= ($.69* 400 shares)
(b) Dividend Income: +$148.00
= $.37 per share * 400 shares 
(c) Capital Appreciation (If Coca Cola stock is above $45.00 strike price at Dec 15th expiration): -$172.95
= ($45.00 -$45.42)* 400 shares - $4.95 commission

Total Net Profit: +$251.05
= (+$276.00 options income +$148.00 dividend income -$172.95 capital appreciation)

Absolute Return: +1.4%
= +$251.05/$17,899.63
Equivalent Annualized Return: +17.7%
= (+$251.05/$17,899.63)*(365/29 days)

The downside 'breakeven price' at expiration is at $44.36 ($45.42 stock price - $.69 options income - $.37 dividend income), which is 2.3% below the current market price of $45.42.

Rolled Out Covered Calls Position in Devon Energy Corp.

This afternoon, with today's (i.e. Nov 17th, 2017) $36.00 strike price Covered Calls position in Devon Energy well in-the-money, the Covered Calls Advisor decided continue with this Covered Calls position that was first established six months ago.  The current position was rolled out to the Dec 15th Covered Calls at the identical $36.00 strike price.  This was done with only about $.02 time value remaining in the November Call options and a net credit in the rollout of $.41 per share was achieved.  Based on the Covered Calls Advisor's current market overall Neutral sentiment, a moderately in-the-money position was established.

As detailed below, a potential return-on-investment result for this Devon Energy position is +12.8% absolute return for 204 days (equivalent to a +22.9% annualized return-on-investment).  


Devon Energy Corp. (DVN) -- Continuation Covered Calls Position
The transactions to-date have been as follows:
05/25/2017  Bought 500 Devon Energy Corp. shares @ $37.45
05/25/2017 Sold 5 DVN June 16, 2017 $36.00 Call options @ $2.10
Note: this was a simultaneous buy/write transaction.
06/13/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
06/16/2017 5 DVN June 16th, 2017 Call options expired
Note: the price of DVN stock closed at $31.76 upon the June 16th options expiration date.
07/03/2017 Sold 5 DVN July 21, 2017 $33.00 Call options @ $.87 per share
07/21/2017 5 DVN Call options expired
07/26/2017 Sold 5 DVN Aug 18, 2017 $35.00 Call options @ $.65 per share
08/18/2017 5 DVN Call options expired
Note: the price of DVN stock was $30.40 upon expiration of the Aug 18th Call options
09/14/2017 Ex-dividend of $30.00 ($.06 x 500 shares)
09/14/2017 Sold 5 DVN October 20th, 2017 $35.00 Call options @ $.89 per share
Note: the price of DVN stock was $34.12 today when the Oct 20th Call options were sold
10/20/2017 5 DVN Call options expired
Note: the price of DVN stock was $34.92 upon expiration of the Oct 20th Call options
10/27/2017 Sold 5 DVN November 17th, 2017 $36.00 Call options @ $.93 per share
Note: the price of DVN stock was $35.66 today when the Nov 17th Call options were sold
11/17/2017 Bought-to-Close 5 DVN Nov 17th $36.00 Call options @ $2.73
11/17/2017 Sold-to-Open 5 DVN Dec 15th, 2017 $36.00 Call options @ $3.14
12/14/2017 Upcoming Ex-Dividend of $.06 per share

A possible overall performance result (including commissions) would be as follows:
Cost Basis of Original Covered Calls Position Established in DVN: $17,679.95
= ($37.45 - $2.10)*500 + $4.95 commission

Net Profit Components:
(a) Options Income: +$2,904.90
= ($2.10 + $.87 + $.65 + $.89 +$.93 -$2.73 +$3.14) *500 shares - 6*$3.35 commissions
(b) Dividend Income: +$90.00
= ($.06 + $.06 + $.06) * 500 shares
(c) Capital Appreciation (If DVN is above $36.00 strike price at the Dec 15th, 2017 expiration): -$729.95
= ($36.00-$37.45)*500 shares - $4.95 commissions

Total Net Profit (If DVN stock is above $36.00 strike price at Dec 15, 2017 options expiration): +$2,264.95
= (+$2,904.90 options income +$90.00 dividends -$729.95 capital appreciation)

Absolute Return: +12.8%
= +$2,264.95/$17,679.95
Annualized Return: +22.9%
= (+$2,264.95/$17,679.95)*(365/204 days)

Rolled Out Covered Calls Position in Best Buy Inc.

This morning, when the price of Best Buy dipped to about $54.30, the Covered Calls Advisor rolled out from today's (i.e. Nov 17th) $52.50 strike price Covered Calls to the Dec 15th Covered Calls at the identical $52.50 strike price.  This was done with only about $.05 time value remaining in the November Call options and a net credit in the rollout of $.76 per share.  Based on the Covered Calls Advisor's current market overall Neutral sentiment, a moderately in-the-money position was established.

As detailed below, a potential return-on-investment result for this Best Buy position is +5.3% absolute return for 51 days (equivalent to a +37.8% annualized return-on-investment).  


Best Buy Inc. (BBY) -- New Covered Calls Position
The implied volatility of the Call options was 25.6 today when this position was established. 
The transactions were as follows:
10/25/2017 Bought 400 shares of Best Buy stock @ $55.11 per share 
10/25/2017 Sold 4 Best Buy November 17th, 2017 $52.50 Call options @ $4.23 per share
Note: this was a simultaneous Buy/Write transaction
11/17/2017 Bought-to-Close 4 Nov 17th $52.50 Call options @ $1.92 per share
11/17/2017 Sold -to-Open 4 Dec 15th, 2017 $52.50 Call options @ $2.68 per share
Note: this was a simultaneous Net Credit transaction of $.76 when the BBY stock was at $54.30.
12/05/2017 Upcoming ex-dividend of $.34 per share


A possible overall performance result (including commissions) if Best Buy is in-the-money at the Dec 15th expiration would be as follows:
Covered Calls Original Cost Basis: $20,359.63
= ($55.11 - $4.23)* 400 shares + $7.63 commission

Net Profit Components:
(a) Options Income: +$1,988.37
= ($4.23 - $1.92 + $2.68) * 400 shares) - $7.63 commissions
(b) Dividend Income: +$136.00
= $.34 per share * 400 shares
(c) Capital Appreciation (If BBY stock is above $52.50 strike price at Dec 15th expiration): -$1,048.95
= ($52.50 -$55.11)* 400 shares - $4.95 commission

Total Net Profit: +$1,075.42
= (+$1,988.37 options income +$136.00 dividend income -$1,048.95 capital appreciation)

Absolute Return: +5.3%
= +$1,075.42/$20,359.63
Equivalent Annualized Return: +37.8%
= (+$1,075.42/$20,359.63)*(365/51 days)

Wednesday, November 15, 2017

Established Covered Calls Position in Bank of America Corp.

Today, a second Covered Calls position was established in Bank of America Corp. (ticker BAC) at the $25.00 strike price and the December 15th, 2017 options expiration date.
The Covered Calls Advisor read today's news that Warren Buffett had increased his holdings in BAC during the 3rd quarter.  Since the stock price declined in early morning trading and based on knowledge that many investors piggyback Buffett's stock picks, I was fortunate to be able to establish this position when the stock was very near its lowest price today.  As detailed below, a potential return-on-investment is +1.8% absolute return in 31 days (equivalent to a +21.7% annualized return-on-investment).  This attractive return includes $.12 per share quarterly ex-dividend on November 30th. 



Bank of America Corp. (BAC) -- New Covered Calls Position
The transactions were as follows:
11/15/2017 Bought 1,000 shares of Bank of America stock @ $25.83 per share 
11/15/2017 Sold 10 Bank of America Dec 15th, 2017 $25.00 Call options @ $1.17 per share
Note: this was a simultaneous Buy/Write transaction

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $24,671.65
= ($25.83 - $1.17)* 1,000 shares + $11.65 commission

Net Profit Components:
(a) Options Income: +$1,170.00
= ($1.17* 1,000 shares)
(b) Dividend Income: +$120.00 = $.12 per share * 1,000 shares 
(c) Capital Appreciation (If BAC is above $25.00 strike price at Dec 15th expiration): -$834.95
= ($25.00 -$25.83)* 1,000 shares - $4.95 commission

Total Net Profit: +$455.05
= (+$1,170.00 options income +$120.00 dividend income -$834.95 capital appreciation)

Absolute Return: +1.8%
= +$450.05/$24,671.65
Equivalent Annualized Return: +21.7%
= (+$450.05/$24,671.65)*(365/31 days)

The downside 'breakeven price' at expiration is at $24.54 ($25.83 stock price - $1.17 options income - $.12 dividend income), which is 5.0% below the current market price of $25.83.