The Covered Calls Advisor had a JPMorgan Chase & Co. (ticker JPM) July 2016 covered calls position at the $55 strike price. Early this morning, I received an email notification from my broker (Schwab) that the 5 JPM Call options were exercised early, so the 500 shares of JPM stock in the Covered Calls Advisor Portfolio were assigned (i.e. sold) at the $55 strike price.
for this JPMorgan covered calls position are provided below. The JPM shares had risen from $58.14 when purchased (only 4 days ago) to $61.66 at
yesterday's market close. The time value remaining in the Call options
had declined to approximately $.44 (based on the midpoint of the $6.95/$7.25 bid/ask spread at
the market close yesterday). Given that the stock price declines at
market open today by the $.48 ex-div amount, I was somewhat surprised
that the owner of the Call options exercised his/her option early since
they immediately forfeited the remaining $.44 time value to purchase the
shares (and capture the dividend). In this advisor's experience, early
assignment normally occurs only in those uncommon deep-in-the-money
positions when there is less than $.15 time value remaining near the end
of trading on the day prior to the ex-div date. But as covered calls
investors, we are grateful to receive the immediate gift ($.44 per share
in this instance) when it does occur.
As detailed below, the actual return-on-investment result for this closed position was a +1.2% absolute return (equivalent to +106.2% annualized return for the 4 days holding period).
The transactions were:
06/27/2016 Bought 500 JPM shares @ $58.14
06/27/2016 Sold 5 JPM Jul2016 $55.00 Call options @ $3.84
Note: a simultaneous buy/write transaction was executed.
07/01/2016 Upcoming quarterly ex-dividend of $.48 per share
5 JPM Call options assigned and associated 500 JPM shares sold at $55.00
strike price. Note: the price of JPM stock was $61.66 at yesterday's
The overall performance result (including commissions) for this JPMorgan covered calls position was as follows:
Stock Purchase Cost: $29,077.95
= ($58.14*500+$7.95 commission)
(a) Options Income: +$1,916.25
= ($3.84*500 shares) - $3.75 commissions
(b) Dividend Income (Call options exercised early on business day prior to July 1st ex-div date): +$0.00
= (+$338.30/$29,077.95)*(365/4 days)
The cash now available from the closing of this JPMorgan Chase covered calls position will be
retained in the Covered Calls Advisor Portfolio until new covered calls
and/or 100% cash-secured puts positions are established. Any new
positions will be posted on this site on the same day they occur.