CaseKeibs' Covered Calls
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Created by casekeibs
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Date updated:02-14-2008

Goal: Make 3% return each month by selling out of the money covered calls.

Strategy: Continuous search for decent priced, sound stocks I'd be happy to hold on to for the long term, that have a good mix of volatility and stability, with the following month out-of-the-money call options selling for at least 3% of purchase price. Of course I won't mind getting called out at a strike price above my purchase price for an additional short term profit. If I like the stock, I'll get back in when the price is right.

Positives:
1. When it works, 36% return on investment for the year, sometimes without ever selling the underlying stock.
2. Extra return made from getting called out above original purchase price.

Negatives:
1. Getting called out at a strike price way below the closing price on the third Friday each month.
2. Buying into something too volatile and wanting to sell before the third Friday, but being locked in from the option sale.
3. Finding the right mix and patience is a must.

I'm open to suggestions and critiques.

symbol name last price % change open
  • +
  • CROX
    Crocs
  • $4.20
  • 0.00%
  • $4.15

Good volatility keeps out-of-the-money call options priced higher. Slowly trying to earn my way back to the original purchase price though. I'll be selling this one way out of he money for the next few months

People owning CROX also tend to own: APCBBIBRLCARCHECMCSKCOP

TheStreet.com Rating: D What is this?

  • +
  • YGE
    Yingli Grn Engy A
  • $17.03
  • -0.93%
  • $16.72

Its in a slump, but might be on the rebound. That's kind of what I'm looking for but have to remember to be patient and this strategy won't work every single month. Sometimes if you like a stock you gotta stick with it for a couple months to get back to the original purchase price so you can go back to making money on it.

People owning YGE also tend to own: AAPLBIDUCROXEMCGEHLYSIIG

TheStreet.com Rating: No Rating What is this?

  • +
  • XLF
    Financial Sel Spd
  • $20.56
  • +1.93%
  • $20.18

Haven't bought it yet but I like its stability around $27-$28/share. The next dollar up strike price for the next month tends to trade a little bit higher than my 3% goal. 14 Feb 08 XLF closed at $26.41. The Mar 08 27 call is going for $1.15 for about a 4% profit and the 28 call is going for $0.75 for a little less than 3%.

People owning XLF also tend to own: AMATAVYBGGBUDCLDDETH

TheStreet.com Rating: No Rating What is this?

  • +
  • ESLR
    Evergreen Solar I
  • $9.31
  • -0.75%
  • $9.35

I have a love hate relationship with this one. Closed trading today (14 Feb 08) at 10.80 and the Mar 08 12.50 call is going for $0.5. A little better than 4%, but I'm hesitant to sell the option because I'd lose money if I got called out. I'll wait this one out

People owning ESLR also tend to own: AEZBLDPGFIGSSNTRZRTKABX

TheStreet.com Rating: C What is this?

  • +
  • UA
    Under Armour Inc
  • $32.38
  • +3.52%
  • $31.02

I wish I bought it two weeks ago when I told a buddy to keep an eye one it, it was going places. It did to the tune of $10/share. Closed today (14 Feb 08) at $43.42 and the Mar 45 is selling for $2.50, or about a 6% premium. Its a tough call if I would sell the 45 thinking its not going higher or sell the 50 for $0.90 and take the lower upfront profit in hops it would go up to close to 50 in the next month. A moot point since I didn't buy it though.

People owning UA also tend to own: EWAGABTXPHOSAGBXSFVBXANSSAQNT

TheStreet.com Rating: D+ What is this?

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