Covered Calls for Fun & Income

February 28, 2009

New – GRMN on Watch List

Filed under: Covered Calls, Investing — Tags: , , , , , , , , — Jeff @ 1:34 PM

On my watch list for the coming week, GRMN caught my eye on the NASD 100 from the CallWriter real-time lists.

Referring to my trade plan, the following attributes look positive: STO heading up from 20, Fundamentals excellent, earnings not until 4/22, price at 20MA, price range-bound, Quality 76% bearish (at least 4 reasons to enter the trade).

A Covered Call at a strike of MAR 7.50 would come in at 7.36% if called out on 3/20 – not bad for 20 days. Even if it isn’t called out, the price is showing strong support at about 14.50, which would mean I could continue to write calls in future months to lower my cost basis.

NVDA Update: If price holds or rises on Monday, I will probably bail and take my 10% and reduce my risk if I hold longer.

AGU Update: It is now off my watch list.

Jeff

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February 25, 2009

Update – NVDA

Filed under: Covered Calls, Investing — Tags: , , , , , , — Jeff @ 3:00 PM

After lunch I lowered my limit on the MAR 7.50 Call to .80 and it executed at 1:03 EST.

So, now my cost basis is 6.55 and the gain, if called out on 3/20 will be 14.5%. Meanwhile I pocketed $80 for each option (I will never tell how many I have).

Update – AGU

Filed under: Covered Calls, Investing — Tags: , , , , , , , , — Jeff @ 11:54 AM

Well, I have not pulled the trigger on this as of yet. Notice on the chart where the 20 & 50 MA are consolidating on price and STO is weakening. I really wanted to enter this trade a few days ago, but now I am not so sure. If I follow my trading plan, then I have to move this into the background.

agu-update-02252009

I haven’t found anything on the CallWriter lists that has excited me so far this week with the exception of NVDA. On Monday I bought the stock for 7.35 and I am waiting to sell the Call. I cannot wait any longer than 3 days, so I need to make a decision whether to proceed today. Right now (about Noon EST), I could simply bail on the stock for a decent 7+% gain – but I will hold off for a while. I have a Limit order in to sell the MAR 7.50 Call for 1.00 (if called is a 18.1% gain) which I may lower later.

February 22, 2009

Definitely on My Watch List this Week – AGU

Filed under: Covered Calls, Investing — Tags: , , , , , , — Jeff @ 2:35 PM

One of the benefits of using John Brasher’s CallWriter service is his Trading Lab web presentations. Besides covering current market conditions, he identifies candidates for Covered Calls that he has on his watch list. Last week he pointed out Agrium Inc (AGU).

Looking at the chart and fundamentals, I would have to agree with him and it will be on my list for Monday.

Fundamentals: They have cash ($374M), P/E is 4.5 vs. 20.2 for its industry and 12.3 for S&P and don’t have to worry about earnings until April.

Chart: On a rising channel – higher highs and higher lows, MACD above zero, STO at 80, volume increasing.

agu-2-22-09

Strategy: Watch price action Monday. If the price is rising, step in (do not bundle buy/write together) buying the Stock and waiting for price to rise before selling a MAR Call (strike price to be determined by price action) to capitalize on rising premium.

Jeff

February 2009 Expiration – It Wasn’t Pretty

The week of expiration was one of the worst I have ever seen. All my positions finished OTM and one ATM. This is the first time this has ever happened to me. Thankfully the underlying stocks didn’t tank.

What I will do with each position is a mix of technical and fundamental analysis to determine if I want to write more calls against a stock, wait to see if the stock recovers and either write calls or sell for a gain, or close the position for a loss and move on.

One position I have is MBIA (MBI) that I had a FEB 4 Call on. Since the stock closed at 4.00 it will be interesting to see if it gets called. My broker tells me that any stock $.01 ITM will automatically be assigned, but I had one position last month that was $0.12 ITM that did not get assigned. Their explanation was there was no interest in exercising all the open calls. So a word or caution regarding that. Of course my answer to that was to sell the stock on Monday as it rose and add another 22 cents to my gain.

Jeff

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