Covered Calls for Fun & Income

March 8, 2009

New Posistion – USO

Filed under: Covered Calls — Tags: , , , , , — Jeff @ 7:18 PM

I have to confess that this is a deviation from my trade plan. A thousand lashes with a wet noodle – but let me explain. You see, I am bullish on oil right now. I figure the inventories will be drawn down and our ‘friends’ that sent us the 339 billion barrels of oil last month cannot support their subsidized economies at $45/barrel. In my mind, the target for oil this year will be close to $90. I didn’t want to just buy the stock, nor did I just want to buy Calls/LEAPS because I don’t want to give someone else all that premium that I am so used to collecting. Besides I always feel better watching my cost basis edge toward zero. USO has always been a favorite of mine when I want to play with oil.

My intent for this position is to hold on for the long term by rolling at expiration if ITM, or if it expires OTM write another call for the following month. So follow along and see if my gut feeling is correct. Either way, I don’t believe I will end up closing this for a loss.

So I entered on Friday, March 6…

Stock=27.65   MAR 29=1.00  Cost Basis=26.65  Exp ITM=8.8%

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