Covered Calls for Fun & Income

April 1, 2009


Pre-market this morning is showing a negative open. Europe is down, although A-PAC is mixed. First Quarter Earnings Season starts next week.

With all that in mind, I will still be looking for the best downside protection for the two positions I still have cash for, and I certainly will not pick any that have earnings on or before expiration on April 17th. Picking Covered Calls with high downside protection reduces my gains, but having 20% or more downside protection at least allows for a lowered amount of risk.

Almost every other open position is currently OTM, which means I will not have many called away this month. There are a few positions that I can roll down to a lower APR strike and still make a profit, such as US Steel (X), and I will not hesitate to do that – but I will wait until a few days prior to expiration to make that decision.

The snapshot below is a tool called Trade Management Calculator TM included with the CallWriter service. It allows me to instantly in real-time compute what-ifs on my positions. The example is for US Steel and shows the Flat and If Called calculations for rolling down those Calls. Also, using Interactive Brokers for my trades will only cost me a few dollars to do the roll.


I will be busy again today, and may just monitor and not make any entry decisions. A distraction when I am trying to make a good choice has had very negative implications to me in the past.

– Jeff

“I am not young enough to know everything.” Oscar Wilde (1854 – 1900)


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