Covered Calls for Fun & Income

April 2, 2009

Covered Call Weather Report – April 2, 2009

Mostly sunny with seasonal temperatures

Pre-markets are looking good today. A-PAC and Europe markets are all up. Oil is up and Gold is down – complimentary signals for a bullish move today. But, for the life of me, I can’t imagine why, with all the bad news around these days.

Looking at a weekly chart of the S&P 500 I have these unsolicited comments: Close yesterday 811, 20 week EMA is at 855, there is resistance around 920, the Stochastic crossed 20 two weeks ago (currently at 46) and this may be the fourth up-week in a row – which hasn’t happened since October of 2007 – and that was the start of the Bear Market. So, if we want to call March a bottom (in my mind) the S&P 500 needs to break the 20 EMA and resistance at 920 and establish them as support. Four up weeks would also help – meaning this week needs to end with a gain.

April Expiration

I have been thinking about my positions that are expiring in April (heck, that’s all of them). Some are currently Near-the-Money, and if this situation sustains itself into the last few days this month, I will not hesitate to either roll them down to get called or let them expire OTM and sell the stocks on the Monday after.

For the most part, I favor rolling down for these two reasons: 1) the commission costs are minimal and 2) Monday’s after expiration (heck, any Monday for that matter) scare the hell out of me. I am always in favor of capturing gains when they are at or near my goal rather than waiting for a few tenths of a percent additional or waiting a few days and increasing my risk. Plus, and this is a BIG plus, if we are in a bull run the best way to capture that with Covered Calls is to write new ones, not roll existing positions up (I will quantify this on a new page sometime in the future).

Watch for a more detailed report as expiration nears.

March was a good month. This weekend I will report on those results and enhance my ‘Closed 2009’ page with more realistic data.

– Jeff

“Victory belongs to the most persevering.” Napoleon Bonaparte (1769 – 1821)


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