Covered Calls for Fun & Income

August 31, 2009

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Filed under: Investing — Jeff @ 6:27 PM

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– Jeff

August 29, 2009


Filed under: Investing — Jeff @ 8:27 PM

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– Jeff

May 1, 2009

April Results

Filed under: Investing — Jeff @ 7:25 AM

Well, it was a pretty good month overall. I like to wait until the end of the month to get a picture of how my accounts are doing – just so I have a logical point to do results and comparisons.

For the month in my two IRA accounts, my realized gain in dollars is $4,339.62 and the realized percent gain is 5.27% based on the account balances as of market close on 4/30. Right now my monthly average for this year is 3.99%, which is right in line with my goal of a range between 3-4%.

Let’s take a look at Jeff vs S&P 500:

S&P 500





Year to Date



This certainly proves that Covered Calls miss out on the big moves at the expense of less risk and more consistent returns. But you can also see that over the long haul Covered Calls are leaving the S&P in the dust. If you want to hit home runs, you need to look for another blog. I’m more like Paul Molitor, who got on base more times than just about any other baseball player in history. Where did that name come from? Oh yeah, I used to live in Milwaukee and I have Green & Gold blood running through my veins.

A few other things happened yesterday too. Akamai (AKAM) had a real nice pop from their earnings, so I closed that Covered Call for a gain of 6.73% as opposed to the projected 8.34% if held until expiration and finished ITM. Why? One reason is I can always take that money and get another 5-7% on something else before the end of the month. Remember, the shorter the holding time, the greater the yield. Another reason is I only held it for 5 days, so factor that out to 365 days!

I also sold my USO shares yesterday. I figured oil wasn’t heading anywhere soon, so I sold them for a nice 8.77% gain. Again, I have cash to go shopping for more May plays.

I almost forgot, yesterday was the Ex-Div date for AFL, so I picked up $0.28/share on that. I could reduce my cost basis based on that, but for now I will just leave it alone.

Check out the Closed 2009 page for a recap of each month and year-to-date.

For those of you who use Interactive Brokers and want to see how to roll options up, down or out, please see my video on You Tube – use the links on the left under Video Demonstrations.

I will be busy shopping today since I am flush with cash – enough to do another 2 or 3 Covered Calls for May. How much more exciting can it get?

– Jeff

“America believes in education: the average professor earns more money in a year than a professional athlete earns in a whole week.” Evan Esar (1899 – 1995)

March 19, 2009

One more for tomorrow

Filed under: Covered Calls, Investing — Tags: , , , , , — Jeff @ 12:31 PM

US Steel Corp (X) made a rather large move this morning. As I write this it’s up 9.4%. If you look at my technical indicators, you will see that it’s at the 20 EMA and the Stochastic just crossed 20 yesterday. Historically the stock has done well in this situation, and past performance is all we really have to go with, isn’t it? Fundamentally, this is a solid stock although it’s not doing well in this economic climate. Regardless, they are still paying a dividend of $1.20/year which is an annual yield of 6.3%.

I won’t mind holding on to this for a few more weeks or months, so today I wrote a Covered Call slightly OTM for March. If it finished OTM tomorrow and the price is still inching up, I will wait to write an April call to see if the price moves above 22.50. I have done this a few times in the past and it has worked very well.

BTO Stock

STO Option

Option Exp/Strike

Cost Basis

ITM Return

Downside Protection

X 22.09

XOKCX 0.70

MAR 22.50





“These days an income is something you can’t live without–or within.”

March 13, 2009

Friday the 13th Activity

I was watching my open positions closely this week as the market rallied. This morning I decided to close the positions that were showing me enough profit to justify this decision. As you know, we are in a very volatile environment and anytime you can take money off the table profitably, you should do it – at least that the way that I play the game.

Although none of these positions turned the profit that I would have had if they had expired ITM next Friday, I was very apprehensive about leaving them ride for another week. Monday’s always tend to scare me anyway as we never know what the week has in store for us.

So here’s what I did:

Closed ILMN – Gain if called out = 11.96% Gain with early close = 9.54%

Closed YHOO – Gain if Exp ITM = 5.91% Gain with early close = 4.46%

Closed ERTS – Gain if EXP ITM = 13.49% Gain with early close = 9.37%

These are actual gains after broker commissions.

See my Closed Positions page for any additional information.

So far this year I have only 1 realized looser, and I consider myself pretty lucky at this point. The realized gain on my account (this is not the account balance increase – just the gain for closed positions (see my confession)) is 9.27%. I base this on the realized gain against the closing balance on my account as of December 31, 2008.

I would have liked to get this info out sooner, but I never intended for this to be an alert service and it never will be. I just want to show my readers that Covered Calls can be profitable in almost any market condition.

Take a look at my new page that discusses various strategies for adjusting trades. Feel free to leave a note and tell me what you think.


March 5, 2009

New Positions – ERTS & ILMN

Yesterday I opened two new positions on ERTS and ILMN. I tired to get this post up earlier but other tasks demanded my attention.

ERTS – This was on my watch list off of CallWriter for a few days now. I was waiting for the right time to strike. Technically, I was attracted by the chart, with good solid support around 14.30 and resistance around 19.15, I was waiting for STO to swing up over 20 and it did that yesterday. Since the 20 and 50 MA’s are consolidating right now, I entered with a slightly OTM call. I am not fearful of an expiration OTM since the options on this have high volatility right now – as long as support is not violated I will sell the next month’s call. As far as qualifying according to my Trade Plan, it met 5 criteria. Here are the details of the trade:

Stock=15.64   MAR 17.5=0.22   Cost Basis=15.42   Exp ITM=13.4%

ILMN – What caught my eye on this one is the strength it has been displaying since mid-December. How many stocks can you find that have a 20MA above their 200MA? It met 7 of my entry criteria from my Trade Plan and again I was waiting for STO to do it’s cross. I again entered a OTM covered call based on the continued upward trend of the price and recent resistance at 35.80 which the price could easily break through. Here are the details for this trade:

Stock=31.72   MAR 35=0.46   Cost Basis=31.26   Exp ITM=11.96%

March 3, 2009

Caution is the Word of the Week

I feel the need to write something but I have no idea where to go with this – and that is not a good thing.

Looking at the list on CallWriter I see MAR covered calls with ITM returns of 10-20%. Unfortunately these are all banks, shipping companies and pharma. Have they hit a bottom? That what I was wondering last month and look at where they are now.

On the other hand, I see some very promising prospects on the NASD 100 lists with ITM returns of 3-6%. Those are the stocks on my watch list.

The one characteristic that differentiates the 10%ers from the 5%ers is their 20MA on a chart. While the 10% stocks have a falling 20MA, the 5% stocks have a flat or slightly rising 20MA.

Confession – Although NVDA makes me look like a genius, I am holding a few stocks that are dropping or below my cost basis. I know, it’s not according to my trade plan. So, for not following my own advice I am paying the price (hey, that rhymes!). So I am patiently looking for opportunities to write some calls against these – hopefully soon.

Overall am I bullish or bearish? Honestly I don’t know, and that makes me very cautions.

Watch List: I added YHOO today to my current list (GRMN, MICC, MRVL, MXIM, NTAP, SPLS, SYMC) all of which meet at least 4 criteria for entry in my Trade Plan and taken from the CallWriter NASD100 list. I have not pulled the trigger on any of them yet – yesterday scared the hell out of me. But, today we may get a bounce – probably a Bear Rally.

Step Lightly – Jeff

March 2, 2009

Update 2 – NVDA

NVDA gaped down at the open today, temporarily dashing my hopes of closing this early. It has gaped down at the open before, so I waited patiently for it to come back to my limit order of 7.21. It did that at 10:08 this morning. My net gain, including commissions, is 8.78%. I held this for 5 market days so I am pleased.

Remember – don’t be afraid to close early. As a matter of fact, this week could be filled with dark and gloomy news (especially Friday with the payroll and unemployment reports) and could drag the market down even more.

Be careful out there   –   Jeff

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.


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).

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