These are my thoughts and opinions on many topics. My passions are the stock market and helping abandoned and orphaned animals. In this world, it seems most things don't make much sense to me anymore. This is my feeble attempt to share all of the above. The blogs will include items that might make you shake my head as well as give you my take on why they happen. Enjoy.

Monday, February 22, 2010

February's Results - Covered Calls

In my first month of writing covered calls on stocks that I own I was able to create additional 1% of 'income'.

February's Results
The calls I wrote were all February 2010 expiration and consisted of

MO $21 strike
DD $34 strike
AA $15 strike
GDXJ $25 strike
NLY $18 strike
MGM $12 strike
MGM $13 strike
WFMI $32 strike

The WFMI calls were exercised at $32, it went from my buy price at $30.52 to over $33/sh in two days after Whole Foods reported earnings. I received 2% premium on the calls and 4 1/2% for the stock appreciation, that's 6 1/2% in 4 days!!!!!

This month's strategy with WFMI: I bought some shares today at $33.83 and sold the Mar 20 $36 calls against that position. I received about a percent on that sale, and IF they are exercised I will have made 6% on the stock, so say a 7% return in a month.

My DD calls were exercised at $34. I got a 3% for the premium and I made 8% on the sale of the stock. I got an 11% total return in less than 2 months on DD. I likely will not buy it back for I believe it is fairly valued and the upside is limited. If it drops a few percent I will entertain buying it again, but not until it drops.

This month's strategy with AA: I sold some Mar 20 $14 strike calls on a portion of my position in AA that I recently purchased at $13.25. I received almost 3% on those calls and if these are exercised I will have made 6% on the stock sale. Basically almost 9% in a little over a month. Not bad. If AA continues to go up, I will sell calls on the other 2/3 of the AA position that I own.

This month's strategy with GDXJ: I like Gold, I like GDXJ, I wanted to sell calls that I hoped would not be exercised. I sold Mar 20 $27 strike price calls. I got 1% for the premium on the calls, IF the calls are exercised, I will have made 8% on the stock for a 9% gain. Keep in mind that I made 1% on the Feb 20 $25 strike calls in three days. So for a month and a half I would make 10% on GDXJ and the call premiums.

I did buy some T at around $25.40 and sold Mar 20 $26 calls and received a 1% premium. I don't expect these to be exercised, but if they are I will get about a 3% win in a month. I am really looking for the dividend at the end of March so I would likely buy it again before the dividend is declared.

My strategy with my NLY position: I want to sell some calls, but I really don't want to sell the Mar 20 $18 calls, heck the stock is at $17.90 and the premium is only 1 1/2%!! I would like to sell some $19 strike price calls but I don't see that happening. I will check out the technical indicators and if it and the market is overbought, I will take a chance on selling the $18 calls.


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