HOW TO WRITE COVERED CALLS - A REAL CASE STUDY!
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Date: Monday, June 9, 1997
1. TECH DATA (TECD)
The stock: TECH DATA (TECD) Keeps on trucking along! .....TECD last traded at $31 5/8 up +11/16 (+3.1%) with a high for the day of $32 on a volume of 856,900 shares. I'm still on the sidelines with the covered calls. I will continue to wait until TECD reaches $34 to $35.00 and more new is announced. At some point I will cast my net of covered calls and also pick up a HEAVY LOAD OF PUTS TWO MONTHS OUT! The July 25s and 30s would be my potential PUTS. The July 30s are @ 7/8. 1/2 point would get my attention.
TECD chart looked pretty good. stocksmart.com
When you set the Bollinger Bands, Candlesticks, and expondental moving average you will notice the upward slant to the upper band and the Candlesticks are moving nicely to the upside at a steady pace. That should help you decide to cover you calls if you set the strike price too low and/or buy more shares or PUTS.
I have been very impressed with Bollinger Bands as a good indicator for buy/sell decisions, deep covered calls writes, and loading up of PUTS for some double action profits. Here how Bollinger Bands work: stocksmart.com
TECD NEWS EVENT TOMORROW
Among other agenda items, TECD company will ask the shareholders at meeting to increase the common stock from 100,000,000 to 200,000,000 shares. I can't imagine the sharesholder (like myself) turning down this opportunity. We can expect to test the old high of $36 with some profit taking shortly after.
2. ROSS STORES (ROST)
The stock: ROSS STORES(ROST) Is one tough stock. After the 2-1 split on March 5, 1997 down to $25, today ROST last traded at a price of $31 up +1 1/16 (+3.5%) with a close on the high for the day of $31. Volume was good with 957,800 shares traded. This action must be part of a dividend play since ROST goes ex-div Wednesday, June 11, 1097. If you considering some covered calls you might want to go AT THE MONEY for July and also pick up a HEAVY LOAD OF PUTS TWO MONTHS OUT (July or Aug.)!
The charts show that according to Bollinger Bands indicator ROST has reached an over purchased condition and should experience some profit taking soon after the dividend play this week. stocksmart.com
ROST 97' earnings was revised upward on June 03, 1997. This is a must hold stock for easy covered call income and long term growth. No doubt, ROST will return to the pre-split stock price of $50 before the 4th quarter of 1997 In the meantime, +8% percent per month from covered calls premies is not too hard to take.
Let The Trend Be Your Friend!
The sectors with the strongest covered call writing opportunities can be found at stocksmart.com
VIX VOLATILITY INDEX
Here is another freebee. The overall market volatility was down today and seems to be trending lower. It appears like go times ahead! stocksmart.com
That's It!
Wishing all of you, the BEST OF GOOD BUYS!
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DISCLAIMER: The writer is presenting a real stock and a live ongoing case study. No recommendations or endorsement to actually buy this stock are suggested nor implied. Trading stocks and buying calls should not be attempted without first understanding the risk/rewards of this type of investment! The writer assumes no responsibility for the opinions being expressed!
Buyers always be aware!
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