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HOW TO WRITE COVERED CALLS - A REAL CASE STUDY!
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Date: Monday, July, 1997
1. TECH DATA (TECD) JUST ABOUT READY TO MAKE A NEW HIGH?
The Stock: TECD had ANOTHER ONE OF those up price rides today to a
closing price of $35 to end the day up +1 3/8 with some serious volume
of 1,308,000 shares. The BIG BIG money moved a WHOPPING 37 BLOCKS of
stock today. Somebody betting pretty heavy for TECD. Up, Up, and Up.
The last tick for the day was A SOLID UP TICK(now get this) with 9,000
shares closing the day. It's another Kahuna for our forum folks! Not
bad for a stock that was at $22.00 two and half months ago when we
first made the TECD buy recommendation.
Today, I wrote six covered calls for the July 35s @ 1. I have a solid
profit at $35.00 I can live with if I get called out! Besides, I still
think there will be another pull back before it moves on over the $36
mark before the July expiration date. I'm watching TECD tomorrow and
I may just turn around and pickup a few in the money calls on the
side for some quick extra profits.
Steve tells me JAG notes had a buy recommendation and I heard the new
TECD target price is $40.00 which is the old split price years ago.
You know, we are waiting for some more great news to skyrocket TECD
pass $36.50 resistance level. A outstanding September earnings report
and split announcement could make the $40 target price an easy spurt.
Without it TECD is getting kinda high in the P/E.
2. VIVUS (VVUS) STOCK BUYBACK PROGRAM - WHERE?
The stock: VVUS had a hard time keeping it up today! VVUS last limped
up by only a whimpy +1/16 with above average volume of 1,118,700 shares
to close at 24 7/16. What's crazy is that 33 large blocks of VVUS
stock traded.
The VVUS news had to do with the appointment of a new member for the
Board of Directors. A heavy hitter named Mr. Joseph E. Smith.
websmart.stocksmart.com:8810/ss-news/CX495443.html
Now, I ask you. If you had a track record like Mr. Smith would you
join up with a losing company? NO WAY! That is another reason why I
think VVUS is going places soon! Something is up! The May short
interest on VVUS is pretty high. A good earings report tomorrow or
next week could skyrocket VVUS stock price. That short squeeze alone
will make a double KAHUNA for those who dare to step up to the plate.
Usually when you have that many bears lined up they are dead wrong!
We will see! Until then, I'm not writing any covered calls until the
verdict is out on VVUS!
3. SHORT INTEREST SQUEEZE?
In covered calls writing short squeezes can blow you out of profitable
stocks when you least expect it! That is, you get called out just when
the stock is skyrocketing in price. Good chart reading, group
phychology, and knowing what the short interest potential is could
keep you in the options ball game longer and more profitable.
nasd.com
4. Let The Trend Be Your Friend!
The sectors with the strongest covered call writing opportunities can
be found at stocksmart.com
I read a few interesting concepts yesterday on knowing when to sell a
stock. In covered call writing, it's always nice to know when the
stock is starting to go sour on you. This may help you see it coming.
traders.com
Here is some more information for your reading on sector rotations.
Which industry group should you be in right now? Enjoy!
traders.com
traders.com
5.VIX VOLATILITY INDEX
It appears like good times are still 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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