The Covered Calls for Dummies Thread Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Covered Calls for Dummies Thread

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Bridge Player who wrote (4436)	8/9/2006 4:08:26 AM
From: Uncle Frank	Read Replies (1) of 5205

Goodyear Tire as a covered call (buy-write) candidate Closing price on 8/8/2006: $11.67. Closing bid on Oct 2006 10 strike calls: $2.00 (no guarantee on opening bid on Wed. 8/9) If you can do this buy-write on Wednesday 8/9 for a net cost of $9.67, the annualized if-called rate of return (the way I like to compute such a yield) is 15.9%. Another way of looking at it is the return will be $0.33 per share on a $9.67 investment, or 3.4%, minus broker's fees. October options don't expire until Friday, Oct 20, so the holding period will be over 2 months, and the underlying equity isn't exactly stable. GT opened this year at 17.54 on January 3, and has been pounded by Mr. Market. It has closed below 10 as recently as July 21, and despite reporting good sales growth last week, their profits were down sharply due to raw material costs. Just today Bridgestone reported sharply reduced profits based on "higher costs for rubber, crude oil and other materials", and I'd be concerned about a sector move. Personally I see too little return and too much risk in this play, bwtfdik? Let's watch it and see how it plays out. duf

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next