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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Bridge Player who wrote (4608)11/22/2006 1:32:23 PM
From: Carl Worth  Read Replies (2) of 5205
 
i don't generally like to do covered calls with tech stocks, because they are so volatile, but that one seems pretty decent, especially given the growing demand for flash memory in so many applications

here's one i did today, equally (or more) volatile stock, but trading below book value with the sector getting buying from luminaries such as gates and icahn, and showing pretty reasonable strength of late:

buy SPF at 24.29
sell SPF december 22.50 call for 2.20

net investment 22.11 including a buck commission on each transaction

net gain if called away: 1.76% (just under 25% annualized) with what i see as fairly low risk, given the strong option premiums for this stock that make it easy to write calls if it slipped below the strike price, and the fact that the company is still quite profitable while the stock is under book value (i used your 26 day number though i usually figure these things to the expiration date, since i can "use" the money again that day in my IB account, knowing that the calling away of the stock that day would coincide with a new buy of something else that day, so there would be no margin cost, and the money will thus be earning me income from a subsequent option trade over that intervening weekend)
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