Sure did jump. I don't know whether to be happy or sad about that.
Certainly, had I waited til today to sell my calls, I could have instead sold Jun 15's for 2 3/4, making a real nice return on my 11 3/4 investment.
However, I think I should be happy. I set out to make a certain profit with this stock and at the same time minimize my risk. That's what cc's do. And having the stock get up above my strike price, gives me a nice comfort zone, knowing I should make the full return when called. As it stands right now, I'll be pulling in a 21.46% (not on margin) return in only 45 days. Most mutual funds won't be able to bag those returns for the whole year.
Sure would have been nice to hold on, but I have also in the past bought a stock and waited for a better premium only for the stock to fall $1 or so and the premium disappear on me. Had CLCX dropped to $10 today and stayed there, I would have been stuck unable to write a call. However, having written the call, $10 would not bother me.
My success on this stock, does lead me to further believe in this strategy. Pick a stock first on the merit of the stock itself. Then look for a good premium.
The way I implement this is to look at tables of high premiums, such as those which are offered at
coveredcalls.com
From the data in such a table, I then look for stocks that have earnings and which in my opinion, represent value. I tend to avoid stocks with no earnings or excessively high PE's. I wouldn't want to own these stocks and so I won't take the bait of high premiums with them either. |
