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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (4347)	3/11/2006 5:30:51 PM
From: Jerome	Read Replies (2) \| Respond to of 5205

The energy stocks are some of the best covered calls available. The companies are making tons of cash, and any time oil drops below 60 a barrel, investors panic and send the stocks into a short term tailspin. And every time Bush or Cheney make some dangerous remark about Iran and that their nuclear potential that has to be curbed, the market panics sending oil prices higher for a few days. This volatility is ideal for a covered call. In my opinion there is too much focus on the weekly inventory increase/decrease. These figures are soft numbers and ignore the fact that world consumption is increasing yoy. Since there are a number of potential oil producer interrupters, such as Nigeria, Iran, Venezuela, and Israel, Mexico, and China, any decline in price will be countered by an immediate reversal on some piece of "news". Through all of this the oil companies will make tons of money. You can safely write on covered call on XOM, CHK, DUK, WMB or any other money making oil or gas company without the fear that the underlying stock will get chopped in half. eg.(INTC, GM). Since this is difficult market, buy the stock and write the covered call immediately. Or buy the stock on a one day spike and cover and then undo the call when the premium is reduced to less than one fourth its original price. Then write the call again on another one day spike. My goal is to generate 3% premium income, relative to the amount invested (in covered call stocks )on a monthly basis. My preference if to use large cap stocks. A good entry point ( after a modest sell off) seems to work best. Good luck to you and keep us informed Jerome