Active-Investor stock picks
ACTIVE
INVESTOR
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Market Commentary & Forecasts
PERSONAL
PORTFOLIO
MANAGEMENT
Click here
click now for your no obligation quote
Login
Home
Mission
The System
Weekly Research
Market Commentary
Market Indexes
Industry Sectors
Bullish Stocks
Bearish Stocks
Covered Call Options
Model Portfolio
Stock Splits
Archive
Performance
Investor Resources
Quotes/Charts
Links
Bookstore
F.A.Q.
Website Information
About Us
Contact Us
Press Room
Disclaimer
Membership Services

Order This Book
Order This Book
Keep it free! COVERED CALL OPTIONS Search this site


Monday
October 5, 2009
www.trendtrader.com   The Power to Trade

Symbol

Company

Previous
Close

Call
Option

Option
Price

Static
ROI

Called
ROI

MBI MBIA $6.87 Nov 7.00 $0.95 124% 141%
IMMU Immunomedics $4.73 Nov. 5.00 $0.60 112% 163%
SGY Stone Energy $14.97 Nov 15.00 $1.75 102% 104%
GENERATE INCOME WRITING COVERED CALLS

Writing covered calls is becoming increasingly popular with active individual investors. When used properly, covered call writing can be an effective strategy for income and growth. The basic covered call strategy is to generate income by selling call options on stocks that you already own. The Active-Investor.com strategy focuses on buying stocks whose near-term call options exhibit high premiums, usually greater than 10% of the stock price. The procedure is to first buy the stock and then immediately sell the "covered" call option. By writing near-term, slightly out-of-the-money calls against a stock that you already own, two outcomes are possible when the options expire:

1) The stock price is at or above the option strike price:
In this case, the options will ordinarily be "exercised" by the buyer (i.e. your stock is "called away" from you by the holder of those options at the strike price of the options). Your profit on the transaction includes the premium that you received for writing the options, plus the difference between the strike price of the option and your purchase price of the stock. You give up any further participation in the upside of the stock price above the strike price of the option

2) The stock price is below the option strike price:
At expiration, "out-of-the-money" call options will ordinarily expire worthless to the option owner, who is unlikely to "call" the stock away from you for a higher price than it would cost on the open market. Therefore, in addition to still owning the underlying shares of stock, you pocket the premium that you received for selling the call options. If the stock price has fallen since purchase, your loss has been cushioned by the income from the option. Furthermore, you now have the opportunity to earn still more from the stock by writing covered calls AGAIN and AGAIN, until you either sell the stock or it gets "called away" from you by an option holder.

COVERED CALL STRATEGY

Writing covered calls works well in bull markets and flat markets. Writing covered calls can even cushion losses during a bear market. Analytical tools are used to select covered call options that will provide at least a 10% return over a relatively short period of time, usually less than 2 months. Most covered call research provided to the subscribers is for stocks that are priced under $30.00 per share. This is important because stocks must be bought in blocks of 100 shares in order to write a call contract. Active-Investor.com subscribers are provided with research on 3 covered call candidates each and every week. Other sites containing this information alone can cost much more than the one, all-inclusive subscription to Active-Investor.com.

The criteria for selecting covered call options can be summarized as follows:

  • Stock costs less than $30.00 per share.
  • Out of the money call premium is greater than 10% of the stock price.
  • Call option has sufficient volume and open interest.
  • Call option to expire in less than 2 months.
  • Stock has positive daily price momentum.

Subscibers can access a weekly table showing the following information on that week's top covered call options:

  • Company Name
  • Stock Symbol
  • Closing Stock Price
  • Recommended Call Option (Month of Expiration / Strike Price)
  • Annualized "Static" Rate of Return (Option not exercised; stock price unchanged at expiration)
  • Annualized "Called Out" Rate of Return (Option exercised; stock called away from you)

This method of investing is based on Active-Investor.com's proprietary research and years of practical trading experience. To help you decide what type of investing is most suitable for you, consult your personal investment advisor. For additional background, you may also want to browse through the online Bookstore.

OUR INVITATION TO YOU

Please accept our invitation to review Active-Investor.com's weekly research for free, with no obligation. Take a moment now to keep it free.



STOCK ANALYZER
Enter Symbol:  
Quote Chart Opinion Profile
MARKET STATS

Select:


Financial Ad Swap
Financial Ad Swap

The Financial Ad Trader
The Financial Ad Trader


Free Trial | Member Login | Home
Bullish Stocks | Bearish Stocks | Covered Calls | Stock Splits | Indexes/Sectors | Commentary
News | Links | Bookstore | Tutorial | Glossary | Portfolio | FAQ
Awards | Performance | Disclaimer

Active-Investor.com
Dayton, OH, USA

Copyright 1998, 1999, 2000