Sept - Oct Covered Calls

In a direction-less market driven by emotions, it is hard to take prudent steps whereby Calls purchased will deteriorate & not recover. So, it may be best to look for covered call strategies where equities may be at or near bottom and sell calls either near or ITM. Selling calls works in the favor of the trader where time works with them & the position sold will decay. If the equity appreciates & expires ITM, then the stock will get sold automatically at expiration to cover the short option position.

Analyze the following covered calls on paper/spreadsheet & calculate the return on investment. For ROI, calculate the minimum & maximum returns.

Majority of the strike prices here for analysis are ITM.

I) September Expiration : MBIA (SP=15) ; DAL (SP=7.5) ; AMR (SP=10) ; UNG (SP=36) ; & AIG (SP=21) this has taken a big beating over past few months; FED (SP=15).

Returns are decent whether one looks into the short term for Sept or a combination of well distributed positions for both Sept & Oct.

II) For October expiration: XLF(SP=21) ; UNH (SP=31) ; IBN (30 or 35) this is a great bank ; EEM (SP=40); TSO (SP=20) this is at the bottom ; VLO (SP=36); HON (SP=50) this is a stable company ; F (SP=5) Ford is too cheap to ignore;

You may also choose to analyze GM for both Sept or Oct. If you doubt F or GM, do some research. These companies are too big & own several product lines.

Watch JPM & MER for pull back.

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Post rally analysis

In general, a large upswing occurred on Tuesday. Whether it can be sustained will be a TBD. Expect a pull back due to FRE reporting losses. That may bring down FNM & various financials & make C, MER, WFC, WB, XLF attractive. Up one day, down the next.

Also, for August 6th -- Watch how the following perform so as to confirm an uptrend of staying above the recent trigger(s) of any of the recent corresponding 9 day or 22 day or 40 day SMA.

BA, WMI, UNH, CVH, PCP had one of the triggers.

WLT is yet to confirm its trigger, although volatility is very high. So analyze a vertical for same month or an Aug/Sept diagonal.

RIG announces earnings prior to market opening.

PSA is poised to make some moves prior to earnings on Aug 7th.

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Financials , Transport, Storage & Insurance

Analyze PSA: Earnings will be announced on Aug 7 after market close.
Buy Sept 75 & Sell Sept 85 Calls OR Buy a Sept 85 call for 3.9 or 4

Analyze JPM: Buy Dec 42.5 & Sell Sept 45 call for debit of 2.55


Analyze the following for returns-
MER BULL PUT SPREAD : SELL 22.5 & BUY 20 ; credit= .50 over 2.5 dollar spread for September


COVERED CALLS: (selling them for Sept)

Buy WFC at $30.5 ; Sell to Open Call STRIKE PRICE Of 31 -WFCIM at $2.10

Buy AET at $41.80 Sell to Open Call STRIKE PRICE Of 45 -AAFII at $.90

Buy UNP at $79.61 ; Sell to Open Call STRIKE PRICE Of 80 -UNPIP at $4.30

Buy XLF at $21.4 ; Sell to Open Call STRIKE PRICE Of 22 -XLFIV at $1.24

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