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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