Covered Call Picks (LNG,MDVN,NFLX,AKS,LVS)

Submitted by Stockmaster2 on Fri, 01/27/2012 - 03:59

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Covered Call Picks for the end of January by Walter.

What's a Covered Call?

The covered call is a strategy where an investor writes a call option contract (sells an option) while at the same time owning an equivalent number of shares of the underlying stock. If this stock is purchased simultaneously with writing the call contract, the strategy is commonly referred to as a buy-write.

While you may have heard that trading options is risky business, covered calls are actually a very conservative strategy, and most brokerages even allow retirement IRA accounts to write covered calls.

Ticker	Company	Price	Strike	Bid	Return	Expiration Date
LNG	Cheniere Energy Inc	11.4	12	1.4	11.90%	Mar-12
MDVN	Medivation Inc	54.3	55	5.8	10.70%	Mar-12
NFLX	Netflix Inc	116	120	8.6	7.40%	Mar-12
AKS	AK Steel Holding Corp	9.82	10	0.7	6.70%	Mar-12
LVS	Las Vegas Sands Corp	49	49	2.9	6.00%	Mar-12

Cheniere Energy Inc (LNG) is currently trading at $11.37. Its 52 week range is between $3.17 and $12.86.

Medivation Inc (MDVN) is currently trading at $54.31. Its 52 week range is between $13.27 and $56.49.

Netflix Inc (NFLX) is currently trading at $116.01. Its 52 week range is between $62.37 and $304.79.

AK Steel Holding Corp (AKS) is currently trading at $9.82. Its 52 week range is $5.51 and $17.88.

Las Vegas Sands Corp (LVS) is currently trading at $48.97. Its 52 week range is between $36.05 and $50.65.

MASTERY Bottom Line (Ninja Style) MASTERY Bottom line:

There are pros and cons to writing covered calls. In theory, this strategy will out perform outright stock ownership if the stock price declines, remains the same, or slightly increases in price. The principal disadvantage of this strategy, on the other hand, is that profit potential can be limited if the underlying stock price advances sharply.