Covered Call Picks (YOKU,GMCR,BAC,CLF,UPL)

Make Fat Stacks with Covered Calls

Here are today's Covered Call Picks for Friday 03-16-2012.

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
YOKU  Youku Inc  27.1 28 1.8 6.70% Apr-12
GMCR  Green Mountain Coffee Roasters Inc  51.4 52.5 2.7 5.30% Apr-12
BAC  Bank of America Corp  9.8 10 0.4 4.20% Apr-12
CLF  Cliffs Natural Resources Inc  72 72.5 2.9 4.00% Apr-12
UPL  Ultra Petroleum Corp  24.9 25 1 4.00% Apr-12

Youku Inc (YOKU) is currently trading at $27.06. Its 52 week range is between $13.76 and $69.95.

Green Mountain Coffee Roasters Inc (GMCR) is currently trading at $51.39. Its 52 week range is between $34.06 and $115.98.

Bank of America Corp (BAC) is currently trading at $9.8. Its 52 week range is between $4.92 and $14.29.

Cliffs Natural Resources Inc (CLF) is currently trading at $72.03. Its 52 week range is $47.31 and $102.48.

Ultra Petroleum Corp (UPL) is currently trading at $24.9. Its 52 week range is between $22.51 and $51.2.

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.