Covered Call Picks (FB,CHK,LVS,USO,C)

covered calls beavis

Here are today's Covered Call Picks for Thursday 07-26-2012. These are for the September Strike. You can tell volatility is down when the best options premium 2 months away is 10%.

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
FB  Facebook Inc  26.9 27 2.7 10.10% Sep-12
CHK  Chesapeake Energy Corp  18.2 19 1.3 7.10% Sep-12
LVS  Las Vegas Sands Corp  36.4 37 1.9 5.20% Sep-12
USO  United States Oil  33.4 33.5 1.6 4.90% Sep-12
Citigroup Inc  26.3 27 1.1 4.30% Sep-12

Facebook Inc (FB) is currently trading at $26.85. Its 52 week range is between $25.52 and $45.

Chesapeake Energy Corp (CHK) is currently trading at $18.15. Its 52 week range is between $13.32 and $35.75.

Las Vegas Sands Corp (LVS) is currently trading at $36.41. Its 52 week range is between $36.08 and $62.09.

United States Oil (USO) is currently trading at $33.41. Its 52 week range is $29.02 and $42.3.

Citigroup Inc (C) is currently trading at $26.28. Its 52 week range is between $21.4 and $39.42.

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.

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