Covered Call Picks (ALXA,VHC,MCP,ANR,LEAP)

covered calls beavis

Here are today's Covered Call Picks for Thursday 10-25-2012. Some hefty returns for the December Expiration Date.

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
ALXA  Alexza Pharmaceuticals Inc  5.11 5.5 1.6 30.30% December 2012
VHC  VirnetX Holding Corp  31 32 5.6 18.10% December 2012
MCP  Molycorp Inc  10.9 11 1.2 10.80% December 2012
ANR  Alpha Natural Resources Inc  8.43 9 0.9 10.20% December 2012
LEAP  Leap Wireless International Inc  5.5 6 0.5 9.80% December 2012

Alexza Pharmaceuticals Inc (ALXA) is currently trading at $5.11. Its 52 week range is between $2.55 and $14.8.

VirnetX Holding Corp (VHC) is currently trading at $31.01. Its 52 week range is between $16.59 and $41.93.

Molycorp Inc (MCP) is currently trading at $10.93. Its 52 week range is between $9.4 and $42.9.

Alpha Natural Resources Inc (ANR) is currently trading at $8.43. Its 52 week range is between $5.28 and $29.29.

Leap Wireless International Inc (LEAP) is currently trading at $5.5. Its 52 week range is between $4.28 and $11.3.

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.