Lets play a game.....

Yes, this helps me study at the same time.....



Most of you own stock. Probably more than a few have one that's selling for less than you bought it for.

Guidelines: You must have at least 100 shares for this work but I don't need to know how many shares you have.


Give me the symbol and what you PAID for it. I will reply with which option you should sell in order to have a a 5% or greater return on your stock. You check my math. If I'm right, I get 1 point. If I'm wrong, yall get a point.



Who's first?

I'll play....But I have a far greater return than 5% already so I don't really know how it will help. I'll gladly check math though.
XOM 65.16
DIS 26.84

Since you already have a profit, these numbers will give you a 5% or greater profit on top of the current market prices. This is something you can do every single month to generate cash flow on your stocks. If you are not doing this, you are just leaving cash on the table. (assuming each stock you do this with is in the right position in the trend cycle.)


XOM 85.80 (You would not do this now because the chart is in the absolute wrong position. You'd have to wait till it got to the top 75% and then started to head back down. Then of course the numbers would be a bit different, but for the sake of our exercise....

Sell long option of Jan13 72.50 @ 14.80 then immediately BTC GTC at 10.51



DIS 43.29 (This chart is also in the way wrong position for this maneuver. But for the exercise.....)



Sell long option Jan13 30 @ 14.05 then immediately BTC GTC at 11.89


The Delta is better on Disney too.

So, it looks like you are writing long-duration deep in the money covered calls and counting on the stock's volatility to allow you to cover it at a lower price. Sounds to me like it will work well for a stock in a trading range (especially if it's high in the trading range), but you might lose if the market turns bullish and the stock takes a run up. Of course, like all covered calls, you could always roll the option up and out but I haven't checked the numbers to see if this would be a winning or losing trade. Am I looking at this right, or did I miss something? I'm also curious about your reference to the chart pattern. What pattern do you look at as favorable to enter this kind of position?