WRITING COVERED CALLS

We've had a few disappointments with some of the stocks chosen to use for covered call writing. We can always improve in the choice department. If we look at just the numbers we often get a lopsided picture. We also must remember to put in our stop losses to protect the downside.

These stocks and their options are not that large in terms of rate of return. In fact they're weak. Why? Part of this is that the market is range-bound. Look at a chart of the Dow. Look below at the DIA, an ETF stock of the Dow 30. It looks like the current range for support to resistance is about 350 to 400 points---say, 11,800 on the support side and 12,200 or so on the resistance end. Will it go higher? Who knows. We're heading into January, but the market is climbing a wall of worry.



So, don't look for great options. The implied volatility in the option prices is lower right now.
LOOK AT THESE DEALS:

CLWR: the stock is at $1.90; a thousand shares is $1,900. the February $2 calls are.20 cents, or $200. But see commissions wipes out a lot of this.

FRO looks good. This is a large container shipping company, Frontline. The stock was $4.10. The Jan $4 calls were .40 X .45 cents. So .40 cents to sell, or $400. The Feb. $4 calls were .65 cents to sell. Seven weeks for $650 now, and maybe a give back of $100 as the stock is .10 cents in the money, or $100.

ROYL was $4.60 and the Feb $5 calls were .30 X .55 cents. There is such a large spread you can probably get .40 cents.

YHOO at $16.08 has Jan $16 calls at .77 to sell and Feb $16 calls at $1.19.
Even Sprint (S) is at $2.28 with Feb $2 calls at .42 cents.
Look at MBI. This used to be one of my favorites. Stock at $11.60 and the Feb $11 calls were going for $1.60 and the Feb $12s were going for $1.12 to sell.

This last one looks good. check it out. I also like FRO. Big decisions ahead for you and your broker.
More later.
Wade