December Option Investing – DRN Covered Calls – Updated

On the 20th, I initiated an income trade using DRN, along with the statement that I would monitor my trading system for an opportunity to add to my position.

If my program indicates a shift back into an uptrend, I may purchase some additional shares of DRN and sell calls above the strike price the first week in January.

Well, an opportunity arose, and I took it.

My program signaled a shift back to an uptrend on the 22nd. So I was already anticipating adding to my position in early January.

Trading around Christmas usually involves minor rallies on low trading volume. And low volume can result in mispricing. On a normal day, DRN already has low trading volume on its options, which is reflected by HUGE bid/ask spreads.

Today, I noticed that a few bids seemed to be high on the high side. After plotting the bid/ask price curves, I decided that the mispricing represented an opportunity and pulled the trigger on 2 Jan $58 covered calls.

Gross Cashflow (today): ~$443 USD
Gross Cashflow (Dec.): ~$1746 USD

And with that, I’m off the celebrate the last few hours of 2010! Here’s to 2011 and achieving financial independence! Thanks for your support.

Celebrate Safely and Responsibly and see you next year…
TK

Related Posts:


Income Trade: DRN Position Initiated
https://investingforcashflow.wordpress.com/2010/12/20/income-trade-drn-position-initated/
Income Trade: DRN Position Dividend
https://investingforcashflow.wordpress.com/2010/12/28/income-trade-drn-position-dividend/

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December Paper Income – DRN Dividend

Using covered calls to supplement dividend investing is a strategy that I have tried in the past. My DRN trades were not made with that strategy in mind, but who doesn’t like a little extra income for Christmas?

  • DRN Dividend Ex Date: Dec-22-2010
  • DRN Dividend Record Date: Dec-27-2010
  • DRN Dividend Pay Date: Dec-30-2010
  • DRN Dividend Amount Current: $ 0.0542

Merry Christmas!

Merry Christmas Everyone!

December Option Investing – DRN Covered Calls

Sold Jan 22 2011 Call options on DRN @ $50 and $51 strike prices.

Gross Cashflow: ~$1110

Since these calls were in the money, I will have a capital loss in January. However, according to my trading system, the overall markets are still in a downtrend, so I sold positions below the strike price.

If my program indicates a shift back into an uptrend, I may purchase some additional shares of DRN and sell calls above the strike price the first week in January.

Happy Hunting!
TK

Last Trading Day before Options Expire

Make sure to log into your account today and check your options!

Unless there is some serious market action today, most of my options will expire, so I’m looking forward to generating some cashflow next week.

Happy Hunting,
TK

Covered Calls are High Yield Investments

Check out this article from Invest-Safely.com on covered calls. It is a pretty simple example, but illustrates the point well.

YES! Creating high yield investments for yourself is possible. The real question is how much time do you want to spend attaining this goal…

I’m not totally sold on picking low volatility vehicles at this point, but I can’t argue with the rationale.

Also, you want to find something that does not have a lot of price swings (volatility). This way, you can spend less time worrying about the changes in your account balance (from changes in the investment’s price).

But Here’s the rub: the lower the price swings, the lower the yield you will make from covered calls.

Sources:


High Yield Investments
Invest-Safely.com
http://www.invest-safely.com/high-yield-investments.html

Free Access to IBD – Nov 29-Dec12 (via Invest Safely)

You can still get free access to Investors Business Daily (via Investors.com) for the next 9 days!

Don’t miss this opportunity to try out some of IBD’s tools. In addition to the electronic version of the daily newspaper (eIBD), you'll get access to The Big Picture (daily assessment of the markets), Stock Checkup Tool, Screen Center (5 stock selection screens), Stocks On The Move (Stocks being purchased by institutional investors), IBD’s eTables ( … Read More

via Invest Safely

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