January Option Investing – Covered Calls Part 2

Trading ranges settled down towards the end of the week, but still rose enough to give us the Santa Claus rally.  FAS climbed back into the mid-60’s causing my Christmas eve calls to be exercised.  Monday was a holiday and the markets were closed, so this week’s FAS premiums were a little lower than those of previous weeks.

A quick look at the charts, and selling out-of-the-money (OTM) calls is the best way to go. DRN, FAS, and ERX broke their July downtrends. EDC actually broke through as well, but hasn’t moved higher like DRN. Given this environment and the potential upside, I added another call for EDC. I could have sold a call closer to the current price (75.50 or so) for a higher premium, but I’ve seen many low volume rallies between Christmas and NYE and I couldn’t pass up a 5% return on an $80.00 EDC call.

I entered orders on Tuesday, and here is where I ended up.

  • EDC – $80.00 calls @ $3.80
  • FAS – $68.00 calls @ $1.32 (These calls expired Dec 30th)

Look for my December Cashflow Report to come out later this week, as well as a year-end review for 2011.

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About T. Knight
Blogging about my journey to financial independence via investing for cashflow.

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