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Acstudio Covered Calls
Been using these for the last month or so and it has really put my portfolio into overdrive. So far I've had AVNR which had a great premium then got called away for an additional +20% per share . ARIA which went nuts on me such that I bought the calls back...then a few hours later sold them again for profit. Then the next day bought them back...then sold the stock for additional profit.
And CHTP which has had a huge drop in price but it doesn't really bother my strategy as I am basically selling the volatility so the more the price swings the better...the only difference is how it may influence which strikes I have to decide to sell for the next month. I bought in at 4.34 per share and sold calls for .77 reducing my cost basis to 3.57 per share. If it expires above 5$ I'll make another .66$ per share when it gets called away....then I can buy them back and start all over again. If not I'll just sell the calls again for whichever strike makes sense depending on where it's at that day.
Covered calls are a nice hedge against risk. If you like trading IV you should check out YRCW. 187% IV on calls expiring in 13 days. I have played this one a few times selling naked calls as well as covered calls as you just can not ignore the premium you can collect on it.
Here is an example on closing Friday.
Purchase 100 shares YRCW @ 19.18. Sell 1 lot Jan '14 $20.00 call collect $1.66 premium.
Cash Outlay - $1918.00
Break even - $17.52
Max Profit (is over 20.00 by expiration) - $248.00
