The position is structured is stock purchased at $15.21 and an option, expiring March 19, with a strike price of $15 sold for a premium of 97 cents.
If at expiration the stock price as $15 or higher, then my net gain will be 76 cents (because of a 21-cent loss on the stock -- $15.21 minus $15). If the price is below $15, then the option expires worthless, and I keep all of the 97-cent premium. In other words, the return if exercised is 5%, if expired, 6.4%. Not too bad for a month-long position. At $15.21, GCI is slightly above the halfway mark between resistance at $15.60 and support at $13.80. Since I make more off the premium on a slight decline, I'm not unhappy to have a bit more running room to the downside. Earnings are April 12, after expiration, but close enough to motivate some price movement. Although it didn't factor into my decision, a new macd bull signal is showing on the GCI chart. Here's the full covered call scan that I did last weekend. | An excellent book covered calls that anyone, novice or old hand, can benefit from. Covererd calls are among the best ways to generate income off of a trading account, and trader Ron Groenke covers all the bases in showing how it is done. |
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