Stocks and Options » Call

Hewlett-Packard Company (HPQ) – Sold Nov12 Covered Calls

Bill — Tue, 22 May 2012 00:25:34 +0000

Today, 5/21/12, I sold 4 HPQ Nov12 $29 Covered Calls for a net deposit of $96.94 in an IRA account. My basis for these HPQ shares is now $27.95. This transaction represents a simple return of about .86% and an annualized return of about 1.74% on my prior basis with 180 days to expiration.

I decided to sell the Nov12 option because the nearer term options did not have sufficient premium to make them worthwhile at the $29 strike price. This is tying up a lost of cash in this account but there is nothing for it unless I want to take a loss at this time…which I do not want to do. A little patience and these shares will be back to where I need them to be.

Holding HPQ until November will have the small benefit of collecting some additional dividends. HPQ is recently increased its dividend to .132 per quarter from a previous .12 per quarter. An increasing dividend is generally a good thing.

S&P continues a 12-month price target of $29 and has a Hold recommendation on HPQ. MarketEdge has a price opinion of $24.51 and a Neutral recommendation. The 22 Yahoo Brokers have a 12-month price target of $29.23 and continue a recommendation of 2.6 on a scale where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Freeport-McMoRan (FCX) – Sold Jul12 Covered Call

Bill — Tue, 22 May 2012 00:11:36 +0000

Today, 5/21/12, I sold 1 FCX Jul12 $39 Covered Call in my taxable Account for a net deposit of $12.24. My basis for these FCX shares is now $37.19. This transaction represents a simple return of about .33% and annualized return of about 1.96%.

This is the next in a continuing series of Covered Call transactions on FCX shares that I purchased and upon which I am selling Covered Calls with the intent that they be called away. In this case, I acquired these FCX shares when my Apr12 $38 Put was assigned to me. I decided to sell the $39 Call to make a little extra when the shares are eventually called away from me. I would like to be selling weekly Calls but FCX is just not cooperating right now.

These FCX trades have worked quite well for me so far. The Covered Calls sometimes expire worthless (not my original intent) but FCX is volatile enough that I am confident that I will eventually sell them at a profit. As long as I can continue to sell near term Covered Calls above my acquisition price I do not care if they are ever called away.

S&P currently has a 12-month price target of $46 on FCX with a Buy recommendation. MarketEdge continues a price opinion of $38.56 and an Avoid recommendation. The 19 Yahoo analysts have a 1-year price target of $52.86 and a 1.8 recommendation where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Alpha Natural Resources Inc (ANR) – Sold Jun12 Covered Call

Bill — Mon, 21 May 2012 21:15:59 +0000

Today, 5/21/12, I sold 3 Jun12 $14 Covered Calls for a net deposit of $43.73 in an IRA account. This transaction represents a simple return of about .94% and an annualized return of about 13.23% with 26 days left to expiration. My basis for these ANR shares in is now $15.28.

I wanted to sell the weekly $16 Covered Call but there was just no money in it at this time. As it is, I had to go down to the $14 strike to be able to sell the Jun12 Calls at a reasonable rate. These Calls leave me underwater on these ANR shares so I don’t want them called away just yet. I am making a small bet here that ANR will not recover above $14 in the next month and that these Calls will expire worthless. I can then sell the Covered Calls on these shares at least one more time. If necessary, I will be able to roll these Calls out and up.

ANR does not pay a dividend so these ANR shares are most definitely a trade and not an investment. S&P has a 12-month price target of $18 and a hold recommendation on ANR. MarketEdge has a price opinion of $13.16 and an Avoid recommendation. The 23 Yahoo analysts covering ANR are more optimistic with a 12-month price target of $21.78 and a recommendation of 2.1 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Bank of America (BAC) – Sold Aug12 Covered Call

Bill — Mon, 21 May 2012 20:50:23 +0000

Today, 5/21/12, I STO 3 BAC Aug12 $8 Covered Calls for a net deposit of $61.73 in my taxable account. My basis for these BAC shares is now $6.90. This transaction represents a simple return of about 2.89% and an annualized return of about 1186% with 89 days to expiration.

For a while, it appeared that these BAC shares would be called away last week. Then, as March ended, the price began to deteriorate. With only a couple of exceptions the price decline continued through today.

On the bright side, I only had to go out to Aug12 to be able to sell the $8 strike for a reasonable price. I would have preferred to sell the Jun12 Calls but that was not possible for me today. I can let BAC be called away in August and be money ahead, which is really my goal here as I am treating BAC as a trade in this account. However, I am not convinced that BAC will be above $8 in August. There is an awful lot of negative commentary working against BAC, which is tending to hold it down.

S&P Currently has a 12-month target of $9 with a 3 star (Hold) rating for BAC. MarketEdge has a price opinion of $7.74 with an Avoid rating. The 25 Yahoo Analysts currently have a 12-month price target of $9.95 and a recommendation of 2.8 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

NVIDIA Corporation (NVDA) – Rolled Down Jun12 Calls

Bill — Wed, 16 May 2012 17:14:37 +0000

Today, 5/16/12, I BTC 2 NVDA Jun12 $18.00 Covered Calls and STO 2 NVDA Jun12 $14.00 Covered Calls for a net deposit of $56.43 in an IRA account. My basis for these NVDA shares is now $21.40. This transaction represents a simple return of about .87% and an annualized return of about 10.26% on my prior basis.

NVDA is falling with the rest of the market, which has allowed me to roll down the strike price and capture some additional option premium. This is the time of year when tech stocks tend to decrease in value anyway so I feel good about this roll down. Of course, it may be that I will need to roll NVDA our and hopefully up if NVDA starts to turn up in a significant way. Time will tell.

S&P currently has a 12-month target of $16 for NVDA, down from $19 last October, with a hold recommendation. MarketEdge has a price opinion of $14.63, down from $15.46 with an Avoid recommendation. NVDA has had a 52-week high of $20.05 and a low of $11.47, which is a lower and tighter band than I noted in October 2011. The 31 Yahoo! Finance analysts have a mean 12-month price target of $16.71, down from an earlier $18.26 with a range of $13 to $22. It is trading at $12.87 as I write this.

One day I will let NVDA be called away from me and be done with it. It does not pay a dividend and I do not normally get sufficient option premiums from it to like it for that reason. For now I continue to hold the stock and sell Covered Calls and am currently a little optimistic that I may actually be able to sell NVDA at a profit one day. About a year ago, I was of the opinion that it was dead money and that I should let it be called away sooner at a lower strike price and redeploy the money in a better returning investment.