Over the last two days I have changed my position in my holding of MED. I bought back the March $10 call, which I had sold at $.50, for $.10. Today I sold the June $10 call for $.75. This is a 7.7% premium on the current share price.
I have collected a net total of $195 of option premium less commissions of $28 on 100 shares (single option contract trades) of MED. I originally purchased the shares for $9.75 and they are currently trading for $8.43, so I am pretty close to even. I still think it is a good stock and I have upside to the strike price of $10.
The volatility of MED has allowed me to trade in and out of the options for good premium. However, trading a single contract at a time causes commissions to eat up a good portion of possible gains.
Learning Covered Calls 
March 2, 2007 at 5:42 am
I am an options newbie. Can you explain why you bought back the March 10s? Do you think that the stock will hit $10 in the next two weeks and get called away, or did you need to buy the calls back so that you could write the June 10s?
Also, I am sure that you have considered this before now, but Zecco offers options trading at $3.50+.60/contract. It’s not much, but since you say that this small volume makes the transaction costs important, $1.50/ea may be enough to consider.
March 2, 2007 at 2:31 pm
Thanks for the response. I have sold and bought the calls on MED twice. As the stock has risen and fallen I have been able to increase my collected premium each time.
I keep doing this because I still believe MED is a good stock and will get to $10 sometime. I sold the June contract, because the May does not come out until after the March expiration, and I was too impatient to wait.
I am not familiar with Zecco, so thanks for the heads up.
March 2, 2007 at 3:41 pm
I just opened my account with Zecco (I have no vested interest in the company other than as a customer), and it was pretty pain-free. I will likely not use this as my only brokerage account – at least until I am very confident in their business model, product, and service. But, as they say, free is free!
If you choose to open an account, I will only advise you to make sure that you choose the money market sweep option, the ability to trade options request, and anything else at the beginning of the sign-up process. Apparently, any changes you want to make to your account after the sign-up requires paperwork to be sent, which seems a little onerous to me.
Thanks for the details on the MED calls.
December 2, 2007 at 12:12 am
I know EXACTLY what you’re saying about only trading single contracts and having commissions completly EAT up your profits.
One strategy I use is to do covered calls where the majority of the cost of the share is paid for up-front.
It’s easy to do, and it gives you a hell of a lot of downside cover (an added bonus 🙂 )
Check out my website: http://www.CashForLifeSystem.com
Happy Investing,
Minesh Bhindi
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