Reseach & Trades

It would be best to read my previous post before starting this one. This is a follow on to how I made my investments this week.

Since I was unable to ferret out any good trades using my “catch a dividend” strategy, I used some other techniques I have learned or discovered while researching stocks, options, and some of the tools available to me.

Trade King has an option scanner tool from ivolatility that is very useful for finding trading opportunities. I screen for expensive (i.e. high volatility) calls at or preferably in the money. I then research the ones that look promising through Yahoo Finance and Motley Fool caps. I then plug the various stock and option prices into a option calculator spreadsheet that I have downloaded and try to make a decision based on the projected return and what I believe the risk is.

Using the strategy above give a list of high volatility tech and pharma stocks. On Monday I placed a trade for 200 shares of EEE at $8.16 and sold 2 Feb $7.50 calls for $1.80. This gives an expected return of 14.6% for 61 days and downside break-even to about $6.60. In the last two days the share price has fluctuated between $7.80 and $9.50, so it may be wild ride for the next two months.

On Tuesday I purchased 100 shares of GRA for $19.74 and sold a Jan $20 call for $1.30. Static projected return is 5.5% for 31 days, higher if called. Downside is covered to $18.60. I made this trade based on good rating on the Motley Fool Caps and good expected return for a short term trade.

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4 Responses to “Reseach & Trades”

  1. The Dividend Guy Says:

    Thanks for visiting my blog. I have enjoyed going through yours as I am trying to learn as much as I can about covered calls. One thing I can’t see yet, is how you decide to invest in a stock – is it based on option premium or do you buy the stock based on wanting to hold it and then just try to eeck out small option gains? Would be interested to hear your perspective.

  2. planetim Says:

    Thanks for the comment, I am trying to maximize either dividend income or option time premium. I really care very little about the stock. I do some fast research; chart trend, recent news, etc. to try to avoid anything that will blow up. With the very aggressive stocks I try to start with an in-the-money call to protect the down side.

  3. finance ninja Says:

    hi Planetim. thanks for the comment on my blog, but I have to say yours sounds a lot more professional and disciplined then mine. the only thing I can admit is that I am a shitty trader because i can’t discipline myself to get out of winning and loosing trades. Though I noticed you read Motley Fool and it’s 300,000 stock picks of 2007. hmm… lets see there are only like 9000 companies to actually choose that are listed. and clearly 300,000 companies aren’t going to make it expecially penny stocks. i dunno dude. BUT for the sake of competition i’m going to do that 2007 stock pick contest with my picks at least the ones i think that are going to go higher. if you know of any options trading contest let me know. the dividend guy sounds smart. i’d read his blog. covered calls are something i want to do monthly for income once i’ve made 40-100k in just trading. thanks for adding me to your blog roll without asking. i like the initiative of adding ninja’s on your team! =D

    well later dude.

  4. Learning Covered Calls Rolling a call option « Says:

    […] a call option January 30th, 2007 — planetim My covered call position in EEE was deep in the money, so I took a  look at the numbers to see if I could/should sell out […]


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