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.