Wednesday, June 29, 2011

Covered call income ACI & DOW

          During the past few days the market has rebounded nicely.  One way to verify market's strength is to see if you can get some additional income from covered calls.  As you know we expect to receive a minimal 10%  gain from covered calls particularly if we are committing additional capital.

          Today I placed several covered call trades and I want to share two with you.

          Arch Coal, symbol ACI, is a company I own that is not quite a dividend machine.  To day I bought more ACI at $26.10 and simultaneously wrote covered calls against the shares I bought.  The calls are due September 20, 2011; the strike price is $29.00 and the premium is $.50.  I immediately receive the $.50 and if they take my stock in  September for $29.00 my gain is 13.03%.   For me it is worth committing more capital to get this type of gain.

          Dow Chemical, symbol DOW, is a company I have owned many times over the years and have sold as a result of covered calls and I am at it again.  Today I bought DOW at $35.82 and wrote covered calls against this new position.  The call expires September 20, 2011; the strike price is 39 and the premium is $.67 plus I will probably receive the $.25 dividend the end of July.  I immediately receive the $.67 call premium; I receive the dividend in July; and if they take my stock in September my gain is 11.44 percent.

         Two good examples of how to make money from covered calls in a volatile market.

Very Truly Yours,


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