CAT, DIA, T Rallies Make Covered Calls Options Trades More Attractive

By Donald E. L. Johnson

Cautious Speculator

• Strong rallies make covered calls trades attractive.

• Short duration trades offer more visibility than monthly and longer trades.

• Sometimes you have to take longer durations to get decent premium prices.

• Small weekly and monthly trades add up.

• I report the trades I’ve done so far today.

Today’s strong rally made selling covered calls on CAT, DIA and T more attractive options trades.

CAT is $190.96. I sold CAT 8.12.22 (2 days that I treat as 7 days for calculating ARoR) $197.50 covered calls for $0.23. Return on risk (ROR) .12%, annual ROR 3.41%. Delta .10. Probability of being out of the money at expiration 90%. This is a long-term position that I’m not ready to sell. So I take a low RoR for the low probability that the stock will be called. I’m also short CAT puts to add to the income stream from the stock. I try to trade its options weekly.

DIA is $332.62. I sold DIA 8.19.22 (9 days) $338 (delta .22) strike calls for $0.93. RoR 0.26%, ARoR 10.65%. I’m taking a moderate risk that this trade will be exercised, and I’m expecting the Dow Jones Industrials to dip a bit after today’s pop.

T is $18.05. I sold T 9.16.22 (37 days) $19 strike calls for $0.15. RoR .48%. ARoR 7.7%. Dividend yield is about 6.14%. I had to go out to the September expiration to get a half way decent RoR. If the stock is called, I’ll take a big loss on the stock and move on.

LINKs:

Home Page. See previous articles on other stocks and watch lists. If you read several of these articles, you’ll learn how this strategy is meant to work. No guarantees. Links to useful web sites are on the lower right corner of the home page. Scroll down.

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Beware. Like all investing, trading stocks and options is risky. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I own and/or have options positions on IWM, DIA and other equities. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor for any links.

@realDonJohnson. Because I don’t want to litter subscribers’ in boxes with emails, I write only one or two newsletters a day. I’m active most days on twitter where I tweet about stocks, options trades and other topics.