Dow Futures Down 438; NEM, XLE May Be Good Covered Calls, Puts Options Trades

The strategy is simple. Pick good under valued dividend stocks. We pick stocks with active and liquid options that can be used to generate additional income by selling covered calls and puts.

By Donald E. L. Johnson

Cautious Speculator

• Dow futures are weak.

• Futures bid/ask prices on NEM, XLE look bullish.

• It usually is wise to wait for at least 30 minutes after the markets open before trading.

Newmont Corp. (NEM) and the Spider Energy ETF (XLE) might open strong Monday in the face of what looks like a weak opening.

Dow futures are down 438 points at this writing. NEM and XLE are on our March 18 watch list. They both are good dividend equities.

While a lot of dividend and total returns investors are taking money out of equities or are on a buyers’ strike until the Russian invasion of Ukraine cools and the Federal Reserve Board’s interest rate policies become clearer, some speculators are bottom fishing.

They’re nibbling at a lot of depressed stocks and some momentum plays like NEM and XLE. As previously reported, my NEM calls were exercised Friday. My inclination is to sell XLE and NEM puts, but I won’t decide until I have a better feel for the markets.

Just before Friday’s close, I rolled covered calls on several stocks I own, mostly at strikes way out of the money. Rolling an options trade is replacing expired calls and puts trades with similar trades on the same stocks with options that expire a week, month or further out. On Friday, I replaced options that expired March 4 with options that expire March 11, 18 and 25, depending on what the stocks were doing.

If I trade NEM, XLE or their options, I’ll announce the trades in the comments section below.

I’ll post possible trades in comments by 10:15 Monday, after the markets have settled down a bit. To see how you might trade these stocks, please click on the link in the first paragraph or the link below to 10 Dividend Stocks.

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Question: Will you buy gold or energy stocks or ETFs Monday and sell covered calls on them, or will you sell cash secured puts or stay on the sidelines?

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.

Calls vs Puts Options: What’s the Difference?

8 Stocks on $25,000 Covered Calls Watch List

If You Buy These 10 Stocks And Sell Covered Calls, Your Premiums Plus Dividends Could Top 10%

10 Dividend Stocks That Look Underpriced; Generate Premium Income By Selling Puts

How to trade the wheel.

Wars Breed Inflation, Rising Interest Rates, Market Turmoil

A video on how to place options trades on Think or Swim.

Beware

Like all investing, trading stocks and options is risky. If you can’t sleep with market risks, you might want to let someone else do your trading. Consider an option trading ETF like XYLD, which I own. I also trade its calls and puts. 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 reserve the right to trade any of the listed stocks and options at any time. I don’t have any positions in NEM or XLE. I own and have options on XOM and KMI, and I own CVX. I have no business relationships with these companies and I receive no compensation for producing this content.

@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.