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Backtesting & High Dividend Covered Calls

We’ve analyzed Jim Cramer’s bullish stock tips in previous articles and found his performance isn’t so hot. But what if we combined Jim Cramer’s recommendations with one of the many covered call strategies available, particularly a high dividend yield covered call strategy?

For this analysis, we’ll backtest Jim Cramer’s recommended stock tips with a high yield covered call strategy for Jim Cramer’s bullish recommended stock tips made one month prior to June 19, 2006. For the analysis we’ll use PowerOptions new backtesting product SmartHistoryXL. The SmartHistoryXL parameters are set to search for covered call strategies for high dividend yielding stocks for the date June 19, 2006 (next market day after June options expiration) with options expiration set for July. A screen shot of the SmartHistoryXL interface is shown below:

The top 20 positions matching the search criteria as returned by SmartHistoryXL are shown below:

The results of all 20 positions at options expiration on July 21, 2006 as indicated by SmarthHistoryXL are shown below:

The results of the high dividend yield covered call strategy using Jim Cramer’s bullish stock tips yielded a backtested average return of 3.4%, with an 85% success rate.

PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income.

[tags]option income, stock tips, stock options, covered call strategies[/tags]

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