In a previous article, “CME Buying CBOT“, we analyzed CME’s purchase of CBOT and we used PowerOptions stock options search tools to find some potentially lucrative covered calls stock options investments with stock options expiring in November of 2006. Every single position selected returned the maximum potential return for an average return of +3.9%, in just 32 days!
We’re still bullish on CME and using PowerOptions Option Chain Tool to search for potential candidates returned the following covered calls stock options positions:
| Chicago Merc. Exch. Hldgs. Inc. (CME) $ 534.20 JANUARY Expiring 1/20/2007 46 days left | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Strike | Call Sym |
Opt Bid |
%Dnsd Prot |
%If Unch. |
%If Assgnd. |
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| 500 | CNMAT | 44 | 8.20% | 2.00% | 2.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 510 | CNMAB | 36.8 | 6.90% | 2.50% | 2.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 520 | CNMAD | 30.3 | 5.70% | 3.20% | 3.20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 530 | CNMAF | 24.9 | 4.70% | 4.10% | 4.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 540 | CNMAH | 19.5 | 3.70% | 3.80% | 4.90% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 550 | CNMAJ | 15.2 | 2.80% | 2.90% | 6.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 560 | CNMAZ | 11.6 | 2.20% | 2.20% | 7.20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For CME, the Option Chain Tool returned seven potentially lucrative covered calls stock options positions with potential returns ranging from 2% to 7.2% (46 days) with downside protection ranging from 2.2% to 8.2%. The higher potential returns for CME are out-of-the-money [OTM] and also exhibit smaller downside protections. The lower potential returns for CME are ITM and have higher downside protection. This illustrates the beauty of covered calls investing, as an investor can tailor their investments according to their own personal risk/reward profile, aggressive investors can select positions more in the OTM direction and investors seeking more safety can select positions more in the ITM direction.
The downside to the covered calls stock options strategy for CME is the amount of capital required for one covered call position, around $53,000. Investors desiring to enter bullish positions for CME with less capital might consider a bull put credit spreads position. Using PowerOptions stock options tools to search for bull put credit spreads for CME returned the following positions:
| Chicago Merc. Exch. Hldgs. Inc. (CME) $ 534.20 December Expiring 12/15/2006 10 days left | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Option |
Expre &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | Net Credit |
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| CNMXB | 06 DEC 510.0 (11) | 2.6 | CNMXQ | 06 DEC 490.0 (11) | 0.85 | 9.6 | 1.75 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNMXT | 06 DEC 500.0 (11) | 1.4 | CNMXQ | 06 DEC 490.0 (11) | 0.85 | 5.8 | 0.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNMXT | 06 DEC 500.0 (11) | 1.4 | CNMXP | 06 DEC 480.0 (11) | 0.45 | 5.0 | 0.95 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNMXQ | 06 DEC 490.0 (11) | 0.7 | CNMXP | 06 DEC 480.0 (11) | 0.45 | 2.6 | 0.25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The bull put credit spreads positions for CME can be entered for around $1000 to $2000 per contract with returns ranging from 2.6% to 9.6%, in only 10 days. As long as the price of CME remains above the short strike price at options expiration on December 15, 2006, the positions will be fully profitable.
The bull put credit spreads positions with the price of the CME stock closing below the short strike price at options expiration will not return the maximum profit and could potentially result in a loss, possibly a significant loss. Even though spread positions can generally be entered for less capital than covered calls stock options positions, they tend to be higher risk, and may require stop-loss management techniques.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered calls stock options investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing stock options positions.
PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, selling naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]CME, Chicago Merc. Exch. Hldgs. Inc., covered call investment strategy, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]