No investment strategy is right for all investors. Investors should research and investigate alternative investment strategies. Listed below are ten reasons why an investor might consider using covered call investing as part of an overall investment strategy. 1. Supplement Income: – CD rates too low? Are stock dividends not producing enough income? Investors can write covered call options to supplement their income. Even on a stable stock, an investor could potentially receive a 6% annual return on their covered call premiums.
Looking for ways to enhance the returns on your IRA or stock portfolio in these times of deflated stock returns and low interest rates? Selling covered call investing equity options is a conservative approach to squeeze out higher returns. When you sell covered-call contracts it gives the buyer the right, but not the obligation, to purchase your stock at the higher price. The seller of the covered call investing contract keeps the profits from the option premium and advances of the stock price. If the stock does not exceed the option strike price, the seller gets to retain the stock and the option premium. Investors can safely achieve 25% to 45% enhancement in their investment program.
How does 3.9% average return in one week grab you? An investor investing in ten S&P500 high potential return covered calls on May 9, 2008 would have experienced a 3.9% return in just one week and would have outperformed the S&P500 by 1.1% (S&P500 return was 2.8%).
Saint Louis based Monsanto (MON), a leading seed company, announced a strong second quarter profit. In fact, the earnings release showed profit more than doubled from the previous year’s second quarter. The news was inspiring to stock trading and many investors added the company to their trading portfolio. Some analysts noted the company’s 2008 earnings forecast in their lists of stock warning signs. Monsanto earned $1.13 billion during the quarter which ended February 29, or $2.02 per share. This was up from $543 million or 98 cents per share from the previous year’s second quarter. A strong 45% surge in revenue, from $2.6 billion to $3.8 billion was a big contributor to the company’s growth. Corn seed, one of the company’s leading products, saw $1.7 billion in quarter revenue, up from $1.2 billion the year before.
Houston based Atwood Oceanics (ATW) announced a strong gain in second quarter profit and revenue. The offshore oil field service provider said its profits jumped 32 percent during the quarter ending March 31, while its revenue spiked 20 percent. Net income for the quarter was $41.8 million, or $1.30 per share. During the same quarter in 2007, the company earned $31.8 million, or $1.01 per share. Revenue rose to $113.5 million, from $94.3 million during the second quarter last year. These are all strong numbers that are certainly please to investors holding the company in their trading portfolio or personal stock portfolio.
You may have come across the term FRO recently while visiting your brokerage account or reading any recent financial newsletters. FRO’s are ‘Fixed Return Options’, a new form of derivative trading vehicle that share various similarities to standard stock options, but also have distinctive differences.
MasterCard (MA) reported a huge boost in profits and revenue during its first quarter earnings announcement. The company seemingly scoffed at the notion of a credit crunch. Net income for the quarter ended March 31 was $446.9, or $3.38 per share. The incredible earnings report was a big driver of stock trading shortly following the announcement. During the same quarter last year, MasterCard earned $214.9 million, or $1.57 per share. Revenue grew an incredible 29.2 percent for the quarter showing a strong increase in business demand for the company’s credit products. Revenue for the 2008 first quarter was $1.18 billion. Last year’s first quarter saw revenue of $915.1 million.
Gartner Incorporated (IT), a Connecticut based information technology research company, said its first quarter profit more than doubled. The company communicated that its impressive earnings growth was due largely to greater contract revenue. This is likely to motivate stock trading as the growth is attributed directly to the company’s business operations. The company said its net income reached $21.5 million, or 21 cents per share, for its quarter, which ended on March 31. During last year’s first quarter, the company netted $8.2 million, or 8 cents per share. This means that the company increased its profit more the double, which definitely emboldens investors maintain Gartner in the trading portfolio as part of a long-term stock trading strategy.
Kaiser Aluminum (KALU) announced that its first quarter profit more than doubled. For the first quarter, which ended March 31, the company said its net earnings were $39.1 million, which amounts to $1.92 per share. During the same quarter a year ago, the company earned $17.1 million, or $0.85 per share. This was huge growth for the company and likely appeals to long-term stock trading strategies. The note that should have really inspired stock trading, however, was the fact that analysts had only expected $1.06 in earnings per share for the company. Kaiser said it soundly beat estimates because of gains from hedging of investments. Revenue for the company climbed to $399 million, from $392.2 million. Analysts had expected revenue to come in at $378.6 million.
A common stock trading technique is to buy a stock or call option when a stock is at a support position and/or to short a stock or buy a put option when a stock is at a resistance point and exiting the position based on some criteria like percent profit, etc. Generally for this trading strategy, it is desirable to find a stock that is in a trading range or channeling, i.e. transitioning or oscillating between the stock’s support and resistance points. One way to find or search for channeling stocks is to use Bollinger Bands. A Bollinger Band is a statistical calculation representing a number of standard deviations away from the mean or average stock price. A typical Bollinger Band is calculated using an average stock price based on a 20 day moving average and upper and lower Bollinger Bands calculated based on two standard deviations away from the…