Covered Calls-Writing Covered Calls

Rich D asked:


I need some advice on a particular trading strategy involving Covered Calls on very cheap stocks.

With a low priced stock like BRLC, (1.05 share), the premium interest is between .10-.30 the past couple weeks. Disregarding the trading costs, that’s about a 10-15% return on the cost of the stock every time the options expire.

I’ve done this a couple of times because the price is so low as was my entry point, and I have been looking at other stocks to use the same strategy.

Other than the risk of the stock going to 0, should this raise any red flags? I’ve been more doing it as an intellectual exercise to get more experience with options, but it’s made me about $10-$15 per $100 invested so far.
Most of these stocks aren’t really penny stocks, but stocks that are severely off their 52 weeks highs. Stocks that traded in the 10-30 range at one point, but now sit very low.

BRLC, LVLT, SPC, KRY, OPWV

Guy Connet

Lilly asked:


When I was at camp we had snacks and ours was always these things like munchies or crunchies. They were basically graham cracker clusters covered in chocolate. Anybody know what those are called or what i’m talking about?

Lorenzo Fey

sz z asked:


I haven’t done any covered calls, but I did want to get a few basics down before I did. One last thing: If for example I have a covered call that expires in 2 years, but say there are possible bankrupcy rumors and I want to get the hell out, I suppose I need to get rid of the option first before I can sell the stock, since the option obligates me to provde the shares at the stock price to the option buyer. How do I relinquish this responsibility if need be? I’m using Scottrade for example, would I “Buy to close” ? Thanks in advance!

Keitha Buikema