Quick Take: 21st Century Covered Call Strategy
Time Frame: One to Eight Weeks.
Stock: Bullish Market Edge Opinion – Long Stock position.
Desired Stock Price Direction: Sideways to Up.
Option Position: Short ATM Call – Long ATM +2 Call (Credit Spread).
Maximum Risk: The stock goes down and you lose the amount of the stock’s decline. However, the loss is offset somewhat by the amount of the credit spread.
Summary: If the stock stays flat or moves down, the credit spread will expire worthless and you will keep the credit. If the stock moves up, the stock and the long call will appreciate in line with the stock price.
What Can Happen At Expiration And What Action Should I Take?
- Stock Position: Stock price closes up or down. Hold For 8 Weeks Unless Downgraded.
- Short Call: If In The Money (ITM). Close Or Let The Stock Get Called.
- Short Call: If Out Of The Money (OTM). Let It Expire Worthless.
- Long Call: If In The Money (ITM). Close.
- Long Call: If Out Of The Money (OTM). Let It Expire Worthless.
Current 21st Century Covered Call Positions
New Positions: MAR
On 10/09/2020, The technical condition of MAR is deteriorating. Overall momentum is slowing and if support levels are violated, further weakness in the stock is probable. The stock has outperformed the market over the last 50 trading days when compared to the S&P 500. The MACD-LT, an intermediate-term trend indicator, is bearish at this time. MAR’s chart formation is showing signs of reversing its recent trend. If the stock closes below $96.89 a change in trend will be confirmed. Upside momentum, as measured by the 9-day RSI, is positive but beginning to weaken. The stock is in a short-term overbought condition based on a Slow % K stochastic reading of 80 or higher. Over the last 50 trading sessions, there has been more volume on down days than on up days indicating that MAR is under distribution, which is a bearish condition. The stock is trading above a rising 50-day moving average. If MAR falls below this important support level it could trigger additional selling pressure. In addition, MAR is below its declining 200-day moving average.
| The Market Edge – Market Posture: | Bullish | 8 Week Hold | ||||||||
| Current Stock Price Is Monday Morning | ||||||||||
| Initial | Current | Short Call | Long Call | |||||||
| Stock | # Of | Stock | 10/16/20 | 10/16/20 | Credit | Best | Week % | Approx | Approx | |
| Stock | Price | Weeks | Price | Strike | Strike | Spread | Bet | Return | Div Date | Div |
| SBUX | $87.14 | 6 | $90.23 | 91.0 | 93.0 | $0.43 | 4.5 | 0.5% | ||
| MAR | $99.47 | 1 | $99.47 | 100.0 | 102.0 | $0.71 | 4.7 | 0.7% | ||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| 0.0 | 0.0% | |||||||||
| Stocks Have Strongest Market Edge Opinions. Weekly % Return: The Higher The Better. Best Bet: The Bigger The Better. | ||||||||||
| Closed Positions | ||||||||||
| # Of | Close | |||||||||
| Stock | Weeks | Price | % P/L | Reason | ||||||
| NONE | ||||||||||
The information contained herein has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. Past performance is not necessarily indicative of future results. Traders should read The Option Disclosure Statement before trading options. No representation is made that any account is likely to achieve profits or losses similar to those shown. Due to the possibility of human and/or mechanical error by The Optionomics Group LLC, Inc., its sources or others does not guarantee the accuracy, completion or availability of any information contained herein and is not responsible for any errors or omissions or for results obtained from the use of such information.