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 Market Edge Opinion Is Downgraded.
- Short Call: If In The Money (ITM). Close The Spread 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 The Spread.
- Long Call: If Out Of The Money (OTM). Let It Expire Worthless.
Current 21st Century Covered Call Positions
New Positions: SBUX
On 12/11/2020, The technical condition of the SBUX is strong. The chart pattern suggests that upward momentum should continue and the stock is positioned for higher prices. The stock has outperformed the market over the last 50 trading days when compared to the S&P 500. MACD-LT, an intermediate-term trend indicator, is bullish at this time. Chart formation indicates a strong rising trend. Upside momentum, as measured by the 9-day RSI indicator is very strong. Over the last 50 trading sessions, there has been more volume on up days than on down days indicating that SBUX is under accumulation, which is a bullish condition. The stock is trading above a rising 50-day moving average. This validates the strong technical condition for SBUX. The stock is above its 200-day moving average which is pointed up indicating that the intermediate term trend is bullish.
| The Market Edge – Market Posture: | 8 Week Hold | |||||||||
| Current Stock Price Is Monday Morning | ||||||||||
| Initial | Current | Short Call | Long Call | |||||||
| Stock | # Of | Stock | 12/18/20 | 12/18/20 | Credit | Best | Week % | Approx | Approx | |
| Stock | Price | Weeks | Price | Strike | Strike | Spread | Bet | Return | Div Date | Div |
| JPM | $116.70 | 5 | $119.83 | 120.0 | 122.0 | $0.75 | 4.6 | 0.6% | ||
| CVX | $87.69 | 5 | $90.26 | 90.0 | 92.0 | $0.87 | 6.0 | 1.0% | 01/05/20 | $0.90 |
| AMD | $87.22 | 4 | $92.51 | 92.5 | 94.0 | $0.36 | 4.9 | 0.4% | ||
| MAR | $121.64 | 4 | $128.09 | 128.0 | 1340.0 | $0.87 | 1.2 | 0.7% | ||
| SBUX | $103.86 | 1 | $103.86 | 104.0 | 105.0 | $0.41 | 5.4 | 0.4% | ||
| 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. | ||||||||||
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.