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.
This Week’s 21st Century Covered Call Selections
There are two new selections this week: JNJ and XOM.
The current technical condition for JNJ is strong and the chart pattern suggests that upward momentum should continue. The stock has underperformed the market when compared to the S&P 500 over the last 50 trading days. The MACD-LT is confirming that the intermediate-term trend is bullish. Over the last 50 trading sessions, there has been more volume on up days than on down days indicating that JNJ 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 JNJ. The stock is above its 200-day moving average which is pointed up indicating that the intermediate term trend is bullish.
The current technical condition for XOM is strong and the underlying indicators should keep the current uptrend intact. Over the last 50 trading days, when compared to the S&P 500, the stock has performed in line with the market. The MACD-LT is confirming that the intermediate-term trend is bullish. Chart formation indicates a strong rising trend. 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 up days than on down days indicating that XOM 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 XOM. The stock is above its 200-day moving average which is pointed up indicating that the intermediate term trend is bullish.
Current Open Positions
| The Market Edge – Market Posture: | Bullish | VIX | 12.88 | Bearish | |||||
| Short Call | Long Call | ||||||||
| # Of | Stock | 03/22/19 | 03/22/19 | Credit | Best | Week % | Approx. | Approx. | |
| Stock | Weeks | Price | Strike | Strike | Spread | Bet | Return | Div Date | Dividend |
| UTX | 8 | $126.12 | 126.0 | 128.0 | $0.87 | 8.0 | 0.7% | None | $0.00 |
| IWM | 8 | $156.08 | 156.0 | 158.0 | $0.70 | 5.0 | 0.4% | None | $0.00 |
| CVX | 7 | $125.90 | 126.0 | 128.0 | $0.73 | 9.0 | 0.6% | 02/14/19 | $1.19 |
| MSFT | 6 | $116.82 | 117.0 | 119.0 | $0.70 | 7.0 | 0.6% | 02/20/19 | $0.46 |
| NVDA | 6 | $172.44 | 172.5 | 175.0 | $1.18 | 8.0 | 0.7% | None | $0.00 |
| JPM | 5 | $107.20 | 107.0 | 109.0 | $0.77 | 8.0 | 0.7% | None | $0.00 |
| LULU | 4 | $143.08 | 143.0 | 145.0 | $1.10 | 8.0 | 0.8% | None | $0.00 |
| JNJ | 1 | $136.85 | 137.0 | 139.0 | $0.63 | 5.0 | 0.5% | None | $0.00 |
| XOM | 1 | $81.20 | 81.0 | 83.0 | $0.59 | 8.0 | 0.7% | None | $0.00 |
| Prices Are Monday’s Opening Prices | |||||||||
| Stocks Have Strongest Market Edge Opinions | |||||||||
| Weekly % Return: The Higher The Better | |||||||||
| Best Bet: The Bigger The Better | |||||||||
Results for this week’s trades will be posted over the weekend on the Scoreboard.