After the gap down this morning there was not that much action in the market. Financials were the worst hit today while tech was modestly down, with each name in FANG down around a couple percentage points. Even though the VIX was flat today, despite the 2% down move in the S&P, option premiums were very expensive the whole day, leaving me unable to buy any premium.
Covered Call Ideas:
The purpose of covered calls is to slowly collect income on stocks by lowering one’s average cost. It is a good way to put on a bullish bet while minimizing your risk. While it does limit your potential reward, this tool can come in handy for those wanting to invest in a stock but on a pullback rather than at current prices. The names each month will most likely change. However, should I be forced to hold onto the stock past expiration because the covered call expired OTM, I would be comfortable doing so. In turn, I am only choosing names I feel confident about long-term. While there are many names with very attractive premium selling opportunities, especially high-beta tech names, most I would not be comfortable holding long-term as I think valuations are stretched. Below are 5 covered call trades that I like for the next month.
