Covered Call Picks (ARNA,CHK,SINA,HLF,SLW)

Make Fat Stacks with Covered Calls

Here are today's Covered Call Picks for Monday 05-21-2012. Today we're looking at the January 2013 strike price. Some great returns here selling LEAP covered calls.

What's a Covered Call?

The covered call is a strategy where an investor writes a call option contract (sells an option) while at the same time owning an equivalent number of shares of the underlying stock.If this stock is purchased simultaneously with writing the call contract, the strategy is commonly referred to as a buy-write.

While you may have heard that trading options is risky business, covered calls are actually a very conservative strategy, and most brokerages even allow retirement IRA accounts to write covered calls.

Ticker Company Price Strike Bid Return Expiration Date
ARNA  Arena Pharmaceuticals Inc  5.92 6 2.2 36.80% Jan-13
CHK  Chesapeake Energy Corp  14.9 15 3.6 24.10% Jan-13
SINA  SINA Corp  54.7 55 11 19.60% Jan-13
HLF  Herbalife Ltd  46 47.5 7.9 17.20% Jan-13
SLW  Silver Wheaton Corp  25.6 26 3.9 15.20% Jan-13

Arena Pharmaceuticals Inc (ARNA) is currently trading at $5.92. Its 52 week range is between $1.23 and $7.02.

Chesapeake Energy Corp (CHK) is currently trading at $14.91. Its 52 week range is between $13.32 and $35.75.

SINA Corp (SINA) is currently trading at $54.74. Its 52 week range is between $46.86 and $128.17.

Herbalife Ltd (HLF) is currently trading at $45.96. Its 52 week range is $42.15 and $73.

Silver Wheaton Corp (SLW) is currently trading at $25.62. Its 52 week range is between $22.94 and $42.5.

MASTERY Bottom Line (Ninja Style)MASTERY Bottom line:

There are pros and cons to writing covered calls. In theory, this strategy will out perform outright stock ownership if the stock price declines, remains the same, or slightly increases in price. The principal disadvantage of this strategy, on the other hand, is that profit potential can be limited if the underlying stock price advances sharply.

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