Covered Call Picks (AEGR,VRNG,AMRN,STSI,VHC)

Make Fat Stacks with Covered Calls

Here are today's Covered Call Picks for Wednesday 10-03-2012. Read on to see how you can collect a 20% retun on options premium for the October 21st Expiration Date.

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
AEGR  Aegerion Pharmaceuticals Inc  14.9 15 3 20.20% October 2012
VRNG  Vringo Inc  4.3 4.5 0.7 15.10% October 2012
AMRN  Amarin Corporation PLC  11.8 12 0.8 6.80% October 2012
STSI  Star Scientific Inc  3.23 3.5 0.2 6.20% October 2012
VHC  VirnetX Holding Corp  26.9 27 1.4 5.20% October 2012

Aegerion Pharmaceuticals Inc (AEGR) is currently trading at $14.88. Its 52 week range is between $11.75 and $17.72.

Vringo Inc (VRNG) is currently trading at $4.3. Its 52 week range is between $0.68 and $5.45.

Amarin Corporation PLC (AMRN) is currently trading at $11.81. Its 52 week range is between $5.99 and $15.96.

Star Scientific Inc (STSI) is currently trading at $3.23. Its 52 week range is between $2 and $5.05.

VirnetX Holding Corp (VHC) is currently trading at $26.86. Its 52 week range is between $11.5 and $41.93.

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.

I hate to break it to you, but if you sold the $15 calls that is the maximum profit you can make on the underlying shares. So you'd make $.50 plus the $3 options premium. Still a very nice profit, but not quite a 100% gain.

I've been following your covered call pics for a while now, and I happened to pick up AEGR at around $14.50 thanks to your recommendation in this article. I got a little scared when it dropped to $13.70, but I hung in there because of the 20% options premium I got from selling the covered calls. That put my cost basis at $11.50, and now shares are trading at $22 a share so I'm up almost 100%. Keep up the good work and keep these covered call picks coming!