This is a covered call trade for monthly income on Kohl’s Corp (KSS) using stock and call option with optional protective put.
Covered Call Strategy: Look at the November 2011 50 covered call. For each 100 shares of Kohl’s (KSS) stock you buy, sell one November 2011 50 covered call option for a $47.37 (50.17 – 2.80) debit or better. This is potentially a 5.5% assigned return.
S&P research notes:
S&P sees September Retail Sales modestly better than expected. Our sales weighted index of 13 retailers reported a September comp gain of 6.8% vs. our 5.4% estimate. We see a cautious consumer with retailers offering both newness and value in their merchandise assortments successfully converting store traffic into sales. We think apparel remains a more promotional business than accessories, with exclusive brands a key comp driver for moderate-price retailers like KSS, which benefited from last month’s Jennifer Lopezand Marc Anthony launches. The company posted a 4% comp gain in September vs. our 1.5% estimate and August’s 2% decline.
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