After another large decline last Thursday, equities along with other “risk-on” assets appear poised for a relief rally that could come early in the week as the markets begin anticipating and debating what Federal Reserve Chairman Ben Bernanke may deliver in his Friday speech. It was in last year’s speech from Jackson Hole when the Chairman unveiled QE2 setting the stage for an equity rally that helped to boost the S&P 500 Index by 32% before reaching a top on May 2, 2011. Although the early comments do not reflect high expectations, unless there is news of more negative developments in Europe chances are we can expect some short covering before the speech, after all nobody knows what he may pull out of his hat.
Here is a FREE Covered Call Trade:
Covered Call STRATEGY:
Look at the January 160 covered call. For each 100 shares of Amazon.com (AMZN) stock you buy, sell one January 160 covered call option for a 147.40 (180.55 – 33.15) debit or better. That’s potentially an 8.5% assigned return. The technicals for AMZN are bearish with a possible trend reversal. The stock is under distribution with support at 175.37. S&P rates this stock 4 STARS (out of five) – buy. The stock has to drop 18.4% to threaten the breakeven point.