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Covered Call Trade of the Month

Investors seeking income in this volatile market can still sell covered call trades for both income and downside protection.  In the past month, the S&P 500 produced a return of 0.73%.  However, subscribers to the Get Rich Monthly Income Plan made off with a 4.7% return by trading a covered call on United Rentals (URI).  Here is the trade posted in July:

Covered Call on United Rentals (URI)

STRATEGY: Look at the August 55 covered call. For each 100 shares of United Rentals (URI) stock you buy, sell one August 55 covered call option for a $52.53 (55.63 – 3.10) debit or better.

Actions: URI is currently trading at $55.01 so the 55 call we sold is ATM.  These shares and call options should be closed on Friday (08/16) for a 4.70% assigned return.

 

Learn more here:

http://getrichinvestments.com/monthly-income-newsletter/

Monthly Income Plan Newsletter

Signup below to receive a free copy of the Monthly Income Plan newsletter for October 2011.  This report contains a market update, list of monthly dividend payers, covered call trades, protective puts and calendar spreads.  Subscribe to Monthly Income Plan.

 


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Covered Call Recommendation on Humana (HUM)

Covered Call Recommendation on Humana (HUM)

STRATEGY:

Look at the October 2011 80 covered call.  For each 100 shares of Humana (HUM) stock you buy, sell one October 2011 80 covered call option for a 75.89 (78.19 – 2.30) debit or better.  This is potentially a 5.42% assigned return. The ex-date is 9/26/2011 for a $0,25 dividend per share which will increase the return.

Blanket Put:  If you are looking for a blanket put for protection, look to buy the Jan 2012 77.50 Put for $7.00.  You will sell the Blanket Put when the covered call position is closed.
Potential Risk: The technicals for HUM are bullish with a possible trend reversal. The stock is under accumulation with support at 76.35. S&P rates this stock 4 STARS (out of five) – buy.

S&P research notes:

S&P reiterates Buy opinion on shares of Humana (HUM) . HUM agrees to acquire MD Care, a California-based Medicare Advantage HMO with 15,000 members. Terms were undisclosed. HUM expects the transaction to close by year end. We see it benefiting modestly from improved economies of scale, as HUM already has 400,000 Medicare members in California. Nonetheless, we think it will improve its competitive position in the state. MD Care had ’10 revenue of $155M, but HUM does not expect the transaction to materially affect ’11 earnings guidance. Our EPS model is unaffected by the transaction until it occurs, and we keep our $90 target price.

Defensive Stocks For a Volitile Market

In markets like we experienced the previous week, you must make adjustments to your monthly income investments.  First, start with a list of defensive stocks that can hold up in all market conditions.  You should make sure these stocks pay a decent dividend for income.  You then sell covered calls on these defensive stocks for monthly income.  Lastly, you must buy a Blanket Put (protective put) to ensure the return of your capital.  See the “Defensive Stocks For Monthly Income Report” shown below.

 

Free Covered Call Trade

Free covered call recommendation on Alkermes is a stock and call setup for income investment.

CALL STRATEGY:

Look at the November 16 covered call. For each 100 shares of Alkermes (ALKS) stock you buy, sell one November 16 covered call option for a 14.78 (16.13 – 1.35) debit or better. That’s potentially a 8.3% assigned return on investment.

 The technicals for ALKS are bearish with a weak downward trend. The stock is under accumulation with support at 15.70. S&P rates this stock 4 STARS (out of five) – buy.
 S&P maintains Buy opinion on shares of Alkermes (ALKS). ALKS completes its acquisition of Elan Drug Technologies for $1.02B, consisting of $500M in cash and issuance of 31.9M of its shares. We continue to see the deal significantly diversifying revenues with royalties from products with long patent lives, thus lowering its risk profile. We also see robust cash flows supporting a rapidly advancing R&D pipeline. On anticipated earnings accretion, we raise our adjusted FY 12 (Mar.) EPS estimate $0.47 to $0.08 and FY 13’s by $0.79 to $1.02. We keep our target price at $22, which reflects the expected benefits from the deal.
Check out the Get Rich Monthly Income Plan for more investment income strategies.

Free Covered Call Trade on Novartis

Covered Call Recommendation on Novartis
Call Strategy: Look at the January 55 covered call. For each 100 shares of Novartis AG (NVS) stock you buy, sell one January 55 covered call option for a 51.62 (55.77 – 4.15) debit or better. That’s potentially a 6.5% assigned return.

 The technicals for NVS are bearish with a weak downward trend. The stock is under accumulation with support at 54.77. S&P rates this stock 4 STARS (out of five) – buy.

S&P research notes:

 S&P reiterates buy opinion on ADSs of Novartis AG (NVS) . NVS recently updated investors on its long-term strategy, indicating that group level margins will be enhanced by its Alcon and Vaccines & Diagnostics (V&D) units, alleviating the impact of patent losses on key brands such as Diovan, Femara and Zometa.
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