Tuesday, May 10, 2011

RSY XXXV: Optional Options

Just as selling into a strong market is good, selling covered options in a strong bull run is beneficial. Before we look into some possible choices for selling covered calls on our portfolio, let us look at the latest Sabrient ratings for our rated positions.

Since there is no rush to unload any specific position, RSY portfolio would like to pick longer term contracts to make it worthwhile. Some of the positions do not have options available. Just like the adage says to make money by selling high and buying low, we want to pick out options to sell that are above their theoretical value and buy back below their theoretical value. RSY rejected Total (TOT) for that reason.

Just as RSY recommends good-til-cancelled (GTC) limit orders for buys and sells, RSY suggests the same for option orders. Some of the possible options that could be fruitful are:
1. STMICROELECTRONICS (STM) OCT-11 $12.50 CALL, 6 option contracts at limit price of $1.20.
2. FOOT LOCKER INC COM (FL) JAN-12 $22.50 CALL, 2 option contracts at a limit price of $2.45.
3. COMPASS DIVERSIFIED HOLDINGS (CODI) NOV-11 $17.50 CALL, 2 option contracts at a limit price of $0.75.
4. INVESCO MORTGAGE CAPITAL (IVR) OCT-11 $30.00 CALL, 2 option contracts at a limit price ofoption contracts at a limit price of $0.45.

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