The results of these 10 trades were
almost uniformly positive.
Trade Number 1 expired on November 19, 2004.
The stock was above the strike price, so the maximum
profit potential was reached.
Trades Number 2 through 9 expired on December
17, 2004. Seven of the nine stocks were higher
at expiration. Only one of the two trades in
the stocks that declined would have resulted in a
loss.
That loss, at $49 per 100 shares, was nothing when
compared to the gain of $1,793 that would have been
realized if 100 shares of each of the 10 stocks had
been purchased and one of the calls suggested in the
email above had been sold against each stock.
These strong
results were achieved mainly because of three
things.
- The major indexes were headed higher in
November and December of 2004.
- Most of the stocks had high combined
fundamental and technical rankings.
- The stocks were already trending higher when
purchased.
Check out the November/December time
frame on the chart of the S&P 500 Index below to
see how the market was doing when these covered
calls were chosen:
Reprinted below is the
market analysis section of the Stricknet.com Options
Report that was also emailed to subscribers on
Saturday, November 6, 2004:
Stocks had rallied earlier in
the week as Republican leaning Wall Street saw its
candidate retain the presidency. Before the market
opened on Friday traders got another shot in the arm
when they learned that October nonfarm payroll jobs
had increased by 337,000. It was almost double the
175,000 expected by a consensus of economists.
August and September job numbers were revised upward
by 113,000 to heighten the bullish mood.
The major averages surged to session highs about an
hour into trading. They withstood a midday bout of
profit taking that saw the S&P 500 briefly dip
into negative territory. It bounced back to finish
4.50 points higher. While its gain of 0.39 percent
was the smallest among the big three, the blue chip
S&P did manage to put together its first
nine-day winning streak since 1997. The Nasdaq
Composite advanced by 15.31 points, or 0.76 percent,
to take first-place honors on the day. It had lagged
the other majors during the prior two outings and
was due to make an attempt at catching up. The Dow
rose by 72.78 points, for a gain of 0.71 percent.
All the major averages added on better than 3
percent for the week.
The mostly positive internals slightly favored the
Nasdaq on Friday. Losers edged out winners 1,700 to
1,695 on the NYSE, while Nasdaq advancers
outnumbered decliners 1,858 to 1,235. NYSE volume
slumped by 4 percent to 1.72 billion shares, but was
still nearly 30 percent above average. Nasdaq volume
increased by 4 percent to 1.91 billion shares. Up
volume was 1.85 times as heavy as down volume on the
NYSE and 2.63 times as heavy on the Nasdaq. The
number of new highs further expanded to 684, while
the number of new lows shriveled to just 32.
High-low ratios like that are only seen during bull
market periods.
The secondary indicators, like the major averages,
while stretched to the upside, still managed to add
to their recent gains. The S&P SmallCap 600 rose
by 0.53 percent to notch its third straight all-time
high. The Russell 2000 climbed by 0.36 percent. It
printed a new intraday high for the year, but
settled a couple of points below where it did on
April 4. A good number of the top 100 stocks saw
some profit taking, but 55 of them managed to close
higher. Only one gained 5 percent or more, while
four lost at least that much.
The Philadelphia Semiconductor Index (SOXX), which
had severely lagged the major indexes during the
prior two sessions, bounced back by 5.11 points, or
1.24 percent, to 417.83 on Friday. It did record its
best close since early July and still appears to be
in the midst of its fourth quarter rally. We would
like the SOXX for new money for December calls if it
could to take out its November 3 high at 424.25.
While the price and volume action in the major
indexes has been undeniably bullish recently, each
day that they rally from here, they become more
overextended to the upside. The gains during the
past four sessions have all come on above average
volume, so the intermediate term technical picture
remains bright. In the very short term, a pullback
on mild volume would be preferable to further gains
that end up seeing the indexes running out of gas. We
still like covered calls here, but would be looking
to focus more on in the money positions until the
market has had a chance to retrace some. If we are
wrong and this strong bullish run continues, most of
the trades will probably still work out and the
stocks will get called out.
We are going to buy
some inexpensive index puts on Monday to be able to
profit if there is a pullback in the very short
term.
***********************************************
***********************************************
If you would like to
receive 10 covered call picks like these every market day
-- that's 50 every week! -- then be sure to sign up for a
FREE trial subscription to Stricknet.com.
