FunnyBiz.today Wise Investor Report Options Trading Strategies of Covered Call Writing and DJX Strangles & Straddles
Here at the FunnyBiz Wise Investor Report, we provide education and information on two primary Options Trading Strategies: 1) Covered Call Writing, and 2) DJX Strangles & Straddles. Both of these Options Trading Strategies possess the potential to generate an average Monthly Return On Investment, i.e. Profit/Income of 10%, resulting in an average Annual Return On Investment Profit/Income of 100%! With these Options Trading Strategies, you may begin with as little as $1,000, and by earning an average of 100% annually, thus doubling your money each year, your initial $1,000 would multiply in just 10 years to $1-Million, and into $32-Million in just another 5 years! The examples of these Options Trading Strategies contained herein are for educational purposes only and are not a recommendation to Buy or Sell any of the listed Stocks or Options. Options Trading involves risk and is not suitable for all investors and may result in loss of principle. Stocks that provide the highest Covered Call Premiums are stocks with the highest volatility which may decline in value as quickly as rise. Each investor must due their own due diligence to determine which stocks and/or Options best suit their particular risk tolerance. Read our full Disclaimer below.
Review of Last Month’s Example of a DJX Strangle Option Position
A Strangle Option strategy is when you Buy both a Call Option, which increases in value when the underlying security increases in price, and a Put Option which increases in value when the underlying security decreases in price, at slightly different Strike Prices. If you Buy both a Call and a Put on the exact same Strike Price it is called a Straddle. But since in our example we are Buying a Call and a Put at different Strike Prices, both slightly Out-of-the-Money, it is called a Strangle. Inevitably in a Strangle or Straddle Option strategy, either the Call or the Put will end up Expiring worthless. The plan is that the Dow will move significantly enough that the remaining Profitable Option makes up for the loss from the Option that Expires worthless, plus a Profit.
Here is our example of a DJX Strangle executed on Monday, June 27, 2016:
At the time the Strangle position was Opened, the DJX was @ 171.24 (meaning the Dow was @ 17,124).
Bought 1 Call, Strike Price of 172, with Expiration Date of July 15, 2016, for $2.72 = Cost of $272.
Bought 1 Put, Strike Price of 170, with Expiration Date of July 15, 2016, for $2.53 = Cost of $253.
Total Cost/Investment/Risk = $525.
The total amount of money at risk, $525 in our example, and the total potential Profit/Income may be increased by Buying more than 1 Call & 1 Put Option contract.
Just four days after Opening the DJX Strangle position, on Thursday, June 30, the DJX was @ 179.30 (Dow 17,93)) and you could have Sold the DJX 172 Strike Call for $7.35, resulting in a $210 (40%) Profit/Income!
If you held multiple Call Option contracts, you could have sold them all for that tremendous Profit or sold one and waited to see where the Dow would go from there.
On July 12, the DJX was @ 183.48 (Dow 18,348) you could have Sold the 172 Strike Call Option contract for $1,200, resulting in a $675 (129%) Profit/Income!
If you held one or more 172 Strike Call Option contracts until Expiration Friday, July 15, the DJX Closed @ 185.17, which results in a 172 Strike Call being $13.17 In-the-Money x 100 (shares of underlying) = $1,317 Settled at Expiration & deposited into your trading account for a $792 (151%) Profit/Income in 1-Month!
When the Dow exhibits more Volatility we will Open another DJX Strangle or Straddle Trade. For this month we will instead engage in Covered Call Writing.
This Month’s Examples of Covered Call Option Positions
Stock Symbol: PGNX (PROGENICS PHARMACEUTICAL INC)
Buy 100 Shares at $4.92 = $492 cost.
Write/Sell 1 Call $5 Strike Price, Expiration Date of 2016 19-AUG, for $0.92 = $92 (18.6%) immediate PROFIT/INCOME; providing Downside Protection on 100 Shares to $4.00 per share; If Exercised @ $5 Strike Price, you receive an additional $0.08 per share = $8 + immediate $92 = $100 (20.3%) PROFIT/INCOME IN 1-MONTH!
Stock Symbol: AVXL(ANAVEX LIFE SCIENCES CORP)
Buy 100 Shares at $7.00 = $700 cost.
Write/Sell 1 Call $7.50 Strike Price, Expiration Date of 2016 19-AUG, for $0.80 = $80 (11.4%) immediate PROFIT/INCOME; providing Downside Protection on 100 Shares to $6.20 per share; If Exercised @ $7.50 Strike Price, you receive an additional $0.50 per share = $50 + immediate $80 = $130 (18.6%) PROFIT/INCOME IN 1-MONTH!
Stock Symbol: CRC (CALIFORNIA RESOURCES CORP)
Buy 100 Shares at $13.16 = $1,316 cost.
Write/Sell 1 Call $14 Strike Price, Expiration Date of 2016 19-AUG, for $1.65 = $165 (12.5%) immediate PROFIT/INCOME; providing Downside Protection on 100 Shares to $11.51 per share; If Exercised @ $14 Strike Price, you receive an additional $0.84 per share = $84 + immediate $165 = $249 (18.9%) PROFIT/INCOME IN 1-MONTH!
HAPPY & PROSPEROUS COVERED CALL WRITING!
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