A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Endo Pharmaceuticals Covered Calls Established for Feb08
01/08/08 Bought 500 ENDP @ $27.01
01/08/08 Sold 5 ENDP Feb08 25 Calls @ $2.60
Annualized Return If Unchanged: 20.4%
Annualized Return If Exercised: 20.4%
Downside Breakeven Protection: 9.6%
This is a deep in-the-money (9.6% downside protection) covered calls position.
I would have preferred to establish a position closer to the strike price, but the stock was midway between the $25 and $30 strike prices and the option premium on the $30 strike was below my minimum threshold of $.40 so I opted for the in-the-money $25 strike price. Since I am bullish on the stock, my hope is that the stock price will rise and approach $30 prior to the February expiration date. If this occurs, I would most likely attempt to augment the current potential annualized return of 20.4% by rolling up the current options to the $30 strike price.