Only one trade today. We need to re-enter IBM buying the stock today and selling a covered call.

 

BUY/WRITE (Buy Stock and Sell Covered Call)

 

IBM (IBM):  138.15

 

We were called out of IBM stock over the weekend and goes ex-dividend Wednesday (11/9) paying $1.65, so we must own the stock by tomorrow before the close. The price is up sharply since the open … let’s buy the stock and sell a covered call far enough out of the money today.

 

ACTION:  Buy/Write to open IBM stock and IBM 18 Nov 141 call for a net debit of around 137.45

Buy IBM stock at market

Sell IBM 18 Nov 141 call for a credit of around 0.65 to 0.70

Cost basis: 137.50

 

Analysis: If IBM stock goes on a tear tomorrow and trades above 141, its possible we will be called out of the stock. If we are, we keep the 0.65 in premium for the covered call we are selling and we pick up another 2.85 in capital gains (difference between the 141 strike and the current price of 138.15) for a total cash profit of 3.50 and a 2.5% return.

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