My old covered call on JNJ expired safely out of the money on Friday.

music selection: “Sundown” — Gordon Lightfoot

weigh-in: 228.0 (2.2)

I wrote Friday about going 10 percent out of the money for covered calls.  That is not a hard and fast rule and was not capable of being put into practice this morning due to low liquidity.  I settled for the 11SEP15 expiry 107 call (about 7% out of the money).  I was able to get 4 cents a contract.  That is 0.37% annualized.  Doesn’t seem like much but it is a 12.33% bonus to the normal 3% yield on JNJ.

I have a solid company with a long history of dividend growth in the portfolio and I’m earning bonus yield while I wait on price appreciation.  In the unlikely event I get called away on 11SEP15, the annualized yield will be 64.24% (7.04 cents over 100 purchase price over 40 days).  I can live with that kind of return in exchange for giving up additional upside.

Devour your prey raptors!

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