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!