LC
TRADE IDEA: LC COVERED CALLMetrics:
Buy 100 shares at 5.41
Sell Oct 21st 5.5 call
Whole Package: 4.93 db (4.93/share's your break even/cost basis)
Max Profit: $57 (if called away at 5.5)
ROC: 11.6%
Notes: I've looked at this underlying several times over the past several weeks, as it keeps popping up on my high implied volatility screens. The good thing about the setup: the short call strike is near to current price, so price needn't move much to finish above 5.50 at expiration. The bad thing about the setup: lows are around $4/share, so it could cave into the poo pile its longer-term charts make it look like -- a post-downhill slide from its initial public offering price of >$25 per share, although support is ZigZag indicated at about 5.15.
NEXT WEEK'S COVERED CALL CANDIDATES: ZIOP, NVAX, LC, WLLHere's my "short list" for covered call candidates for next week generated by looking at Barcharts.com high volatility stock options list and the Dough grid:
WLL buy shares at 7.66; sell Sept 16th 8 call; 7.10 debit; $90 max profit (12.7% ROC)
CC buy shares at 11.45; sell Sept 16th 12 call; 10.78 debit; $122 max profit (10.6% ROC)
LC buy shares at 5.40; sell Oct 21st 5.5 call; 4.85 debit; $65 max profit (13.4% ROC)
ZIOP buy shares at 5.46; sell Oct 21st 6 call; 4.65 debit; $135 max profit (29.0% ROC)
NVAX buy shares at 7.04; sell Oct 21st 8 call; 5.42 debit.; $258 max profit (47.6% ROC)
FCX buy shares at 11.92; sell Sept 30 12 call; 10.90 debit; $102 max profit (9.3% ROC)
JCP buy shares at 10.55; sell Sept 30th 11 call; 9.59 debit; $96 max profit (9.6% ROC)
Notes: (1) WLL's a petro play. Because so many small petro companies are in trouble of one kind or another (i.e., shale and/or offshore oil exploration exposure), I generally prefer playing something with a little less "single company exposure" (e.g., XOP). But, hey, it meets my general rule of >10% ROC. (2) CC is a basic materials/chemical play. It spun off from DuPont and has had quite an up run here in spite of a recent punitive damages judgment for chemical dumping (weirdly, the stock dipped and then subsequently popped on the news, probably out of relief that the debacle was in the rear view mirror). (3) LC's been in a downtrend since IPO. At best, a money, take, run play. (4) I still like ZIOP. It's biopharma and has a fairly diverse pipeline such that if one drug fails, they still have more in the hopper. And that 29% ROC, well ... drop dead gorgeous if it can get to $6. (5) I'm also in NVAX (biopharm). In comparison to ZIOP, their pipeline is quite narrow and currently devoted to a single vaccine (RSV). sg.finance.yahoo.com (vaccine "could be breakthrough," but not time to "break out the champagne" (code for "it could suck ... or not")). (6) FCX (mining). I covered called this in late 2015, early 2016 which commodities were at a cyclical low and then bailed out when it appeared to be topping. Looking back, it kind of looks pricey here in comparison, and I'm not so hot on the ROC. However, it's highly liquid, and it has some room to pop to 14.00 resistance (and naturally some room to cave; the 2016 low is sub-$4). (7) JCP. Well, it's JCP. Plus, it's had a bit of a run up here, and if past performance is indicative of future results, well, it could zombie trade back to sub-$9 and with the ROC, well, not at the top of my list ... .
NEXT WEEK'S EARNINGS TO WATCH: LC, VRX, M, JWN, NVDAWith broad market volatility ebbing, the place to sell premium is with earnings plays for now.
Next week, look to put on options plays shortly before the earnings announcement to capitalize on post-announcement volatility contraction. This little fellahs currently look best for plays:
LC: 5/9 (Monday) after market close. Due to the price of the underlying, short straddle it, if anything. Neither a short strangle or iron condor will be productive unless you go with a larger number of contracts.
VRX: 5/11 (Wednesday). I don't show it as before or after market right now.
M: 5/11 (Wednesday) before market open.
JWN: 5/12 (Thursday) after market close.
NVDA: 5/12 (Thursday) after market close.
I also looked at a couple of others, but decided that they were problematic for one reason or another:
TEVA ... is scheduled to announce on Monday, is an ADR. I'm not a huge fan of ADR's, since they're basically free to tentatively schedule an earnings announcement and then move it back a week or two. For a volatility contraction play, which I want to put on immediately before the announcement, this does me no good ... . Moreover, the spreads are wide on the options; if they're wide going in, they're going to be wide trying to get out ... .
SCTY ... will announce on 5/9 after close. I would love to play this little fellow, as it's plenty full of premium given its relatively modest price. That being said, it's another "spread wide" situation ... .
AGN ... announces on 5/10 before market open. You would think an underlying that trades 4.9 million shares on a daily basis would have fairly decent spreads on their options. Nunh-unh ... .
RAX ... 5/9 after market close is the announcement. You guessed it -- illiquid options.
I'll post actual setups as we get closer to earnings ... .
