The Closing Print live trading and financial blog during market hours.

Day trading does not suit all investors. Some traders have responsibilities that preclude them from watching the markets intraday. Perhaps the trader is gainfully employed, while others may be retired and have little desire to trade everyday. Perhaps you are unemployed and wish to make income while pursuing your next position. You can utilize your severance for this purpose. Properly executed, you receive premium for shares you own without the worry of losing your principal.

We employ this strategy for my wife on a regular basis.

We wish to employ a modest sum of discretionary cash to receive current income. We do not want to take a loss, so we will provide downside protection in the event of an unforeseen catalyst.

Cliffs Natural Resources Inc., (CLF) a mining and natural resources company, produces and supplies iron ore. The company operates four iron ore mines in Michigan and Minnesota; and Koolyanobbing iron ore mining complex located in Western Australia. It sells its products to integrated steel companies and steel producers in the United States and the Asia Pacific. – source Yahoo Finance

We entered this trade, buying 1000 shares of CLF stock at $12.10 and sold 10 option contracts using the 2017 17-FEB 11.5 call option for $0.95. This trade will expire in 4 days and return 1.4% if the stock is assigned at expiration. We want it for the $950.00 income. We swept the premium received to checking.

We have 6.20% downside protection, if the stock pulls back before expiration. You could also buy some cheap OTM puts for insurance. We are bullish CLF.

CLF

 

Exelixis Inc. (EXEL) a biopharmaceutical company, engages in the discovery, development, and commercialization of new medicines with the potential to enhance care and outcomes for people with cancer.


We entered this trade, buying 500 shares of CLF stock at $21.53 and sold 5 option contracts using the 2017 17-FEB 20.00 call option for $2.10. This trade will expire in 4 days and return 3.0% if the stock is assigned at expiration. We entered this trade for the $1050.00 income. We immediately swept the cash received to checking.

We have 9.80% downside protection, if the stock pulls back before expiration. You could also buy some cheap OTM puts for insurance.

EXEL

Last Update: 2/13/2017 3:00:38 PM

Criteria:

  • Income premium > $0.75 and at least 1.25% return.
  • Expiration in less than 5 days.
  • Stock in an uptrend: 20 EMA moving higher and MACD crossover.
  • Open interest for liquidity.
  • No earnings announcements expected before expiration.
  • At least 1% in-the-money for protection.

We executed these trades yesterday, providing $2,000 income for the week.

Obviously there are downside risks and the potential for the stocks above to appreciate rapidly in price. Since we sell covered calls, the stock can be called away at expiration. We lose the opportunity for upside in return for weekly recurring income. We employ downside protection by purchasing OTM puts.

Think outside the box. As an investor and trader we have many opportunities to pull cash from the markets. All you have to do it invest a little time and do your homework.

Happy Trading – Vinny



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