NVDA is higher pre-market. We will take some profits during the Opening Range. We will take 1/2 off and watch for potential upside follow through, as the shares were trading $105.09 at the close of the Thursday after hours session. The stock is currently trading $104.57, as we go to press.
The three income trades we took over the past 2 weeks have done very well. All together these trades have profited handsomely. We now have premium that we can sweep into a cash account or continue to build our trading account balance. We generally do both; sweep some funds to a checking account and keep some to build our trading account balance.
We are considering a new trade on PFE. No earnings reports are scheduled until May 2, 2017.
PFE – Technical considerations.
The stock is at the top of current VBP levels, so any push higher will now have support just below price. The moving averages (SOTEMA) are bullish and climbing. The wick at lows suggests buyers at the 9ema. Bollinger bands are pulling inward and RSI is fading from overbought territory. MACD is somewhat flat, as it fades from its recent peak. Volume has been tepid. We anticipate price action will stay in this current range, as Bollinger bands tighten over the next few days.
If you are conservative, you could generate $1,600 by trading covered calls on PFE. You could buy 1000 shares (or smaller increments of 100 shares) then immediately sell 10 contracts of PFE 2017 21-APR 33.00 CALL.
If assigned, you could make a profit of $170. This trade will also get you 4.6% worth of downside protection for your stock.
- Premium received: $1,600 ($1.60/call)
- Potential Profit if Stock is Above Strike: $170
- Downside Protection: 4.6% (this is your break even point)
If you are neutral, you could generate $840 by trading covered calls. You could buy 1000 shares (or smaller increments of 100 shares) then immediately sell 10 contracts of PFE 2017 21-APR 34.00 CALL.
If assigned, you could make a profit of $410. This trade will also get you 2.4% worth of downside protection for your stock.
- Premium received: $840 ($0.84/call)
- Potential Profit if Stock is Above Strike: $410
- Downside Protection: 2.4% (this is your break even point)
We have 36 days till expiration. If the stock starts to move higher we have the option of rolling out to a higher strike. By doing this, we capture additional gains in the common that we purchased to put on the trade.
We are protected against any pullback. The “downside protection” calculation noted above. is our breakeven point. This is also our “cost basis”, found by taking the total cost of the common and subtracting the premium received.
Restoration Hardware
RH is in an uptrend, beating analysts estimates in its latest earnings report on 2/23/2017. Revenue fell 9.3% compared to the same quarter a year ago, yet we see a bullish continuation in the current trend. SOTEMA is near vertical, with RSI approaching the 70 zone. MACD shows sustained momentum. Future earnings are not until May 25.
The 39 level appears to be the top of the current trend, before encountering any significant resistance.
This trade expires next week.
We want to generate premium by trading covered calls. We want to sell increments of 1 contract of the 2017 24-MAR 36.00 CALL at 0.95 or better, for every 100 shares of common that we purchase. It’s possible that RH will continue higher this morning, so we will attempt to sell our calls for additional premium. Friday affords us some time decay over the weekend, compounding our reason for the trade.
BMY Covered Call Position
This trade was taken on 3/02/2017 and produced $440.00 income. Since the calls expire today, we will let them expire worthless, keep the premium and the shares. We will look to put on another trade.
Have a great day,
Vinny
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