Covered Call Investing Strategies

I wanted to give a brief update to those of you who are awaiting the posts on various covered call investing strategies in the blogosphere. I plan to publish the first installment (Asset Allocation) sometime in the next week. In the meantime I am going to be testing out a new "covered call position selector" over the next few months mostly in virtual form (rather than establishing real covered call positions) to see if it is a good strategy. The information which I will be using is:

• Assigned Rate of Return
• Distance from 52-Week High
• Distance from 52-Week Low
• Downside Protection (or return if not called)
• Dividend Yield
• Earnings Date
• The # of Days since the stock last closed below the covered call cost-averaged price
• An Average of analyst ratings at TD Ameritrade (this includes thestreet.com, ford equity research, s&p, and others)

All of the stocks that were evaluated came from either other covered call bloggers portfolios, financial magazines, or are stocks which I have simply heard mentioned in the news or other mediums. As the months go by I will most likely expand this starting list. I will use the Top 10 stocks on the list each month. The option premiums will be the current bid price. All cost averaged prices and returns include $15 in trading commissions.

For this month, the virtual trades that will be entered as of mondays close are:

PP = Purchase Price
OS = Option Strike
OP = Option Premium
CA = Cost Averaged Price
IF = Return If Called
DP = Downside Protection

Regency Centers (REG) - PP=34.66, OS=35, OP=1.75, CA=33.06, IF=5.87%, DP=5%

MEMC Electronic Materials (WFR) - PP=19.14, OS=19, OP=1.45, CA=17.84, IF=6.5%, DP=6.5%

CBS (CBS) - PP=7.34, OS=7.5, OP=0.5, CA=6.99, IF=7.3%, DP=5.76%

Simon Property Group - PP=52.92, OS=55, OP=2.1, CA=50.97, IF=7.91%, DP=3.93%

Schlumberger - PP=55.35, OS=55, OP=2.95, CA=52.55, IF=4.66%, DP=4.66%

BHP Billiton (BHP) - PP=56.1, OS=57.5, OP=2.3, CA=53.95, IF=6.58%, DP=4.08%

Joy Global (JOYG) - PP=36.6, OS=36, OP=2.7, CA=34.05, IF=5.73%, DP=5.73%

McGraw Hill (MHP) - PP=29.69, OS=30, OP=1.15, CA=28.69, IF=4.57%, DP=3.67%

Sandisk (SNDK) - PP=14.56, OS=15, OP=0.84, CA=13.87, IF=8.15%, DP=5.35%

Diamond Offshore - PP=87.67, OS=90, OP=2.8, CA=85.02, IF=5.86%, DP=3.18%

I will give an update at the end of each week how this basket of covered call positions is doing vs. the S&P 500 index.

As always, feel free to comment if you have any thoughts or questions.