News Flash: this column will now run on Friday afternoons rather than Monday mornings. This way, you have the weekend to plan your free trade(s) for Monday at the market open.
Let’s get started…
This time, it’s all about the banks.
The big banks, led by JPMorgan Chase (JPM) announced earnings this week and the Street liked what it saw.
More importantly for call sellers, anticipation of earnings announcements drives up volatility and increases the premiums available when you sell a call.
This creates a couple of great short-term buy-write opportunities in the banking sector. Buy the shares and immediately sell a weekly call.
Some may scoff at returns of 1.43% or 1.33%. Where I grew up, there were 52 weeks in a year, so you have to multiply that rate of return by 52 and that is your real return on capital. Not too shabby.
Now, how about those free trades?
Bank of America (BAC): The stock closed right around $14. If you buy the shares, sell the April Week Four $14 call for $.20 or so, or $20 a contract. If you are called out, you net 1.43% in a week—or near 75% on an annualized basis.
Citigroup (C): The stock closed at $45. Buy the shares and sell the April Week Four $45.50 call for $.60 or so, or $60 a contract. If you are called out, you net 1.33% in a week, or near 69% on an annualized basis.
Think about it…