free option strategy

Covered Call – Free Trade Idea

Every Friday we give you a free options trade idea identified by Option Party. Today, we’re focusing on the classic covered call.

OPPORTUNITY

There is an attractive covered call trade in KERYX BIOPHARMACEUTICALS (KERX). It is currently trading at $5.75.

CHARACTERISTICS

There is a 76.9% chance the stock will close above 4.00 on 11-17-2017, and you will earn your target return of $157.35. There is a 78.6% chance the stock will close above 3.86 on 11-17-2017, and you will earn a profit. There is a 0.8% chance the stock will close at or below 0.00 on 11-17-2017, and you will have a total loss of $4,637.70.

ASSIGNMENT

For call options that are in the money when sold, the assigned return will be the same as the target return. For call options that are out of the money when sold, the assigned return will be more than the target return. There is a 76.9% chance the stock will close above 4.00 on 11-17-2017, and you will earn a return of $157.35.

ENTRY PLAN

To enter this position you will sell 12 call options expiring on 11-17-2017 with a 4.00 strike price and buy 1200 shares of stock for 5.75. This will require a net debit of $3.85. The commission for this trade will be $17.70.

DISCLAIMER

All information presented here is current as of 11/3/2017 11:11 am EST. All trading involves risk. Free trades ideas are presented for illustrative purposes only and are not to be construed as financial advice.


How Did We Do? The Results…

This trade employed a Covered Call strategy that needed KERX to close above $4.00 on November 17, 2017 to earn the targeted return. KERX closed at $4.93 which resulted in a return of $157.35.