New Born To Sell Newsletter

Below is the most recent Born To Sell Newsletter.

Sum Of All Fears (Time Premium)

Right now there are 136,136,068 open call option contracts across all underlying stocks, ETFs, expirations, and strikes. The sum of all the time premium (not including intrinsic value) in those 136 million contracts is $12,370,031,659.88. That's $12 billion of wasting assets. Of course, 60% of those contracts will be closed prior to expiration, but at least $5 billion willtime decay to zero, and some of that will go to us covered call writers.

AAPL Weekly Trade

Followers of our blog know that we've had a good track record of weekly buy-writes on AAPL (24 out of 24 trades closed profitable). We believe this week's pull back is another good entry point. What has changed in the last few days to justify a 70 point drop from 590-ish to 520-ish? Nothing fundamental to their business. Yes, there are fears of increased competition, but it's mostly a combination of tax-selling (people taking gains this year in advance of feared increases in capital gains rates next year) and margin requirements being increased for some AAPL shareholders. We believe there is an opportunity this week. For details see our blog article onshort-term buy-write in AAPL.

Scanner Nominated Again

Born To Sell's covered call investment tools have been nominated (again!) for a trading software award. Help us win (by voting) and you are automatically entered into a drawing for $10,000 of trading software. Please vote for us in the Trading Software category. We are listed as "Covered Call Investment Tools": TraderPlanet 2012 Star Awards Thanks! And good luck in the $10,000 free drawing!

How Professionals Use Options

A recent Options Industry Council article interviewing managers of a $200 million fund on how they use options stated: "(1) we don't own more than 15 names; we know these companies quite well and only deal with names we want to own, (2) if you can write calls 3 or 4 times per year you can increase returns substantially, and (3) we tend to stay within 90 days, and include dividends when we can." Sounds like a reasonable strategy: Not chasing high flyers, being consistent in their use of options over time, and using relatively short time frames.

Buy-Writes By Pension Funds

Pension funds, who have historically been shy about using options, are beginning to see the wisdom, according to an article on MarketsMedia. Not all option strategies are created equal, and the income-generating technique of writing call options against stocks they own has some appeal. "A buy-write strategy generated about 5-8% more than a long-U.S. equity strategy in 2011, when stocks were highly volatile yet finished roughly flat", according to Phil Gocke of OIC. Read the full article Pensions Warm Up to Options Slowly.

AAPL And 3 Other Covered Calls For Dec 22 Expiration

With just over 2 weeks to go until the December options expire, the top 4 covered calls Born To Sell members have written are (in order of popularity): Rank Symbol Strike 1. AAPL 560 2. AMRN 11 3. DOW 30 4. GMCR 25 (Note: Born To Sell members have access to the full Top 10 Covered Call list, as well as having this list update real-time as members change positions. These are not recommendations, they are merely a reflection of our members' current positions.)

3 Weeks Unitl Expiration on ARNA Trade; Status Code Yellow

There are three weeks remaining on the current ARNA covered call trade. The status of the trade is Code Yellow. The stock closed the week at $8.86. That is a decline of $0.36 for the week. The Dec $9.00 call ask closed the week at $0.43. That is a decline of $0.12 for the week. Since the beginning of the trade, the stock has risen $0.84, while the option has risen $0.02.

Previous covered call trades have been made in AA, OCZ, YHOO, ZAGG, LLEN, CLSN, EDMC, EXAS, ARIA

If you are interested in futures options or futures etf options, Sell The Call is now following Trading Futures ETF Options.

** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages.

Four Weeks Until Current ARNA Trade Expires; Code Green

There are four weeks left until the current Arena Pharma covered call trade ends. The status of the trade is Code Green. The stock ended last week at $9.22. That is an increase of $0.72. The December $9.00 call closed the week at $0.55. That is an increase of $0.16 for the week.


Previous covered call trades have been made in AA, OCZ, YHOO, ZAGG, LLEN, CLSN, EDMC, EXAS, ARIA

If you are interested in futures options or futures etf options, Sell The Call is now following Trading Futures ETF Options.

** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages.

Sold AA and OCZ Shares Code Red Status

Last week, Sell The Call sold the shares it owned of AA and OCZ. Both stocks hit the Code Red level. A dividend of $0.03 per share for AA will still be received on November 25. Analysis of both trades will be forthcoming in separate posts.

Previous covered call trades have been made in YHOO, ZAGG, LLEN, CLSN, EDMC, EXAS, ARIA

If you are interested in futures options or futures etf options, Sell The Call is now following Trading Futures ETF Options. 


** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages. 

Born To Sell Article About Time Premium

Here is an article sent to Sell The Call by Born To Sell. It was back in September.

A Lot Of Time Premium

Ever wonder how much total time premium is in the market at any given time? It turns out that right now there are 130,513,596 open call option contracts. The sum of all the time premium in those 130 million contracts is $18,757,615,007.42. That's $18 billion of wasting assets that someone is going to collect (*)! What does $18B look like? We couldn't find a photo of $18 billion in cash (and, sadly, are a wee bit shy of the $18B needed to take our own photo), but we did find a photo of one billion in cash. You'll just have to imagine 18 times as much as the pile of $100 bills pictured here. And if you want to see a LOT of cash (like 1000 times as much), check out theTrillion Dollars article from January. (*) Since 60% of contracts are closed prior to expiration, only 40% of $18B, or roughly $7B is going to time decay to zero between now and expiration. Of course, some contracts will partially decay before being closed, and new contracts will be opened between today and expiration, so it is likely more than $7B of premium will be collected. In any case, it's a big number and you should get your piece by selling some premium!

Five Ways To Increase Portfolio Income

There are many ways to use covered calls to increase your portfolio's income. Here are five of them: Turn non-dividend stocks into yield generators. Any stock in an existing portfolio can generate a dividend-like yield by selling out of the money call options. Probably want to sell 10% out of the money strikes so you leave yourself some upside potential on the underlying stock or ETF (it is presumed you are bullish, since you already own them). Double Dividends. If your stock pays 3%/year, why not make it pay 6%? Take the annual dividend and divide by 12. That's the amount of time premium you need to capture each month in order to double the yield. Example: If your stock pays $1.20/year dividend, sell out of the money calls to generate 10 cents/month ($1.20 / 12) or more in premium (probably a bit more to cover transaction costs). If you don't like the near month strike price that is offering 10 cents of premium, then go out 3 or 6 months and try to get 30 or 60 cents of premium at a strike you are happy with. The point is, premium should average 10 cents per month (after transaction costs) in order to double your dividend (for this example stock). Target Yield. Say you have a goal of 1%/month in income (12%/year). All you have to do is find the deepest in the money buy-writes that yield 12% or more on an annualized basis (including dividends, since your goal is simply to have 1%/month in overall yield). Once you have those buy-writes identified, sort by downside protection, eliminate risky situations (like earnings before expiration, small market cap, thinly traded, biotech, etc) and then research the ones at the top of the list. (hint: our screener will save you a ton of time) Dividend Capture. Find all stocks that have an ex-dividend date before the option expiration date. Remove those with earnings before expiration and then sell in the money calls. You'll get time premium plus the dividend. If the time premium remaining the day before the ex-dividend date is really small (zero or very close to zero) then you may getearly exercised, but you'll still make something. (hint: our screener has a special dividend search to help you with this strategy) Time Premium Capture. Sort all 240,000 covered calls by annualized return and then downside protection, research the ones at the top of the list, and then do some deep in the money short-term buy-writes to capture time premium. (hint: not surprising, our screener does this for you) Any way you do it, you can increase portfolio income and lower portfolio volatility by selling calls on stocks and ETFs you own (or buying stocks just for that purpose).

Free Covered Call Books Giveaway

Like Born To Sell? Help us get the word out and you could win a free book on covered call investing, or an iTunes gift card:    There are 8 ways to enter (Facebook, Twitter, Google+, etc). Full details on theLink To Us And Win page. Thanks and good luck in the drawings!

5 Weeks Left on Current ARNA; Status Code Yellow

There are 5 weeks left on the current ARNA trade. The status of the trade is currently Code Yellow. The stock closed the week at $8.50. That is an increase of $0.46 since the trade started. The December $9.00 call that was sold is currently at $0.39. That is a decrease of $0.02 since the trade started.


Previous covered call trades have been made in AA, OCZ, YHOO, ZAGG, LLEN, CLSN, EDMC, EXAS, ARIA

If you are interested in futures options or futures etf options, Sell The Call is now following Trading Futures ETF Options.

** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages.

Arena December Covered Call Trade Made

Sell The Call has made a covered call trade on Arena Pharma. Shares were purchased at a price of $8.04. The December $9.00 call was sold on the shares purchased for $0.44.


 Previous covered call trades have been made in AA, OCZ, YHOO, ZAGG, LLEN, CLSN, EDMC, EXAS, ARIA

If you are interested in futures options or futures etf options, Sell The Call is now following Trading Futures ETF Options.

** Disclaimer** - Sell The Call is simply posting information. This is not a recommendation to buy or sell any of the securities above. Do your due diligence before investing as there is risk to all investments. Be sure to Like ourFacebook page, and follow Sell The Call's Twitter and Stocktwits pages.