As per my previous post, I expect my Merck shares to be called away tomorrow so I ran my screens this afternoon to look for another stock to buy shares of and then sell covered calls on. My selection was Alibaba for which I paid $240.32 per share and then sold slightly OTM Apr-16 $245 calls at $9.05 each.
As per the analysis below, if my BABA shares are called away on the option expiry date of April 16, the trade will generate an annualized return of 59.2%. If the shares are trading at $240 on April 16 then the trade will generate an annualized return of 38.7%. Of course, as with all my covered call trades, a profit is not guaranteed as the stock price could fall below my breakeven price.
By now you may have noticed that many of the stocks that I choose to sell covered calls on have exhibited a recent downward price trend. BABA fits that bill.
All the best in trading and in life.