Sunday, November 14, 2010


This update illustrates an egregious exemplum (e.g.) of why I like DITM covered calls in this investment environment: NUE
Although the SPX has run from 1115 to 1200 YTD (UP 7.6%),Nucor Steel, a DITM candidate with over 3% dividend and liquid options, has dropped from $46.65 to 40 YTD (14.3%). The buy/write occurred on March 26 with the stock at $45.93.
In sum, with dividends and call premiums, if called away at yearend at 37-strike(next ex-D), it will have returned an annualized +6% while the stock dropped 6%.
Bot stock 200 shares: $45.94 or $9196
Dividends rec'd (3): $216
Call premiums (3): net $2007
Net profit at 37: $416, or 6% annualized over 9 months. (10 months if not called away).

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