I wrote a covered call option on Cheasapeake Energy (CHK) today. The expiration is January 2010 with a strike price of $28 (.HKWAB). The contract price was $1.50. Since I held shares in CHK prior to 2009, this trade will not appear in the Performance Page.
My thoughts are:
- I don’t intend on selling CHK in the near term (next four months)
- The market is overvalued and has gone up five days in a row (giving me an exit opportunity)
- I’d be happy to get called out at $28
- Besides, S&P has a 12 month price target at $28. So, if it gets there before then, I’ll save myself eight months of time and keep the call premium
- Downside risk, I forgo upside potential
- Bottom line, I’m just trying to generate some income here
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