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By Mark D Bern, CPA CFA

I will start out by explaining the purpose of this series of articles. I am trying to accomplish two objectives with this series:

1) Provide an easy-to-follow explanation of how to use call options to enhance returns on investments held for the long-term. I will use a specific analysis for a different company in each article for illustration purposes. Rather than reiterate the methodology in every article I will refer back to the original article in the series. If readers want a more detailed explanation of the overall strategy, they can find it in my inaugural article titled “Daily Call Sheet Focus: Bank of America," located here. In that article I discussed why selling calls makes sense for long-term investors and provide a detailed explanation of the strategy along with a basic tutorial on call options including term definitions.

2) The second objective of each article is to provide a list of call option premiums of up to 20 widely held companies that present, in my opinion, a good opportunity to lock in a good return over the coming month(s). Again, details can be found in the article link above.

Today’s focus company is Weatherford International (NYSE:WFT), the fourth largest oilfield services company in the world. Political upheaval in the Middle East and Northern Africa has created a drag on the company’s operations in that area, but should right itself by the second half of 2012. It just may take a few months for the political environment to sort itself out and get back to important issues like drilling and pumping oil to support new governments in the region. High oil prices have most other regions running well for the company with the exception of North America.

The consensus 12-month target price for Weatherford is $21.56. The current price (as of the close on Tuesday, November 15, 2011) is $15.94. I believe the company has excellent growth potential but revenue and earnings will be held down through the first half of 2012 due to problems discussed in the previous paragraph. For this reason I have a 12-month target on Weatherford of $20.75.

I don’t own stock in Weatherford, but if I did I would consider selling the February 2012 $19 strike call at a premium of $0.67. That provides a return on the current share price of 3.6% and if called away at $19 the total received over the three months would be $19.67 for a gain from the current price of 23.4%.

And Now The Final Piece Of The Article

My favorite call premiums on widely held stocks available on November 15, 2011 are listed in the table below. These are not pure recommendations. Rather this list is provided as a useful tool for those who sell calls to enhance their income from stocks that they own or plan to own in the near future. The list includes premiums that appear to present the best value of all widely held stocks for the day.

I have also included calls that meet my criteria on stocks that I have written about in another series that was begun on September 21, 2011, with the inaugural article entitled “My Long-Term Investing for Income Strategy," click here to read the article.

I hope readers will find this daily list useful as a starting place in finding calls to sell for added income.

Top 20 List

11/15/2011

Symbol

Exp. Mo.

Strike $

Premium

AA

Apr-12

$12.00

$0.63

BAC

May-12

$8.00

$0.43

BBL

Mar-12

$70.00

$2.95

BLK

Jan-12

$180.00

$4.20

C

Mar-12

$34.00

$1.54

CAT

May-12

$110.00

$5.35

DD

Jan-12

$52.50

$0.86

DIS

Apr-12

$40.00

$1.40

DOW

Jan-12

$31.00

$0.70

EBAY

Jan-12

$35.00

$0.70

F

Feb-12

$12.00

$0.48

GLW

Jan-12

$17.50

$0.41

GM

Jan-12

$26.00

$0.71

HAL

Jan-12

$43.00

$1.61

HPQ

Jan-12

$31.00

$1.00

JCI

Apr-12

$35.00

$1.80

JPM

Mar-12

$37.00

$1.54

LLY

Apr-12

$42.00

$0.67

LVLT

Jan-12

$24.00

$1.05

MMM

Apr-12

$90.00

$2.60

MRO

Jan-12

$31.00

$0.73

MS

Dec-11

$18.00

$0.45

ORCL

Jun-12

$37.00

$1.71

PFE

Jun-12

$22.00

$0.62

SE

Mar-12

$32.00

$0.60

SLB

May-12

$85.00

$5.00

UNP

May-12

$115.00

$4.25

VFC

May-12

$150.00

$7.00

VLO

Mar-12

$28.00

$1.63

WFC

Jan-12

$28.00

$0.59

WFT

Feb-12

$19.00

$0.67

YHOO

Dec-11

$18.00

$0.40

Source: Daily Call Sheet Focus: Weatherford International