revtodd64's  Instablog

Send Message
I blog about covered call investing at my website: I generally write monthly covered calls and try to make 3-5% a month in my IRA account. My blogsite includes articles about my strategy and trade alerts as I put them on. I have a goal to make an... More
My blog:
Revtodd's IRA Plot
  • TRW Covered Call Trade 0 comments
    Sep 20, 2010 7:23 PM | about stocks: TRW

     TRW makes a wide variety of auto parts, especially auto safety equipment.  The company has modest expected earnings growth at 8 percent.  Last quarter they had a large earnings surprise of 58 percent.  The company announced that several executives and shareholders were selling 7.5 million shares in a public stock offering.  TRW's price took a steep dip on the news, but bounced very nicely off its 50-day MA and is starting to climb again.  I like the durability the stock has shown after that announcement, so I bought it today at $36.42 and sold the October $35 calls for $2.49 leaving me with a cost basis of $33.93 and a profit of $1.42 per share if called out, which is a profit of 4.18 % with a downside hedge of 6.8%  

    The stock meets all my technical criteria:

    1.  TRW is in a nice uptrend.  Since hitting a low of $26.20 in July, the stock has had a healthy rise and has stayed above its 200-day MA throughout 2010.

    2.  The price just moved above the 20 day MA and bounced of the 50-day MA which is now at $34.98.  My cost basis is $1 below this first support level.  It is also below the recent low of $34.41 which was the low point of the most recent dip.

    3.  Trading volume has been rising on up market days since the big September 9 dip, confirming the price uptrend.

    4.  Open interest is over my 2500 minimum at 4700 for the $35 October call strike.

    5.  Earning come out November 10, so we have plenty of room before the October 15 expiration cycle. 

    Disclosure: Long TRW
    Stocks: TRW
Back To revtodd64's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.