Summer Rally Coming? Here Are Some Beaten Up Beauties With Some Call Protection

Includes: RGR, SLM
by: Mitchell Harris

It was a mild weathered spring here in the Northeast, but the markets have been stormy for the past few weeks as everyone panics about the euro, the impending political war until election day and anything else the press likes to superimpose on us poor suspecting investors. I have seen some really nice companies get beaten up in the past month and I think there is some real value there. Some of these we have traded in my previous articles. I have not written in awhile, I am trying to get my hands around the issues of the world and how much is overblown and how much really has teeth. One thing remains certain, and as much as I don't like it, a traders market continues to be in the forefront of most mentalities. Yes you have the days when gold is the most flavored and then there are the TIPS but for the most part, when flight to quality isn't a factor, trading is what makes the loot. So I adhere to what the masses want, and that is some nice trades. As you know I love the covered call, and with 5 weeks until July expiration, let's try and get the lead out and make some quick money, shall we? Here is what I have been working on:

Sturm Ruger (NYSE:RGR) was trading at $58 the last week of April 2012, the stock is currently trading at $35.15. Last week they resumed manufacturing of guns, why you ask, because their suppliers could not meet the 50% increase in demand thus far this year. Their backlog is significantly above last years as well. Their earnings in May were up 88% as people are starting to lock and load. This looks like a no brainer, so you can go long here at $35.38 and write the July 40's and grab $1. You have room so if you don't get in until $36 then you will just get more premium. This way if the stock runs away to $40 you are a hero. We can reassess in July.

SLM Corp. (NYSE:SLM) the former Sallie Mae was trading at $16.60 this past March, and is currently at $14.45. They just approved an additional share buyback of $400 million which is on top of the $500 million from earlier this year. I love the way this stock had traded and if you have written covered calls all along the times I have written about SLM, you have had quite a year. Let's take a look at the July 15 calls, they are currently paying $.40 or 2.8% premium. If you get called away in 5 weeks you earn a tidy 6.6%. There are no problems with that. If you want to read a great article about the twists and turns of SLM since the early 70's, take a look at the link.

I am going to leave it at 2 stocks right now, because they are WAY oversold. So good luck as always, and message me with any thoughts you may have.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.