I opened a trade on VMW, buying the stock at 85.94 and selling the $85 calls for $3.61 for a cost basis of $82.33. If called out, the profit will be $2.67 per share, which is 3.24%. The downside protection is 4.2%
VWM is a leading company in new virtualization technology. Their stuff is apparently so new that "virtualation" is not a word the spellcheck recognizes. For that matter, "spellcheck" is not a word yet either. But take a look at this chart and you will see why I like it:
Note how it meets my criteria:
1. What a beautiful, steady rising profit chart! Don't look at the PE ratio. This is a growth story.
2. Notice the price interaction with the moving averages. The first level of support is at the 20-day MA which is 83.15, while my cost basis is $82.33. Note that the stock has stayed nicely above the 50-day MA all year and its bounces below the 20-day MA have never been for more than about a week.
3. You can see that the volume was moving up last week, so no major counter indicators there. It may pull back a little with the rest of the market here, but I think it will close above our strike or we can just write it again next month.
4. Open interest on the call strike is above 4000, so we have the liquidity we need to roll down if needed.
5. Earning are close to the October 15 expiration at October 20, but at least it is the following week.
Disclosure: Long VMW