Seller's Paradise

There is a time and a place for everything, including fireworks. Yes, they're pretty to look at, especially on a cloudless dark night over the water, but they really don't belong anywhere near your portfolio. They're explosive, unpredictable, and can start fires that burn everything to the ground.

They can be fun, too. All that excitement, sounds, bursts of color, the oohs and ahhs... But rarely are these attributes you want to have in your portfolio. Best thing to do if you are going for entertainment value in your portfolio is to keep your positions really small.

What kind of firework stocks are we talking about? Generally small cap stocks with pending news announcements (earnings, FDA, M&A rumors). These situations can cause a stock's price to double or get cut in half overnight. If you're going to play with fire, then at least be sure to use in the money (or deep in the money) covered calls to protect your downside.

For some tips on which stocks to avoid when call writing, please see Top 10 Tips For Call Writing Profits.

Our string of successful AAPL covered calls continued in June, bringing the total to 19 out of 19 successful trades. We're not in AAPL all of the time, but we are in it most of the time, usually buying on the dips and then selling a weekly in the money call against our new position. This strategy has been a winner for 19 trades in a row.

Currently we have 3 AAPL strikes we suggested for the July 6 expiration. All are currently in the money and if AAPL stays above 565 in the next 5 days then the predicted returns will be realized.

You can read about the prior AAPL trades in our covered call blog.

Congrats to the many Born To Sell subscribers who made money with their ARNA covered calls (the most popular covered call last week). This one first showed up on our Top 10 list a couple of months ago because the call premiums were super high in anticipation of the FDA announcement regarding weight-loss drug Lorcaserin (which, now approved, is the first weight-loss drug since 1999).

Although this stock fits squarely into the 'fireworks' category, if you keep your positions really small (like 1/4 or your normal position size), and your risk profile is okay with a potential loss, then an in the money covered call isn't a horrible way to go.

The stock had been trading around 9 before the FDA announcement, and the most popular covered call strike among Born To Sell members was 8. Soon after the announcement the stock was trading over 13, but in the days since then has come back down to 9.50 or so, making the 8-strike covered calls look pretty good. They siphoned off some of the excitement premium and continue have some downside protection because they're still in the money.

Again, if you're going to take a gamble with an FDA announcement, please use small position sizes. You can't play if you lose all your chips...

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With 3 weeks to go until the July options expire, the top 4 covered calls Born To Sell members have written are (in order of popularity):

(Note: Born To Sell members have access to the full Top 10 Covered Call list, as well as having this list update real-time as members change positions. These are not recommendations, they are merely a reflection of our members' current positions.)

Currently, the top 8 stocks Born To Sell members are using for their Watchlist are (in order of popularity):

(Note: Born To Sell members have access to the full Top 20 Watchlist, as well as having this list update real-time as members change their watchlists. And, you can have the highest yielding covered calls from your personal watchlist emailed to you after the close each day. Never miss a fat premium from your watchlist again!)

Born To Sell is dedicated to only one thing: Making Money With Covered Calls. Our subscribers have access to state-of-the-art covered call screeners and covered call portfolio management tools. For less than the profit of a single trade you could be enjoying recurring monthly income using our tools. Three subscription types to choose from:

Plus, all subscriptions begin with a no-obligation 2-week free trial. What are you waiting for? Start collecting premium today!

Happy Trading,

The Born To Sell Team