In early August, when Apple shares were trading around $96, listed call options with a $100 strike price and a mid-October expiration date were priced at nearly $2.80. Thus, a client holding 100 shares of Apple stock—a $9,600 value—could have sold (“written,” in options parlance) an option to buy the shares and pocketed a premium of almost $2,800, for an immediate return of about 3%. If that could be repeated for a string of two-month options, the annualized return from selling these so-called covered calls would approach 18%.
All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.