Seller's Paradise

Goldman Sachs released a recent study that shows how writing covered calls can help you beat the market. Conclusion: "Writing covered calls would have increased performance smartly over the past five years."

Their study Beat Your Benchmark states, "The key to significantly outpacing the market seems to be selling calls against large-capitalization stocks with high implied volatility (the critical part of an options price) during months in which the company isn't reporting earnings." Doing this, Goldman reports, "boosted annual returns by 5.39 percentage points from 1996 to 2011, and reduced risk."

To read more about the study along with 13 stocks to consider now, see A Triumph Of Strategy Over Hope on Barrons.com.

Ever wonder how many covered call candidates exist at any given time? While it varies from day to day, normally there are around 300,000. Too many to look at individually but if you use a covered call screener you can reduce that number to something much more manageable. Quick example:

To see the rest of this funnel and how it reduces the 16,537 candidates down to 38, please read our blog entry on Using A Covered Call Screener. Example trades for each of the final 38 candidates are listed, too.

One popular screen to look for high yield (but relatively stable) stocks for covered calls is to sort the Dow 30 industrials by dividend yield, and then look for the lowest P/E ones near the top of the list. The idea being that you will be buying high yield value stocks.

We did this in early January to find 8 stocks with low P/Es and high yields. Chevron (CVX) came out on top, and makes a good covered call candidate. To see the other 7 stocks, see our article on High Yield Stocks.

Despite being a conservative strategy, covered calls can be used aggressively if an investor wants to do that. While the conservative investor seeks large cap dividend paying blue chips that do not have earnings before expiration, the aggressive investor chooses momentum (and other high beta) stocks, trades on margin, and seeks the highest annualized returns possible.

While the aggressive plan is great when it works, many investors have been burned at some point by following that strategy. For some conservative trade ideas, see our article on Writing Covered Calls For Consistent Profits.

With just over 2 weeks to go until the Feb 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