Covered Calls for International Business Machines (IBM)
International Business Machines (IBM) is a good blue-chip selection for covered calls. IBM has already reported earnings, and they weren’t that great. IBM stock fell as a result, so that means you could buy it here and sell a call, or if you own the stock, sell the call against your position. Either way, IBM stock is likely dead money until the next earnings report in April.
As of this writing, IBM stock trades around $174. There’s a nice play by selling the March 7 $172.50 call for $3.95. Backing out the $1.50 between the current price and strike price, that’s a 1.4%-plus return for a four-week holding period, or 17% annualized. Does anybody else think IBM stock will return 17% over the next year? I don’t.