Covered Calls: Home Depot (HD)
One of the reasons I like Home Depot (HD) for covered calls is that it’s one of these companies that isn’t going to vanish overnight.
I like using covered calls for global, large-cap brands because the risk associated with owning the stock goes down. In the worst-case scenario, if I buy HD stock and it subsequently blows up, I might be bummed in the short term … but over the long term, I know I will make my money back.
HD stock right now trades at $77.80. The weekly May $78 call (May 23) goes for $1.93. That’s a 2.5% return for six weeks, or about a 22% annualized return. Sell two of these covered calls for $386, bringing your total premiums to $926.
Here also, if HD stock gets called away, you pick up an extra $40.