There is a lot of bullish sentiment on Wall Street, and we’re going to use it to generate some income on our shares of Ball Corporation (NYSE:BLL). We’ve been holding shares of BLL since our our BLL September 20th $77.50 Put Write expired in the money, and we’ve already successfully sold one covered call.
Earnings season started with a bang yesterday. JPMorgan Chase (NYSE:JPM) and UnitedHealth Group (NYSE:UNH) soared higher after beating earnings expectations and raising earnings guidance. We got more good news this morning when Bank of America (NYSE:BAC) reported better-than-expected earnings.
This is the first real glimpse we’ve gotten into corporate America’s third quarter performance, and traders are breathing a huge sigh of relief after seeing numbers this good.
We’re certainly not out of the woods yet. After all, earnings season is just getting started. But we’re off to a great start.
All this bullishness has given us a good opportunity to collect extra premium from selling covered calls on BLL.
New Products and Facilities
BLL has already released some good news this week.
The company recently announced a partnership with Kroenke Sports & Entertainment, LLC to bring sustainable aluminum cups to the Pepsi Center in Denver, CO. While this isn’t the biggest story, it serves as great publicity for the other big BLL announcement.
The company will be constructing a new aluminum cup facility in Rome, GA. The factory will open in the fourth quarter of 2020, and it is a good sign of things to come. Expanding operations could boost optimism around the company’s prospects, increasing investors’ interest in the stock.
A Potential Breakout After Earnings
The biggest reason we’re eyeing BLL for a covered call is its technical performance. The stock has been consolidating in a down-trending channel since it broke through key support in early September. Because the stock hit down-trending resistance and failed to break higher with the rest of the market yesterday, we don’t expect it to break out until the company reports earnings on Oct. 31, before market open.
Daily Chart of Ball Corporation (BLL) — Chart Source: TradingView
The potential breakout (or downturn) that could come after BLL reports earnings will increase the premium available to options sellers, especially if those options expire after earnings. We’d recommend looking at November options to take advantage of the situation.
Because we bought the stock for $77.50, that’s the level we want to use as a strike price. If BLL jumps after earnings and our shares get called away, we will still have collected a profit. We will break even on our common stock position, and we will get to keep all the premium we collected when we opened this trade.
To find out which BLL covered calls we’re selling—and to get access to our full portfolio of income-generating trades—sign up for a risk-free trial of Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.