MyTradingBlog

BABA is the 4th on my new list of 16 stocks . BABA had 2 disappointing earnings, but the market responded positively to the most recent earnings, with several analysts’ upgrade. BAB is now trading above 200 SMA, RSI not overbought at 55, MACD neutral.

From the previous post, ATM ($90 call) covered call gives one 10% downside protection, 65% ROI/Yr; ITM ($87.5 call) has 11.47% downside protection, 56% ROI/Yr; OTM ($92.5 call), 8.77% downside protection and 74% ROI.  I’ll select either ATM or OTM calls, in this case.

Here is how I select stocks to invest.  Combining the stocks I traded or still hold with the new candidates by screening, I came up with a list of 16 stocks (I usually adjust the screening criteria to provide a manageable list of 15-20).

The stocks that are of high ROI are listed on top of the table with 3 different strikes: ATM, ITM and OTM, for comparison.  There are a total of 6 such stocks to consider.

From Row 27 and down are list of stocks still with great but lower ROI.

Column M is the sum of ROI of the covered call + dividend yield.

*Stocks in capital letters with * are new candidates of my screening result with the following criteria: Div yield>5%, Beta>1, Price above 50 and 200 SMA, Sales growth over the past 5 years: >15%, optionable and the RSI is not overbought.

A bit more detailed analysis of 3 stocks of the top 6 will be provided separately.

I have trading SLW for many years and currently still hold a large position of SLW. SLW has been trading in a range between ~18/19 and ~26 for the last 2 years.  Currently, it’s trading at the lower end of that range. SLW also pays a dividend, albeit very small, ~1%.

An ATM covered call (Jan. 15, ’16, 19 strike) will produce 80%  annualized return.  Although SLW is trading below 50 and 200 SMA, the upside for SLW is much higher than the downside.

RNF, closed at $14.94, has been trading above 200 SMA; MACD is neutral, RSI is neutral to slightly high at 59%.  Six analysts give a rating of hold and 1 buy with an average price target of $16.88. The price pattern currently is trading at a very tight range, with a coiled spring pattern.  It may break above $15 or down to $13.

Dividends: Dividend yield: 9.7%.

 A covered call with an ATM strike of $15 will provide 97% annualized ROI.

RNF looks quite impressive and I placed an order to buy RNF and sell RNF Jun 2015 $15 call for a debit of $14.4.  One downside is the option volume is on the low side.