Successful covered call writing requires proper stock and option selection. With the significant increase in our premium membership subscriptions over the past several months we have received dozens of inquiries as to how best to incorporate the stocks on the ‘running list”, our watch list, into our portfolios. The Premium (BCI) Report takes the universe of 8000 securities and screens it into a workable list of 40-60 stocks in most weeks. The question has come up as to how to reduce this list into the equities we will include in our current portfolios. In other words, how do we determine which of these stocks to buy as our underlying securities?
One of the incredible features of this tool is that you can tailor the list to your specific priorities and risk tolerance. In this article I will demonstrate several approaches members can take to make our final decisions. The flexibility we have is a testimonial to the amount of information incorporated into this tool and for that I send my kudos to Barry Bergman (Director of Research for The Blue Collar Investor) who oversees the production of this weekly report and the BCI team members.
Here are some of the priorities you can stress in your final stock selections:
- Stocks with the strongest current technicals
- Stocks located in the best-performing industries
- Stocks that perform the best in the current market environment (bullish or bearish)
- Stocks that generate a dividend yield
- Stocks with “staying power” or passed all screens over a long period of time
- Stock price to accommodate a low cash portfolio
Once you determine the category or categories most important to you, the report will help guide you to your ideal portfolio. In the screenshot below, I have highlighted certain aspects of the running list (pages 4-6 in most reports) that relate to the first five of the above categories:
The BCI Premium Stock Report is a tool designed to save our members an immense amount of time. It screens the universe of over 8000 equities into a manageable list of 40-60 securities. At that point you can use your personal preferences and risk tolerance level to make your final selections. If your portfolio requires 5-7 equities, select about 10 stocks from the list and use the Ellman Calculator to make final selections. We report, you decide! Once you use the process for a few months it will become second nature as you use the report to maximize your profits to the highest possible levels.
May 8th: I will be the keynote speaker for the Long Island Stock Traders Meetup Group. I will present a basic review of covered call writing and then proceed with an audience participation section where your favorite stocks are analyzed for potential covered call trades:
Place: Plainview-Old Bethpage Library (Auditorium)
Time: 7 PM
- This week’s economic reports continue to show an economic recovery that is both modest and spotty:
- The Commerce Department reported GDP annualized growth of 2.2% lower than the 2.3% expected
- However investment in residential structures rose to its highest level since 2010
- Personal consumption rose from 1.5% in the last quarter to 2% for the 1st quarter this year as exports increased more than imports
- The Conference Board’s Consumer Confidence Index reading of 69.5 was lower than the expected reading of 69.7. However, the reading remains much higher than the recent October low of 40.9.
- Durable goods orders fell by 4.2% in march more than the expected loss of 0.5%
- The Fed announced that it was holding its monetary stance with short-term interest rates between 0% and 0.25% through late 2014
- The Fed revised its long term forecast of GDP increase from (2.2% to 2.7%) to (2.4% to 2.9%)
- New home sales came in at an annual pace of 328,000 higher than the projected 320,000
For the week, the S&P 500 rose by 1.8% for a year-to-date total of 12.3% including dividends.
In the past 3 months the market has been trending higher but the VIX has been erratic as shown in the chart below. That is the reason this site remains bullish on the overall economy but hedging positions with in-the-money strikes:
IBD: Confirmed uptrend.
BCI: Cautiously bullish favoring in-the-money strikes.
Wishing you the best in investing,