Friday, August 8, 2008

Bank of America

BAC 100 shares at 32.25, sell August call at 32.50 for 0.85. The stock also has a 7.7% dividend yield.
Initial Investment = 3225
Option Investment Value = 3335
Option Income Yield = 3.4
Option Total Profit = 3250 - 3225 + 85
= 110
Strike Price Value = 3250
Investment Profit = 25
Option Income = 85
Expected Price Value = 3225
Difference from Option Strike Price and Expected Price = 25
Since the expected price is less than the option strike price, you kept the shares at 32.25. The profit from selling a covered call was 85. The current stock gain or loss is 0. With covered call profits, the net result is 85.

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