CPSL and the Covered Call

After dumping Exxon on its slide down, I had cash to go around. It needed a place to call home. I had decided on CPSL for several reasons.



1) It was trading at a good price $4.40

2) Its current position had not been overbought

3) It had a high Implied Volatility of 59%

4) It's 200 day moving average ranged between 4 and 6 dollars

All of these things made buying Chinese Precision Steel a solid bet for the covered call strategy. At the market open I placed a limit order at $4.45, and executed taking 700 shares at $4.42. I am now long 800 shares (100 from my previous trade), average value at $4.79. Wiping out any pain from my original long position (see previous posts).

September calls @ 5.00 were trading at .45--just shy of two months out. At 7 contracts, that would net me a 10% return for 2 months, or 5% a month. Excellent deal. If they expired worthless, I would still have 800 shares, and could write more calls, and hopefully make more money (I am selling high--volatility--so the call premium is higher). If CPSL should close above 5.00 and my stock get called away, that's more money in my pocket. And, if previous patterns maintain, buy it back after it dips below 5.00 and write some more calls.