Option Letter Daily

In this week’s screenshot of top options writes, I have selected the best yielding calls to sell (using either covered writes or in-the-money debit spreads) on stocks with upcoming splits. It is important to look at the individual stocks to indentify exactly when they will split and which are technically trading in a bullish trend. Typically, highly rated splitting stocks will have good support going into the split dates. I like to do in-the-money debit spreads to trade these because of the limited downside and best use of capital, because in-the-money debit spreads typically will produce 3 to 4 times as much as a covered call write.  With the splitters, I like to watch the 2-for-1 splitters that have a very nice technical picture, such as a smooth 50-day moving average above a smooth 200-day moving average and get into positions that will expire just before the split date. The best time to get into these stocks is after a pullback to trendline support (i.e., 50-day moving average), where they will typically find buyers and at least hold these levels, or just below, going into the split. I hope this gives you some further ideas for trading options from the “write” side.

John Summa is the president of OptionsNerd.com, which he founded in 1998.  For a free trial to OptionsNerd.com’s custom and predefined screening tools and portfolio tracker, please visit OptionsNerd.com.

It should not be assumed that the methods, techniques, or indicators presented on these websites will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these websites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.