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New trade – Demand Media Inc (DMD) covered call

Last week I took a position in Demand Media Inc (DMD) and wrote a covered call (buy-write), but posting it now (during Christmas time I didn’t want to post anything). This position was taken as a total-return trade, meaning that I want the stock being called away. Here are some details on the trade:

12/24/2012 11:19:36 Bought 100 DMD @ 9.5
12/24/2012 11:19:36 Sold 1 DMD Feb 16 2013 10.0 Call @ 0.6
Total trade: $890.00
Commissions: $8.78
Total NET trade: $898.78

Option assignment: $1,000.00
Option assignment fee: $19.00
Expected proceeds: $981.00

Expected NET gain: $82.22
Expected ROI: 9.15%

I am expecting the stock to rise at or above $10 per share at expiration in February. If that happens, I will realize the expected return. If it doesn’t happen and the stock stays below the strike price I will repeat the process and sell another 10 strike call against already held position as long as the stock is called away.

Here is a trade adjustment taken on 01/29/2013

2 responses to “New trade – Demand Media Inc (DMD) covered call”

  1. admin says:

    Marvin, I think this will work. The only danger here would be if the stock starts slipping too low. For that case I am thinking using proceeds to buy a protective put, but at this point nothing seems to be wrong and if we won’t go over the cliff (stupid politicians) then I think the stock shall go at or above 10 strike. We are not that far away from it.

  2. Great strategy!! I love covered calls and plan to do a lot more in 2013. The technicals look good for this trade hope it works out for you.

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