Friday, October 21, 2011

3M (MMM) - Covered Calls

MMM crossed back over $80 today.  CCI continues to believe this is blue chip company.  Not sure that means it will soar, but do think that may limit its downside.  However, earnings are next week and CCI believes it is likely MMM will continue in its tradition of  performing OK, talking down expectations, and the stock price falls back.  With option volatility still historically high,  CCI sold the $80 OCT 28 (weekly) calls today for about $1.50. Nearly 2% for 1 week holding.

(As an aside.....yes, there are now weekly options.  Hard to see how weekly options are absolutely critically important  to the success of the world,  but it sure does seems like yet another trading vehicle created by our friends on Wall Street to encourage speculation.  Isn't that what we have come to expect from Wall that is the world we live-in....we might as well play the game!)

- If I'm right about MMM pulling back next week, I'll pocket this premium and that will drop the break even point on this lot to  below $77.  We can then consider November option plays against the position.
- If I'm wrong and MMM rises from here, the lot will be called away capping gains at a modest, low risk, 4.4% over 2 months.
Stay tuned

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