CBAK Covered Calls Looking Good

After beating myself up for not buying more STP call options when stock price was $24 two weeks ago ($27 now as I blog), its time to go back to scouting out more opportunities in this exciting world of options trading. Hey Xcalibus, $24 is very low already!! What the **** were you thinking!??

Anyhow, going back to this topic, after checking thru my portfolio, I came across some CBAK shares sitting in my account.  Bought them for $5.79 a share in August, now they are $7 a piece. A paper gain of 20% over 3 months. Not too shabby. For your information, CBAK, or China BAK Battery Inc. is a Chinese company (yes I love China stocks!) that makes lithium batteries – lots of batteries. They have probably sold like US$100 million worth of batteries last year. Bought their stock at the time because I thought the Tesla Roadster is a really cool idea – an idea that may soon change the way cars are built. Oh boy, how many tonnes of batteries will they need by then huh? Huh?

Remember this car?

Back to the Future!

We are going BACK! To the Future!

This baby's electrical... 1.21 gigawatts...

Yes! But its gonna take like a few years (or a decade!) at least for that future to happen and judging from how the stock price of CBAK been trading lately, this multibagger is not going to happen anytime soon. So I was checking on the prices of the call options on this baby and found that the DEC 7.50 out-of-the-money calls are selling for $0.60 a piece. Obviously some folks think this baby is going to hit at least $8.10 by mid December.

You know what? I hope he is right! I going to encourage him by selling him my CBAK Covered calls! If he is wrong, I hope he is right by January 07 coz I will again sell him some covered calls!

I earn 3 x $0.60 = $1.80 if he is wrong 3 months in a row. If he is right and CBAK hits $8.10, I will also earn $0.50 from my shares and another $0.60 from selling the calls for a not too shabby total of $1.10 in one month’s time.

What the heck am I talking about? This blog post is not a good tutorial on how covered calls work. Check out this article to learn more about how to profit from writing out-of-the-money covered calls on shares you plan to keep long term.


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