No. of Recommendations: 0
Taylor,,, this is an obvious statement but IV is only what the market THINKS volatility will be. The implied vol on MRK is around 20% now. 11/04 the implied volatility of MRK calls were more like 50% and the puts were off the charts. That "prediction" of volatility has clearly not materialized. MRK has just sort of wobbled around between 26 and 34. Not very exciting when you look at a 14 mo chart.

I really look at total return and really like to see a dividend bumping high enough that it gives very strong downside support.

Look at CAG... dollar09 dividend for a 5.4% yield. Jan 07 $20 right on the money calls go for a buck.65 gets a 14% yield... if you satisfy yourself the dividend is safe. The IV here is only 14%... complete lack of irrational fear.

If you can believe it, I wrote puts on CAG in Feb of 2001, Jan 03 $17.50 puts and I wrote them for over $5. Hard to believe that level of fear existed. The company had a yield of 5% that was in no danger and someone was willing to buy insurance for over 25% of the price of the stock. I wrote 20, should have written 200. The risk of loss with that particular put write was so low....

anyway... with th covered call you are NOT looking for protection, you are looking for a fairly specified return. High IV, safe high dividend= a great return in the tax advantaged account

Print the post  



The 2009 BMW Method Conference has been cancelled, due to minimum attendance numbers not being met. We hope to continue the annual BMW Method Conference tradition next fall.

Learn about the first four conferences on the BMW Method Website.

The BMW Method FAQ

BMW Method Website
Annual Conference Videos and Other Resources & Services
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.