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Has anyone employed a covered call strategy in an IRA. I began one in my ROTH IRA a few months ago. I am cdurrently using Ensco (ESV) a stock on which I am also long in my margin account.

I like ESV for this strategy because of:

1. First, I am willing to own ESV long.
2. Has high volatility (as do many of the drillers and Oil stocks)
3. ESV is part of the OIH. This increases volatility because the big wall street traders manipulate the OIH at least in the short term against the individual components of the OIH (e.g., ESV).

ESV closed Friday at $55.28. The last trade for the Jan 07 55 calls was $2.83 and the last trade for the Jan 07 $60 calls was $1.00. The last options are $5 OTM and cost $1 for 35 days.

My trades so far have been

Date Action Security Net
11/3/06: Buy 400 ESV ($19,996.91)
11/3/06: Sell to open 4 Nov $50 Call $592.43
11/16/06: Buy to close 4 Nov $55 Call ($67.55)
12/8/06: Sell to open 4 Dec $55 Calls $312.46
12/15/06: Dividend Paid $10.00
12/15/06: Calls Assigned ESV at $55.28) $22,000.00

In less than two months I have had the following results:

Total Gain: $2,850.43 (14% Gain) (84% annualized return)

Gain on Options & Dividends ONLY: $847.34 (4% Gain) (24% annualized return)

These are stupendous returns especially when one considers they are TAX FREE being in a ROTH IRA account.

I calculated the Options and Dividend Only return to reflect the situation if ESV had not risen from $50 to $55 while I held it. If ESV had fallen to $45, I would have written one month $50 calls for which I would earn about $1 in call premium. At $45, I would also sell some put spreads in my margin account.

Has anyone else used this type of strategy? I think the key to this strategy is to have a stock you are long on that is volatile, and do this in a tax advantage account. In a margin account the gains would be cut down by about one-third in taxes.

I would appreciate the thoughts of any of the more experienced options traders out there.

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