About two weeks ago, I made a covered call play with AFL and the $31 strike for August expiration. AFL closed yesterday at $36.60, so my call is deep in-the-money. Looks like I way misjudged where AFL might end up, though we’re still 24 days away from expiration. I’m wondering what I should do to try and capture more of that run up for myself?

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Earlier this week I executed another covered call trade, this time using Alcoa (AA) and the Aug09 $11 call (AA HL). This wasn’t quite according to earlier mentioned plans, and I’m now wondering if I made a mistake.

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As mentioned in my posts last week, my wife and I have decided to consider dividend paying companies as the underlying stock in future covered call trades. The idea is to not only capture the call premium, but also receive a dividend during the period in which we hold the underlying shares. It’s important to note that using a single company as the underlying adds concentration risk compared to using an ETF, but we hope to mitigate that somewhat by picking our companies from the list of 2009 Dividend Aristocrats.

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Today, we had more transferred funds clear the ACH waiting period in our TradeKing account / GI portfolio, so we were able to execute another covered call: AJO HE (Aug09 $31) and the underlying Aflac (AFL).

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Dipping our toes in the water a bit this week, we did our first ever covered call trade (also called a buy-write.) Given our small GI portfolio size (only a couple thousand $ transferred and available for transactions at TradeKing), we chose to use the ETF known as UNG as the underlying, and a July $13 strike as the call (UNY GM). You might be asking “Why?” about now.

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