I’ve got 5 contracts of Cree (100 shares each), at about a value of 60, expiry Jan 2011. Currently waffling on placing a covered call for July, at 65 or 70.

If 65, option will almost certainly divest (if not, then whoppee I can lease it out again at no loss), total gain $1750 instantly, and an additional approx $2500 if its above 65 on the third Friday in July.

Or, do I go for a strike price of 70? Total gain $850 instantly, which is less of course. Also, lesser chance of it hitting 70, which means I could then lease it again in July, meaning more potential future profit. But if it does hit 70 (CREE’s gains are often swift, so it’s pretty much a coin toss), there’s an additional $5000 payout.

Hmmm, will have to do some thinking…

UPDATE: A few hours later, and the above numbers shuffled a little, I’m rolling with the 70 strike price for July.