Eastman Kodak, EK, for a potential covered call? The stock gained $.011 cents after an accounting mistake delayed formal results, overshadowing the company's push into digital technology. Sales of digital cameras jumped nearly 50% year-over-year, powering the new-wave business lines to a 40% gain. That offset a 16% decline in film sales and photo processing. Overall, the company exceeded expectations and boosted targets for the coming year, even as one-time restructuring costs produced a net loss. The company does not have the best phase 2 score so any potential paper trade of a covered call would likely be for those who like the concept that EK is moving towards in the digital photography arena and their 50% growth in this area. I like the concept of a legging in strategy for this trade of buying the stock EK and then waiting for it to move near $32.50 before selling the February $32.50 call option.
Homework: Let
us see how a legging in strategy works for EK as stated above.
The sideways trending stock reported some semi positive news and moved up $0.11
on 3 times the normal volume. With the first level of support at $31.50 and the
resistance at $32.80 the stock could easily continue to move sideways. However
the news could push the stock into a slightly higher trend. With this is mind a
legging in strategy for a covered call on the stock would involve two steps.
First buying the stock and then waiting for it to bounce higher to sell the
covered call portion.