GE Covered Call Play Thoughts

I made mention of a GE short put play back in November of 2008.  I made some premium on the OCT 2008 puts and rolled up to DEC 2008 where I was subsequently assigned at $17.50. I've been holding to GE ever since. Needless to say, it's been a hell of a ride, but we're to where writing premium might actually make some sense at this point. GE has risen pretty substantially over the last couple of weeks. The OCT calls are looking good to offset some downside risk on the recent run up. If GE falls back down to earth, I can buy the calls back at a profit. If GE continues to rise, I can get called away and look into short puts again. Let me put the move into perspective a little.

ge-chart-sep-2009.png (48.25 kb)

I like to plot bollinger bands 1 and 3 standard deviations away from the closing price. When the old stalwarts start flirting with 3 standard devs, it's time to take some profit. 1 std dev is represented by the purple line and 3 standard deviations is represented by the crimson line. GE is very unlikely to "break out" like a small cap or new issue would. It's not to say it's impossible, because nothing really is.

My idea here is probably look at the OCT 18's here. My cost basis on GE is somewhere around 16.50-16.90 because of previous premium sold, the 18's allow me to get some profit on the move plus get some more premium.

As usual, I don't recommend followers, ever. I don't know anything more than you do, I'm just playing what I think are the odds in a speculative account given my specific situation and tolerance for risk. As usual, I welcome comments on my ideas.

Update: Filled OCT08 calls @ 0.15.