Fri Nov 30, 2007: Selling RIMM Naked Calls

Investors looking to enter short positions after last week's big bounce in the stock market might consider selling out-of-the-money call options for January on some of the popular stocks that have had big run-ups in 2007.

One such stock is Research In Motion (NASDAQ-RIMM,113.82).

Chart of RIMM stock

January 140 naked calls can currently be sold for $445 each with a margin requirement of $1,138 for a return of 445 / 1138 = 39.1% assuming RIMM stock stays below $140 when the options expire January 18th.

An interesting point to note is that even with the lowest premium amount, this percentage return is higher than any of the other closer-to-the-money call options in the table above, because the initial margin requirement is lower the further out-of-the-money you go.

Until next time, best of luck with your option investments!