The Tycoon Report

Why You Should Consider Selling Calls on Nike Right Now

I'm sitting in my Miami Beach office looking out of my window at some plastic furniture being thrown around because we are getting hit with the outskirts of Hurricane Rita as we speak.

The palm trees are bending over and sheets of rain are being dumped on us. I hope that I can send you this e-mail before the electricity goes out because it's an important one.

I just checked out Nike Inc. (NKE-NYSE) the world’s largest foot wear company. The stock gapped up 4 points yesterday on positive earnings. I guess that because of the high gas prices, people are running and walking a lot more which must have increased Nike's bottom line!

This is a great example of what I have been talking about lately when a stock breaks out. These stocks have almost always been regressing back to the mean. Especially with a big company like Nike; you should sell calls on the earnings announcement. The premiums are big and the stock will most likely not continue running up that fast.

So if you own the stock, take advantage and SELL COVERED CALLS.If you are not selling calls on your positions you are missing the party.There is no doubt that options now hold a major place in the investment landscape.`It is troublesome when I see how many people don't bother to try to understand them.

In the next bear market, you may protect yourself from big losses, or make a killing by trading put options like I did iin 2001 and 2002.Trust me, you will feel amazing when you are getting paid as the market trades lower along with your co-workers stock accounts who never bothered to learn and master basic option trading skills.

Anyway, I wanted to talk to you folks about what happened earlier this morning when I came in (about 7:20 am.) I was sitting outside of my office getting some air. I guess I was observing the quiet before the storm. Well I'm sitting there and I look on the ground across the sidewalk and I see a dollar bill. It was folded, so for all I knew it could have been $200.00. I waited for this man to walk by it before I moved to pick it up. I couldn't help feeling anxious about the possibility of the man seeing it.As I leaned over to pick it up I felt like I was scratching off a lottery ticket.

I unfolded it and it was just a dollar. The (greedy) voice in my head said: "how come it's never $100.00 or $1,000.00?" My other (rational) voice said: "that's cool. I'll take it". It was only a measly buck, and I was happy. Then I naturally thought about what I could get for free with this free dollar that I found. I also thought about what all of the dollars that I found throughout my life must add up to.

That made me think about the F.A.S. readers. I always talk about the benefits of selling covered calls in the free weeklies that you are reading. When you sell calls, you may be picking up that one dollar bill. Sometimes you will be picking up a $5 spot. But you certainly wouldn't be leaving it there on the ground for the next man to pick up.

If you don't sell calls when you can, (Like with Nike Inc.) you should just leave that dollar bill on the floor the next time you find yourself in that situation. When you don't sell those covered calls, the money left on the floor is an extremely small fraction of what you leave on the table every month.

Think about it.