Risks of Rolling Up Covered Calls – ADM Stock Trade Update

This is a FullyInformed Members trade strategy update on Archer Daniels Midland Stock which trades on New York under the symbol ADM. ADM Stock has been in and out of my portfolio for many years. This article focuses on the risks of rolling up covered calls.

Back on December 8 I wrote about Archer Daniels Midland Stock and my trade ideas for this stock. I entered the trade on on December 9 doing both the covered calls and the naked puts as described in my article.

Archer Daniels Midland is an excellent company. It has strong management and reasonable revenue growth. With 30,000 employees, $90.6 billion in revenue, debt to capital of just 26% and an annual dividend of 96 cents, Archer Daniels Midland is a decent stock for trading.

A number of investors followed my lead and entered the covered call trade as well. Quite a few have written me wondering about rolling up covered calls after ADM moved up recently. This question from Ian which was posted to the ADM article is typical so I thought I would answer it to cover the same question from other investors.

Hi Teddi, I BTO 200 shares @ 42.02 and sold a $42 17Jan’14 CC and a $43 17Jan’14 CC. With the stock having risen so much would you roll the calls forward, and in the case of the 42 especially, up or would you let the shares be taken away, leading to less capital gain than if the CC were not sold?

Thanks
Ian

This article looks at rolling up covered calls. It looks at how to know when to roll up covered calls, why to roll up covered calls and when to not roll covered calls higher.

ADM Stock Strategy Update on Rolling Up Covered Calls

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