Covered Call Blog
How to use covered calls to generate recurring income.
Most Recent
Most Popular
By Topic
By Symbol
Receive new blog articles automatically by following us:
Email newsletter
Twitter
Facebook
YouTube
LinkedIn
Do you have an idea for a topic you'd like us to write about? Please contact us.
Bear Market Shopping List
Jim Cramer of TheStreet.com spent the weekend screening S&P 500 stocks, looking for companies selling below the market's P/E of 16 with an above-average 3.75% yield and a dividend that he thinks is not only sustainable but can grow.
Immediately, that eliminated oil and oil-related stocks. And while there were plenty of stocks with yields north of 3%, there were few companies with yields over 3.75%. "I think we would all agree that anything less than 3.75% in this environment isn't enough protection given that it's pretty easy to see an 8% decline in the indices morph into an 11% selloff, so that's where I have chosen to make a stand," Cramer wrote.
"On average, these stocks are cheap on both last year's earnings and this year's estimates and they can afford to pay you that protection. They will most likely bounce on any good news and preserve the downside given how scant the yield is on the 10-year," he wrote. Cramer eliminated two high-yield stocks, Caterpillar and Seagate, over concerns about the companies as well as real estate investment trusts and utilities, with the exception of one stock.
The resulting list contains 15 stocks that Cramer feels you could buy now.
15 Bear Market Stocks To Buy Now
Note: Some of these have a higher P/E than the 16 Cramer said he screened for. You can read his comments on why he likes each of these here.
| Pick | Symbol | P/E | Div Yield |
|---|---|---|---|
| American Electric Power | AEP | 16.2 | 3.8% |
| Verizon | VZ | 10.8 | 4.8% |
| Ford | F | 10.2 | 4.9% |
| General Motors | GM | 10.7 | 4.9% |
| Tupperware | TUP | 12.0 | 5.4% |
| Ventas | VTR | 44.9 | 5.3% |
| Dow Chemical | DOW | 11.1 | 4.3% |
| Eaton | ETN | 11.2 | 4.5% |
| International Paper | IP | 17.3 | 4.8% |
| Diebold | DBD | 23.7 | 4.4% |
| Cummins | CMI | 9.2 | 4.5% |
| Kohl's | KSS | 12.8 | 3.7% |
| Pfizer | PFE | 23.1 | 3.9% |
| Prudential | PRU | 9.4 | 4.0% |
| RR Donnelly | RRD | 26.9 | 7.9% |
In-the-money Covered Calls For Jan 29
If we plug those 15 stocks into Born To Sell's screener and look for weekly in-the-money covered calls for the Jan 29 expiration, we find several offering double-digit annualized returns for a 5 day trade:
At-the-money Covered Calls For Jan 29
If you prefer at-the-money choices for Jan 29, we have:
Out-of-the-money Covered Calls For Jan 29
If you want some upside potential then the out-of-the-money choices for Jan 29 are:
Covered Calls For Feb 19
Going out a bit farther, to the Feb 19 expiration, we see that most of these have an earnings release before expiration (red dates, below). And a few have an ex-dividend date before expiration (green dates, below):
Note: These are not trade recommendations. They are candidate stocks from Jim Cramer. Do your own research, keep position sizes modest, and stay diversified.
Mike Scanlin is the founder of Born To Sell and has been writing covered calls for a long time.