Airline Stocks Now Banned from Covered Call Writing and Put-Selling Strategies

03/11/2015 8:00 am EST

Focus: OPTIONS

Alan Ellman

President, The Blue Collar Investor Corp.

Alan Ellman, of TheBlueCollarInvestor.com, shares a list of airline stocks that are now banned from covered call writing and put-selling strategies, why they’ve been banned, and what options traders should do about this, especially those screening the stocks themselves. 

Stocks eligible for our covered call writing and put-selling portfolios are screened in a 3-pronged approach: fundamental analysis, technical analysis, and common sense principles like avoiding earnings reports. One of the categories under the common sense umbrella is banned stocks due to monthly same store retail sales. This list, once 80-long, is now down to 8 companies as the others opted out of reporting on a monthly basis and reverted to quarterly reporting. Monthly reports like these create the same type of risk as do earnings reports. If they disappoint, share value can take a major hit and wipe out our profits for the month.

Recently, one of our members, Ryszard from Tempe, Arizona, was kind enough to share with me that airlines have analogous monthly reports that can create a high level of risk. These reports are known as capacity reports and are published in the first or second week of every month depending on the airline. Airlines report ASM (or available seat miles) as their maximum capacity and then these monthly capacity reports reflect the actual percentage of ASM used. Like earnings and revenues, analysts make predictions of these reports, and if they disappoint, we can get hurt. I back-checked and found that disappointing capacity reports occur frequently enough where I felt the protection of banning these stocks was justified. Here is the updated list of “banned stocks.”

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For our premium members, these stocks are automatically screened out and will never appear in our watch (running) list. To those of you screening the stocks yourself, print out the list and keep in by your computer for reference. We will continue to update all our members should we locate additional securities that may not fit our risk profiles. Thanks again to Ryszard for sharing this information.

By Alan Ellman of TheBlueCollarInvestor.com

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