Covered Calls

I bought 100 shares of RIM today, mostly so that I could sell a covered call on it.  Here are the details:

Buy price: $15.05 (+fees) = $1509.95
Sold an in-the-money option contract with a strike price of $15 for $100 (-fees) = $89.05
If the option is exercised, I'd be forced to sell the shares at $15 and after fees would lose $14.90 on the trade.

So, total profit would be what I earned from the option minus what I lost on the stock = $74.15.

Which is of course assuming that RIM will be above $15 when the option expires in 29 days.  It would have to sink to below $14.20 for me to lose money.

Assuming all goes well and I earn the $74.15, that would be a yield of 4.9% on the initial investment.  However, that's 4.9% in 29 days.  Annualized over the year, and the yield goes up to almost 62%.  Sweet.

A lot of the profit is eaten up by fees.  Which means that larger trades would have a higher yield.