VVUS Covered Call

I liked the idea of the covered call with RIM, so I went looking for another one.  I found this web site which lists candidates for covered calls based on their ROI and that led me to VVUS.  It's a tech company on the NasDaq exchange. 

I bought 100 shares of VVUS at $11.46 and sold a call option on it.  However, this time I sold a fairly deep in the money option - it had a strike price of $8.  So, assuming the price of VVUS is over $8 when the option expires, I'll have to sell my 100 shares which will be at a loss of about $350.

However, I sold the option for $444, so combined, that's a profit of $88.  That's a 7.6% return on investment of what I paid for the VVUS shares.  Annualized, that's over 100%.

Now, I could have made more money by selling an option with a strike price closer to the share price, but the beauty of doing it the way I did is the break-even price.  The break even in this case is $7.07, so the shares would have to lose 38% of their value before I risked losing any money.  While that is certainly possible in the next 25 days, I think the probability is somewhat low.  Even if it does, I think I'll have lots of warning if the share price starts to tank.

That's all the option writing I'll be doing this month.  They both expire on March 16th, so I'll post around then to let you know how they did.