Trading Options: DENTSPLY SIRONA Inc (NASDAQ:XRAY) : Using Covered Calls to Outperform the Stock – CML News

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PREFACE
While covered calls are one of the most commonly used option strategies, it turns out we need to be clever in how we treat earnings in order to maximize the strategy in DENTSPLY SIRONA Inc (NASDAQ:XRAY) . Even further, if we don’t do this analysis, we can easily dismiss some worthy covered call opportunities as losers. This is one of those cases.

STORY
There’s a lot less ‘luck’ involved in successful option trading than many people realize and we’re going to review that right now for XRAY. Let’s first examine a one-year back-test of a covered call strategy with some simple rules:

* Trade monthly options (roll the trade every 30-days).
* Avoid earnings
* Test this strategy for one-year

Here’s how this quick set up looks in the back-tester:

If we do this test, it turns out the best covered call to sell is out of the money with a delta of 35. Any delta below 50 is usually out of the money and certainly a 35 delta is out of the money.

RESULTS
If we do a covered call in DENTSPLY SIRONA Inc (NASDAQ:XRAY) over the last one-year but always skip earnings we get these results: