BofA names top 10 stock options overwriting candidates
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Investors looking for additional premium on a long stock position should consider these covered calls strategies, according to BofA's equity derivatives team.
"The strategy is best suited for names the call seller has a neutral short-term view on, as a call sells the right to upside participation beyond the call strike for a fee," analyst Gonzalo Asis wrote in a note. "Covered call writing is not a hedge and maintains full downside risk. High volatility names generally have higher call option prices to compensate for increased risk."
"Overwriting outperforms a long-only position if the underlying stock declines, but if the stock rises, it can underperform if the call strike is not sufficiently high," Asis said. "Investors concerned about missing out on the upside when overwriting may wish to consider the following candidates within the Russell 1000 (IWB) that allow at least 9% gain by 21-Oct2022, earn a minimum premium of 6%, and have underlying notional option volume of at least $5mn."
He also noted the significant risk investors take on in trading options.
The top 10 overwriting candidates all have options expiration dates of Oct. 21, 2022:

Carnival (NYSE:CCL), options strike price $10, call bid $1.05, call and dividend premium 10.7%, call-away return 13.1%
AppLovin (APP), $25, $2.50, 10.2%, 12.3%
APA (APA), $40, $3.40 and dividend $0.13, 8.9%, 10.6%
Biogen (BIIB), $200, $16.80, 8.6%, 10.6%
Freshpet (FRPT), $45, $3.70, 8.4%, 10.3%
Dish Network (DISH), $17.5, $1.40, 8.2%, 10.2%
Range Resources (RRC), $32, $2.90, 9.2%, 10.2%
Wynn Resorts (WYNN), $62.50, $3.80, 6.3%, 10.1%
AMD (AMD), $90, $5.50, 6.3%, 9.8%
Schlumberger (SLB), $40, $2.27 and dividend $0.18, 6.4%, 9.8%

Dig into how call options work.