EMCORE Corporation (EMKR) offers semiconductor products for fiber optics, solar power, and broadband industries. The stock is currently trading around $5.55 in a 52 week range of $3.32-$6.75. The stock has been strong this year, outperforming the broader market, rallying over 29% year to date. . On Wednesday there was heavy trading in the EMKR Dec 5 calls. Open interest in that line has now swollen to over 8,600 contracts indicating there is a good chance EMKR continues higher. With stock trading in bullish technical territory as well we are looking for a covered call set up in EMKR. Using a covered call will allow a trader to profit if the stock moves higher, slightly lower or not at all.
Trade: Buying 100 shares of EMKR at $5.55 for every Dec 5 call sold for $0.75.
Reward: $20 per 1 lot
Breakeven: $4.80
If shares of EMKR close above $5.00 on December expiration this trade will net its maximum potential profit of $20 per 1 lot. A trader would also net some profit anywhere above $4.80. Should the stock close above $5.00 on expiration this trade will net an annualized return of 26.9%.
