STOCK SHOWDOWN - Writing Covered Calls - CVX vs PSX

Which stock would I buy for Writing Covered Calls - CVX vs PSX
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DISCLAIMER: This stock comparison is 100% for entertainment. I'm not recommending these stocks as a purchase. The research jump links in this blog post are ones that I use to start my stock investing research. Always do your own due diligence and never risk more money then you are willing to lose. Think of it like this blog post as seeing the world thru my eyes.
COVERED CALL SHOWDOWN! - WHICH STOCK WOULD I PURCHASE TO WRITE A COVERED CALL
Chevron Corporation
	CVX	vs		PSX
Phillips 66
Seeing the World Thru my Eyes - the Straight Talk
When it comes to BIG OIL ... one company comes to mind ... Chevron and over the years CVX has proven to be a Wall Street favorite largely (I feel) they will protect that dividend and for Wall Street that's a good sign. Phillips 66 is a spin off company from Conoco many years ago and has found itself BIGGER then COP ... and if you're asking me one of the more premier oil refineries in the world. Both companies as you will see have been both crushed during the virus sell off and recovered somewhat in the recent stock market rally ... both are pay good dividends to its investors which always make them favorites. Which one WINS this Stock Showdown? Let's check the numbers and get too it.
NOTE - AT THE TIME OF THIS POSTING, BOTH COMPANIES STOCK PRICES BELOW
CVX			PSX
$93.56			$80.95
Chevron Corporation			Phillips 66
Just in case you didn't know ... here's some basic company information about what they do.
Chevron Corporation, through its subsidiaries, engages in integrated energy, chemicals, and petroleum operations worldwide. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as operates a gas-to-liquids plant. The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil and refined products ...			Phillips 66 operates as an energy manufacturing and logistics company. It operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment transports crude oil and other feedstocks; delivers refined products to market; provides terminaling and storage services for crude oil and petroleum products; transports, stores, fractionates, exports, and markets natural gas liquids; provides other fee-based processing services; and gathers, processes, transports, and markets natural gas. The Chemicals segment manufactures and markets ethylene and other olefin products ... Phillips 66 was founded in 1875 and is headquartered in Houston, Texas.
Yahoo Summary-CVX			Yahoo Summary-PSX
#1 - The Golden Rules of Covered Call Writing!
The Golden Rules of Covered Call Writing are subjective ... the basic idea is to avoid as much risk as possible when determining a new stock purchase for a Covered Call Write ... we can not avoid risk entirely but using certain rules or guidelines will help use reduce that risk during the timeframe we use the stock for selling premium. I've included the most popular rules or guidelines below which include: avoid a company's earnings report, is the company apart of the S&P 500 or Dow Jones?. Does the company have a dividend? Does the company have same store sales reports? Do you want to own the stock? > This list isn't the end all be all list but a starter list for your research and lowering your risk ... but again, we can not avoid risk .
Chevron Corporation			Phillips 66
S&P 500?	OPTIONS?	DIVIDEND?	S&P 500?	OPTIONS?	DIVIDEND?
Confirm	Option Chain-CVX	Verify-CVX	Confirm	Option Chain-PSX	Verify-PSX
Seeing the World Thru my Eyes - the Straight Talk
Both companies pay a very nice annual dividend which translate into a decent quarterly dividend which I like for possible CCW+DIV Capture trades as they come along ... CVX has been a staple investment of mine for years and Im not going to change that. PSX is solid too ... I have my winner on this one ... what's yours?
#2 - What story is the chart telling us?
When buying stocks to Write Covered Calls the prime objective is for the stock to trade sideways to higher ... selling premium traders will purchase a stock and sell the Out of the Money strike to collect both the premium and the stock appreciation. I always like to look at a chart and ask the question "what story is this chart telling me?" ... if its trending higher, this is good. If its trending lower, well, I really need to do my research if I'm going to invest in a company that its stock is trending lower.
See Support-CVX			See Support-PSX
Seeing the World Thru my Eyes - the Straight Talk
The charts for both CVX and PSX have recovered as with the rest of the markets ... if you ask me, PSX REALLY fell hard so once demand for gasoline increased due to the re-opening of the economy ... Wall Street went buy buy BUY on PSX shares ... CVX isn't that far from its pre-virus selloff price (~$110) where as PSX fell some -50% (it was trading around $100) and fell into the high $40's ... both chart works for me but PSX is telling me Wall Street likes it more ... right now anyway
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#3 - What are "THEY" saying?
I'm not an expert when it comes to whether a stock is undervalued or overvalued or if its a Buy or a Sell ... so I use some great websites to 'paint a picture' for me. Some will have a stock as a Buy and another will have it as a Sell ... so I usually have 3 or 4 different sources to help me.
Chevron Corporation			Phillips 66
Zacks	Yahoo Prem	AmBull	Zacks	Yahoo Prem	AmBull
BUY	OVERVALUED	STAY SHORT	HOLD	UNDERVALUED	STAY IN CASH
Corfirm Rating - CVX	Yahoo Summary-CVX	Trending? -CVX	Corfirm Rating - PSX	Yahoo Summary-PSX	Trending? -PSX
Seeing the World Thru my Eyes - the Straight Talk
Chevron's rally off the lows seems to have maxed out its short term technicals ... American Bull being a candlestick charting indicator site has a SHORT call on CVX ... PSX is pretty milk toast here but do like both companies Zack's ratings ... for me, these companies are Best of Breed in what they do so I wouldn't have any issues holding the stocks should the markets sell off again ...
#4 - SHOW ME THE MONEY!
Another great visual when quickly trying to determine if this/these are companies we want to own ... remember, we have to own these companies and if the picture isn't telling us a clear picture of a companies prospects then I have to make sure I really do my homework.

Yahoo Summary-CVX			Yahoo Summary-PSX
Seeing the World Thru my Eyes - the Straight Talk
Big BIG money is made selling their products and services ... seems CVX took a bigger hit on revenue's in 2019 as oil prices seemed to stall in the low 50's ... PSX refines that oil and found its revenue's a bit lower by a hair (-20 Bill vs -2 Bill) PSX didn't have is earnings beat down like CVX's ... I'm liking PSX's financial story better right now if you're asking me.
#5 - What kind of Covered Call profits can we make?
Giving someone the right but not the obligation to take your shares can be very profitable if done correctly ... typically most Covered Call writers will try to make 3% Cash on Cash profit in a 30 day period. Mastering this skill of selling premium can increase your annual returns vs a buy and hold investment strategy. Below is a (1) deviation Out of the Money Covered Call that one might do if they sell premium.
Looking at a 30 day window using (3) deviationS Out of the Money
	THESE ARE NOT REAL TIME! CLICK LINK BELOW FOR THAT			POSTED >	5/27/2020
CVX	Current Price	Strike Price	LAST TRADE	30 day return	Expiration
	$93.56	$94.00	$0.90	1.43%	5/29/2020
	$93.56	$95.00	$0.46	2.03%	5/29/2020
	$93.56	$96.00	$0.24	2.86%	5/29/2020
			THIS IS NOT THE BID OR MID
Check this stocks options here >		https://finance.yahoo.com/quote/CVX/options?p=CVX
	THESE ARE NOT REAL TIME! CLICK LINK BELOW FOR THAT
PSX	Current Price	Strike Price	LAST TRADE	30 day return	Expiration
	$80.95	$81.00	$4.50	5.62%	5/29/2020
	$80.95	$82.50	$2.85	5.44%	5/29/2020
	$80.95	$85.00	$2.45	8.03%	5/29/2020
			THIS IS NOT THE BID OR MID
Check this stocks options here >		https://finance.yahoo.com/quote/PSX/options?p=PSX
Seeing the World Thru my Eyes - the Straight Talk
Clearly if you were confident in PSX they have the Premium game locked with a 1 strike out, 30 day trade collecting 5.62% ... also, would love to search the EX-Date and see if a CCW+DIV Capture play is 'in play' because they do pay some nice quarterly dividends.
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#7 - "HURRY HURRY, READ ALL ABOUT IT!"
The internet has so many resources for good information on companies ... whether its news, events or just some blogger with a great perspective on a company's prospects ... I love just glancing at the news feeds to get a feel for what's going on with a company I'm researching ... below are some helpful jump links I use.
Seeking Alpha		DivChannel	Seeking Alpha		DivChannel
Alpha Articles Search-CVX		Verify-CVX	Alpha Articles Search-PSX		Verify-PSX
MY WINNER IS!!!
	CVX	vs		PSX
	SCORE		SCORE
	2		6
Seeing the World Thru my Eyes - the Straight Talk Recap!
PSX wins this very entertaining Stock Showdown this time and with the economy re-opening, oil prices stabilizing ... both of these companies have been rewarded with higher stock prices. Where we go from here is anyone's guess but watching both CVX and PSX get HAMMERED in mid March to now back near the pre-virus sell off prices ... just tells me Wall Street likes their stories and throws money at them :) I'll be checking on EX-Date's for possible CCW+DIV Capture plays ... one thing is clear ... both could be used for that traditional 30 day Covered Call trade.
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The BONUS Deeper Dive!
#8 - More number that help us Up Our Game!
I'm not an expert when it comes to whether a stock is undervalued or overvalued or if its a Buy or a Sell ... so I use some great websites to 'paint a picture' for me. Some will have a stock as a Buy and another will have it as a Sell ... so I usually have 3 or 4 different sources to help me.
FFTY	ST50	S&P 500	FFTY	ST50	S&P 500
		YES			YES
Does either of these companies have Earnings Report (next 30 days)
April 16, 2020		-		May 16, 2020
~	Jul 31, 2020 - Aug 04, 2020		~	Jul 24, 2020 - Jul 28, 2020
Verify-CVX			Verify-PSX
Dividend 2%	EX-DATE	Ave Vol	Dividend 2%	EX-DATE	Ave Vol
5.19%	May 18, 2020	15.977M	4.45%	May 15, 2020	5.056M
Verify-CVX			Verify-PSX
What story is the chart telling you?
StockCharts	Finviz	BarCharts	StockCharts	Finviz	BarCharts
View Chart-CVX	See Support-CVX	View Chart-CVX	View Chart-PSX	See Support-PSX	View Chart-PSX
I hope you enjoyed this Covered Call Stock Showdown blog ... as always you know this is for entertainment and before EVER investing a nickel of your hard earned money you need to do your research or what they call due diligence ... no, nada, zip zilcho stock recommendations were made here ... this ALL should be your STARTING POINT for determining if either of these companies meet your stock investing risk profile. Good luck everyone!
Disclaimer - Yes - at the time of this posting I do have a position in this equity. By posting this I am by no means recommending this equity and am not front running for its performance. I have risked my own money and am accountable for the trade results.
Remember, the content of this site is for informational and educational purposes only. If you invest using information contained here, do so at your own risk. Please read the full disclaimer posted below and visit cptdashboard.com for my privacy policy.
Trading stocks and options have risk. Required reading prior to placing money at risk with options is the ODD which is posted below. "The Characteristics & Risks of Standardized Options" Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options.
- http://www.optionsclearing.com/about/publications/publication-listing.jsp
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Topics I discussion range from:
Using stocks to Write Covered Calls
The Covered Call Investment strategy
Using Covered Calls to earn money
Explaining the Covered Call strategy
Selling Covered Calls
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CREDIT - How and Why to Use a Covered Call Option Strategy
BY ADAM MILTON
Updated July 29, 2019 > https://www.thebalance.com/determining-intrinsic-value-1031125
A covered call is an options strategy involves trades in both the underlying stock and an options contract. The trader buys (or already owns) the underlying stock. They will then sell call options for the same number (or less) of share held and then wait for the options contract to be exercised or to expire.
Exercising the Options Contract
If the options contract is exercised (at any time for US options, and at expiration for European options) the trader will sell the stock at the strike price, and if the options contract is not exercised the trader will keep the stock.
For a covered call, the call that is sold is typically out of the money (OTM). This allows for profit to be made on both the options contract sale and the stock if the stock price stays below the strike price of the OTM option. If you believe the stock price is going to drop, but you still want to maintain your stock position, for the time being, you can sell an in the money call option (ITM).
For this, you will receive a higher premium from the buyer of your call option, but the stock must fall below the ITM option strike price, otherwise, the buyer of your option will be entitled to receive your shares if the share price is above the option's strike price at expiration (you lose your share position). Covered call writing is typically used by investors and longer-term traders, and is rarely used by day traders.
How to Create a Covered Call Trade
Purchase a stock, and only buy it in lots of 100 shares.
Sell a call contract for every 100 shares of stock you own. One call contract represents 100 shares of stock. If you own 500 shares of stock, you can sell up to 5 call contracts against that position. You can also sell less than 5 contracts, which means if the call options are exercised you won't have to relinquish all of your stock position. In this example, if you sell 3 contracts, and the price is above the strike price at expiration, 300 of your shares will be called away, but you will still have 200 remaining.
LEARN MORE
Wait for the call to be exercised or to expire. You are making money off the premium the buyer of the call option pays to you. If the premium is $0.10 per share, you make that full premium if the buyer holds the option until expiration and it is not exercised. You can buy back the option before expiry, but there is little reason to do so, and this isn't usually part of the strategy.
Risks and Rewards of the Covered Call Options Strategy
The risk of a covered call comes from holding the stock position, which could drop in price. Your maximum loss occurs if the stock goes to zero. Therefore, you would calculate your maximum loss per share as:
Maximum loss per share = (Stock entry price - $0) + Option premium received
For example, if you buy a stock at $9, and receive a $0.10 option premium on your sold call, your maximum loss is $8.90 per share. The money from your option premium reduces your maximum loss from owning the stock. The option premium income comes at a cost though, as it also limits your upside on the stock.
You can only profit on the stock up to the strike price of the options contracts you sold. Therefore, calculate your maximum profit as:
Maximum profit = (Strike price - stock entry price) + Option premium received
For example, if you buy a stock at $9, receive a $0.10 option premium from selling a $9.50 strike price call, then you maintain your stock position as long as the stock price stays below $9.50 at expiration. If the stock price moves to $10, you only profit up to $9.50, so your profit is $9.50 - $9.00 + $0.10 = $0.60.
If you sell an ITM call option, the underlying stock's price will need to fall below the call's strike price in order for you to maintain your shares. If this occurs, you will likely be facing a loss on your stock position, but you will still own your shares, and you will have received the premium to help offset the loss.
Final Word on the Covered Call Options Strategy
The main goal of the covered call is to collect income via option premiums by selling calls against a stock that you already own. Assuming the stock doesn't move above the strike price, you collect the premium and maintain your stock position (which can still profit up to the strike price).
Traders need to factor in commission when trading covered calls. If commissions will erase a significant portion of the premium received, then it isn't worthwhile to sell the option(s) and create a covered call.
Link can be accessed here > https://www.thebalance.com/determining-intrinsic-value-1031125