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Tuesday, November 20, 2007

Buy Celanese, Intel, and Kinetic Concepts

Three new covered call positions were established today in the Covered Calls Advisor Portfolio(CCAP) as follows:

1. Celanese Corp Covered Calls Established for Dec07

11/20/07 Bought 200 CE @ 36.56
11/20/07 Sold 2 CE Dec07 40 Calls @ $.60

Annualized Return If Unchanged: 18.7%
Annualized Return If Exercised: 126.0%
Downside Breakeven Protection: 1.6%


2. Intel Corp Covered Calls Established for Dec07

11/20/07 Bought 1000 INTC @ 25.59
11/20/07 Sold 10 INTC Dec07 25 Calls @ $1.28

Annualized Return If Unchanged: 30.7%
Annualized Return If Exercised: 30.7%
Downside Breakeven Protection: 5.0%


3. Kinetic Concepts Inc Covered Calls Established for Dec07

11/20/07 Bought 400 KCI @ 59.53
11/20/07 Sold 5 KCI Dec07 60 Calls @ $2.35

Annualized Return If Unchanged: 45.0%
Annualized Return If Exercised: 54.0%
Downside Breakeven Protection: 3.9%

4 comments:

  1. 2. Intel Corp

    Annualized Return If Unchanged: 30.7%
    Annualized Return If Exercised: 30.7%

    Is this correct???

    Love the site! Keep up the good work, I am planning to do similar investing shortly

    ReplyDelete
  2. Not sure if it is ok to ask questions like this? Just wondering why you chose CE? Also, why such a small premium ($120 gross)? ARIE @ 18.7% seems to violate your guideline 0f >30%? Seems more like an investment than a covered write. Just wondering your thought process on this one?

    Thanks again.

    Ray

    ReplyDelete
  3. Hi Ray,
    Both CE and INTC are rated 'buy' by both stock advisory services I use (Schwab Equity Ratings and MarketGrader.com). Also, a bonus is that both are in industries that are rated 'A' by Schwab (Chemicals and Semiconductors).
    Regarding CE, when I combined the ratings of both Schwab and MarketGrader, this was the highest ranked company in the Materials sector, and I wanted some exposure in Materials since my current 'Theme' has Matls at 'marketweight'. You are correct that the ARIU is below my 30% threshold, but I'm bullish on the company and believe there's a good chance my stock will close higher than the purchase price of $36.56 on expiration Friday (12/21/07).
    Regarding INTC, the 30.7% is correct. The annualized return-on-investment formula is:
    [(1.28-(25.59-25.00))/25.59]*(365/32days)]*100
    The ARIU and ARIE are always identical for in-the-money stocks. The ARIE is higher than the ARIU when out-of-the-money covered call positions are established (note: CE is a good example of this case).

    ReplyDelete
  4. Thanks for sharing your thoughts!
    Very much appreciated.
    Ray

    ReplyDelete