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Thursday, July 24, 2008

Established Devon Energy Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:

Established Devon Energy(DVN) Covered Calls for Aug08.

07/24/08 Bought 200 DVN @ $94.45
07/24/08 Sold 2 DVN Aug08 $105.00 Calls @ $2.30

Annualized Return If Stock Price Unchanged (ARIU): +34.2%
Annualized Return If Exercised (ARIE): +191.0%
Downside Breakeven Protection: 2.4%

As you know, normally I do not establish deep-out-of-the-money covered call positions. In this case however, I believe the recent short-term sell off in Devon shares has been greatly overdone. I'm expecting a sharp bounce back in the stock price, especially in conjunction with the likely strong quarterly earnings announcement forthcoming on August 6th.

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