Tuesday, January 20, 2009

Establish Hewlett-Packard Covered Calls


A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Hewlett-Packard (HPQ) covered calls.

Hewlett-Packard is a leading worldwide provider of personal computers, printers, and servers. With their recent acquisition of EDS they are now also a leading provider of information technology services. The company has demonstrated continual improvement in its operating performance under the excellent leadership of its CEO, Mark Hurd. HPQ's financials are strong, and for a company of such high quality and profitability, the stock currently provides an especially attractive valuation relative to its peers with its price/sales ratio at a relatively low 0.7.


Established Hewlett-Packard Covered Calls for Feb09:
01/20/09 Bought 300 HPQ @ $33.89
01/20/09 Sold 3 HPQ Feb09 $37.50 Calls @ $.80

Absolute Return if Unchanged: +2.4%
Annualized Return If Unchanged (ARIU): +29.6%
Absolute Return if Exercised: +13.0%
Annualized Return If Exercised (ARIE): +151.1%
Downside Breakeven Price Point: $33.09
Downside Breakeven Protection: 2.6%

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