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Wednesday, February 25, 2009

Establish BHP Billiton LTD ADR Covered Calls

A new covered call position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of a BHP Billiton LTD ADR (BHP) covered call.

BHP Billiton is the world's largest mining company. It is based in Australia but its scope of operations is worldwide. It ranks highly overall in the CCAP 'Buy Alerts' worksheet with 8 of 9 indicators being positive including an attractive p/e ratio of 9.0 and a return-on-equity of 30%.

A summary of the transactions is as follows:

Established BHP Billiton Covered Call for Mar09:
02/25/09 Bought 100 BHP @ $36.75
02/25/09 Sold 1 BHP Mar09 $37.50 Call @ $2.90

Absolute Return if Unchanged: +7.9%
Annualized Return If Unchanged (ARIU): +119.9%
Absolute Return if Exercised: +9.9%
Annualized Return If Exercised (ARIE): +151.0%
Downside Breakeven Price Point: $33.85
Downside Breakeven Protection: 7.9%

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