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Monday, June 29, 2009

Establish Family Dollar Stores Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Family Dollar Stores Inc (FDO) covered calls as follows:

Established Family Dollar Stores Inc(FDO) Covered Calls for Jul09:
06/29/09 Bought 500 FDO @ $28.68
06/29/09 Sold 5 FDO Jul09 $27.50 Calls @ $1.88

Family Dollar Stores, Inc. operates a chain of over 6,000 self-service retail discount stores for low to lower-middle income consumers in the United States.
This Advisor currently has a cautious view towards domestic consumer spending. Consequently, a conservative in-the-money position was established with up to 4.1% [($28.68-$27.50)/$28.68] downside protection available while still achieving the maximum potential annualized return-on-investment of 46.8% from this covered calls position.

Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for FDO. It scored above the threshold of 20.0 with a Total Points rating of 20.67.

Note: For expanded view, left click on the spreadsheet above.

Some potential results from this transaction are:
Absolute Return if Exercised at $27.50: +2.4%
= [($1.88-($28.68-$27.50)]/$28.68
Annualized Return If Exercised (ARIE): +46.8%
= [($1.88-($28.68-$27.50))/$28.68]*(365/19 days)

Downside Breakeven Price Point: $26.80
Downside Breakeven Protection: 6.6%

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