Tuesday, July 21, 2009
Establish Aspen Insurance Holdings Ltd. Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Aspen Insurance Holdings Ltd.(AHL) covered calls as follows:
Established Aspen Insurance Holdings Ltd.(AHL) Covered Calls for Aug09:
07/21/09 Bought 500 AHL @ $24.95
07/21/09 Sold 5 AHL Aug09 $25.00 Calls @ $.90
Aspen Insurance Holdings Limited, through its subsidiaries, provides insurance and reinsurance products and services in the United Kingdom, the United States, and internationally. AHL's primary business is in catastrophe reinsurance including earthquakes, hurricanes, and floods. However it is continuing to grow and diversify into additional insurance and reinsurance areas. It represents an attractive, value-oriented investment at this time as it is expected to earn $4.00 per share this fiscal year. In addition, at AHL's current price the stock trades at only about 80% of its book value.
Some potential results from this transaction are:
Absolute Return if Stock Price Unchanged at $24.95: +4.2%
Annualized Return If Unchanged (ARIU): +48.0%
Absolute Return if Exercised at $25.00: +4.4%
Annualized Return If Exercised (ARIE): +50.3%
Downside Breakeven Price Point: $23.90
Downside Breakeven Protection: 4.2%
Note: Although a quarterly dividend has not yet been declared, it is likely that there will be a $.15 ex-div payment on or near Aug 11th. This dividend is included in the returns shown above.