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Thursday, July 23, 2009

Establish Synaptics Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Synaptics Inc.(SYNA) covered calls as follows:

Established Synaptics Inc.(SYNA) Covered Calls for Aug09:
07/23/09 Bought 300 SYNA @ $33.95
07/23/09 Sold 3 SYNA Aug09 $35.00 Calls @ $1.80

Synaptics Inc is a worldwide leader in developing touchscreen applications for the laptop (58% of revenues) and mobile phone (42% of revenues) industries. Its current market share in worldwide laptops is about 60%. While Synaptics does not currently supply to Apple, some of its primary customers are RIMM, Nokia, and LG. The current growth opportunities for SYNA are substantial, including: (1) The Windows 7 Operating System will be the first Windows system to offer a multi-touch screen interface support capability; (2) As reported by Intel in its most recent quarterly earnings conference call, they are now seeing a resurgence in notebook demand; and (3) the announcement this week of its product-line offerings expansion with its new ClearPad 1000 (low-end) and 3000(high-end) products. Each of these three situations will provide strong incremental demand for Synaptics' product offerings. In addition, Synaptics is attractive from a valuation perspective since the current year P/E of 16 seems relatively low in relation to the potential for 20%+ annual growth over the next several years.

Below is the Covered Calls Advisor's 'Buy Alerts' spreadsheet for SYNA. It scored well above the minimum threshold of 20.0 with a Total Points rating of 22.76.

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

Some potential results from this transaction are:
Absolute Return if Stock Price Unchanged at $33.95: +5.3%
Annualized Return If Unchanged (ARIU): +64.5%

Absolute Return if Exercised at $35.00: +8.4%
Annualized Return If Exercised (ARIE): +102.1%

Downside Breakeven Price Point: $32.15
Downside Breakeven Protection: 5.3%

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