Monday, October 26, 2009

Establish Cal Dive International Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Cal Dive International (DVR) covered calls as follows:

Established Cal Dive International (DVR) Covered Calls for Nov09:
10/26/09 Bought 500 DVR @ $10.21
10/26/09 Sold 5 DVR Nov09 $10.00 Calls @ $.55

Cal Dive International, Inc., a marine contracting company, provides marine construction, diving, and offshore services to offshore oil and natural gas industry. The company offers manned diving, pipelay and pipe burial, platform installation, saturation, and platform salvage services, as well as construction, inspection, maintenance, and repair and decommissioning of offshore production and pipeline infrastructure. It primarily operates in the Gulf of Mexico Outer Continental Shelf, the northeastern U.S., Latin America, southeast Asia, Australia, the Middle East, India, and the Mediterranean. It recently signed its second contract agreement with China, a positive sign for future growth potential. It owns a fleet of 31 vessels, including 21 surface and saturation diving support vessels, 6 pipelay/pipebury barges, 1 pipebury barge, 1 combination derrick/pipelay barge, and 2 derrick barges. With oil currently above $75, the outlook for increasing development expenditures from major exploration and production companies for 2010 is promising. Cal Dive was founded in 1975 and is headquartered in Houston, Texas.

The 'Buy Alerts' spreadsheet below shows that DVR has a 'Total Points' rating of 23.59 which exceeds the Covered Calls Advisor's desired threshold of 20.0 points. As such, DVR became a candidate as a potential covered calls investment.

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

Some possible overall performance results(including commissions) for this DVR investment would be as follows:
Stock Purchase Cost: $5,113.95
= ($10.21*500+$8.95 commission)

Net Profit:
(a) Options Income: +$262.30
= (500*$.55 - $12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock exercised at $10.00): -$113.95
= ($10.00-$10.21)*500 - $8.95 commissions

Total Net Profit(If stock exercised at $10.00): +$148.35
= (+$262.30 +$0.00 -$113.95)

Absolute Return if Stock Exercised at $10.00: +2.9%
= +$148.35/$5,113.95
Annualized Return If Exercised (ARIE): +40.7%
= (+$148.35/$5,113.95)*(365/26 days)

Downside Breakeven Price Point: $9.66
= $11.21 - $.55
Downside Breakeven Protection: 2.9%
This in-the-money position provides up to 2.1% [($10.21-$10.00)/$10.21] downside protection available while still achieving the maximum potential annualized return-on-investment of +40.7% from this covered calls position.