Wednesday, November 25, 2009

Establish Dresser-Rand Group Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Dresser-Rand Group Inc. (DRC) covered calls as follows:

Established Dresser-Rand Group Inc. (DRC) Covered Calls for Dec09:
11/25/09 Bought 300 DRC @ $29.30
11/25/09 Sold 3 DRC Dec09 $30.00 Calls @ $.60

Dresser-Rand Group Inc. manufactures steam and reciprocating compression turbines for the oil, gas, petrochemical and related industries. It also sells replacement and upgrade parts, as well as maintenance, installation, upgrade, overhaul, monitoring and repair services for both its own equipment and the equipment of other manufacturers. The company is the leading supplier of rotating equipment in the U.S. and is one of the top three suppliers worldwide, with manufacturing facilities in the U.S., France, Germany, Norway, India and Brazil.

The 'Buy Alerts' spreadsheet below shows that DRC has a 'Total Points' rating of 20.22 which exceeds the Covered Calls Advisor's desired threshold of 20.0 points.

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

Some possible overall performance results(including commissions) for the DRC transactions would be as follows:
Stock Purchase Cost: $8,798.95
= ($29.30*300+$8.95 commission)

Net Profit:
(a) Options Income: +$168.80
= (300*$.60 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.30):
-$8.95 = ($29.30-$29.30)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $30.00): +$201.05
= ($30.00-$29.30)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.30): +$159.85
= (+$168.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $30.00): +$369.85
= (+$168.80 +$0.00 +$201.05)

Absolute Return if Unchanged at $29.30: +1.8%
= +$159.85/$8,798.95
Annualized Return If Unchanged (ARIU) +27.6%
= (+$159.85/$8,798.95)*(365/24 days)

Absolute Return if Exercised at $30.00: +4.2%
= +$369.85/$8,798.95
Annualized Return If Exercised (ARIE) +63.9%
= (+$369.85/$8,798.95)*(365/24 days)