Monday, September 27, 2010

Establish Oshkosh Corp. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Oshkosh Corp.(OSK) covered calls as follows:

Established Oshkosh Corp.(OSK) Covered Calls for Oct2010:
09/27/2010 Bought 300 OSK @ $26.46
09/27/2010 Sold 3 OSK Oct2010 $27.00 Calls @ $.80

Oshkosh Corporation designs, manufactures, and markets a range of access equipment, specialty vehicles, and vehicle bodies worldwide and operates in four busines segments. Its Defense segment manufactures severe-duty, heavy, and medium-payload tactical trucks for the Department of Defense, including hauling tanks, missile systems, ammunition, fuel, and cargo for combat units. The company's Access Equipment segment was added the Access Equipment segment in December 2006 when it purchased JLG for $3.2 billion. The segment manufactures aerial work platforms, scissor lifts and telehandlers (a mix between a cherry-pickers and a forklifts). Its Fire and Emergency segment provides custom and commercial fire apparatus and emergency vehicles, including pumpers, aerial and ladder trucks, tankers, light and heavy-duty rescue vehicles, wildland rough terrain response vehicles, mobile command and control centers, bomb squad vehicles, hazardous materials control vehicles, and other emergency response vehicles. Its Commercial segment produces and sells front and rear discharge concrete mixers, and portable and stationary concrete batch plants for the concrete ready-mix industry; and field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, and mining industries. This segment also offers lease financing to concrete mixer customers, concrete batch plant customers, and commercial waste haulers. The company was formerly known as Oshkosh Truck Corporation and changed its name to Oshkosh Corporation in February 2008. Oshkosh Corporation was founded in 1917 and is based in Oshkosh, Wisconsin.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 17.90 exceeds the minimum purchase threshold of 16.0 points for a new investment. As shown below, the momentum factors (especially pricing momentum) are weak, but this weakness is more than overcome by the very strong value, growth, and profitability characteristics of Oshkosh Corp:

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

Some possible overall performance results(including commissions) for this Oshkosh position would be as follows:
Stock Purchase Cost: $7,946.95
= ($26.46*300+$8.95 commission)

Net Profit:
(a) Options Income: +$228.80
= (300*$.80 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $26.46):
-$8.95 = ($26.46-$26.46)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $27.00): +$153.05
= ($27.00-$26.46)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $26.46): +$219.85
= (+$228.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $27.00): +$381.85
= (+$228.80 +$0.00 +$153.05)

Absolute Return if Unchanged at $26.46: +2.8%
= +$219.85/$7,946.95
Annualized Return If Unchanged (ARIU) +53.1%
= (+$219.85/$7,946.95)*(365/19 days)

Absolute Return if Assigned at $27.00: +4.8%
= +$381.85/$7,946.95
Annualized Return If Assigned (ARIA) +68.9%
= (+$381.85/$7,946.95)*(365/19 days)