With the latest Hewlett Packard boardroom-spying episode, maybe Hewlett-Packard is finally ready to get back to business. Hopefully with some of the HPQ board members departing, Patricia Dunn, Tom Perkins, George Keyworth, etc., maybe the HPQ board can begin to cooperate with each other instead of playing politics.
The HPQ founders, William Hewlett and David Packard, have probably been rolling in their graves ever since the announcement of the Hewlett Packard merger with Compaq and the resulting proxy fight between then Hewlett-Packard CEO Carly Fiorini and William Hewlett’s son Walter.
While news of the HPQ boardroom-spying saga will continue to detract from HPQ’s image, Hewlett-Packard appears to be primed for performance. Hence, a covered call investment strategy for HPQ may be appropriate. Using PowerOptions‘ SmartSearchXL to perform a covered call investment strategy search on October 10, 2006 with all options expiring on November 17, 2006 (November stock options expiration day) for HPQ returned the following results:
| SmartSearchXL covered call search for October 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/3/06 |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| HPQ | 37.75 (-0.25) | HPQKG | 06 NOV 35.0 (39) | 3.5 | 9.3 | 2.2 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HPQ | 37.75 (-0.25) | HPQKU | 06 NOV 37.5 (39) | 1.8 | 4.8 | 4.3 | 4.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
Two positions were returned with maximum potential returns of 2.2% and 4.3% (39 days) with downside protection of 9.3% and 4.8%, respectively.
The search results illustrate the reason the covered call investment strategy is considered conservative, as all of the positions have “downside protection” of at least 4% (see “Aggressive Strategy for the Conservative Investor” for more information). The downside protection is the percentage that a stock can decline in value before the position will incur a loss. It is simply the option premium divided by the stock price. Each of these option positions is In the Money (ITM); therefore the percent of unchanged in price and the percent if assigned are equal in value.
Out of the money (OTM) calls offer greater upside potential, but the calls above do not require the stock to go up in price to realize these gains. OTM calls are often more a play on stock appreciation rather than covered call income.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing covered call stock options positions.
[tags]option income, stock options, covered call investment strategy, Hewlett Packard[/tags]