With the 2006 hurricane season nearing its November 30 official end, the property & casualty segment of the insurance industry is probably starting to break out the champagne after enduring 2005’s tumultuous hurricane season.
Even though the NOAA (National Oceanic and Atmospheric Administration) predicted an active hurricane season for 2006, it has pretty much been a party pooper (fortunate for those living in the path of hurricane alley).
With hurricane season nearing its end, the property & casualty insurance stocks look attractive for a covered call investment strategy over the next several months.
Using PowerOptions stock options search tool SmartSearchXL to search for covered call investing positions in property & casualty insurance companies on October 19, 2006 with all stock options expiring November 17, 2006 (November stock options expiration day), the following positions were found:
| SmartSearchXL Covered Call Search for October 19 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/19/06 |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| TWGP | 34.79 (+0.03) | PTQKG | 06 NOV 35.0 (30) | 1.35 | 3.9 | 4.0 | 4.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HIG | 90.40 (-0.65) | HIGKR | 06 NOV 90.0 (30) | 2.45 | 2.7 | 2.3 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
Two property & casualty insurance covered call strategy stock options positions were returned with potential returns ranging from 2.3% to 4.7% (not bad for a 30 day investment) and downside protection ranging from 2.7% to almost 3.9%.
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 2.7% (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. Downside protection is simply the option premium divided by the stock price. The HIG position 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 require the stock price to appreciate in order to realize the greater returns as in the case of the TWGP position. OTM calls are often more a play on stock appreciation rather than covered call income and this can be seen by the higher return if assigned and the lower percent downside protection.
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] covered call investing, covered call investment strategy, investment strategy, option income, poweroptions, stock options, property insurance, casualty insurance[/tags]