With the recent decreases in the cost of fuel, the trucking industry is looking bullish. Like the airline industry, one of the largest operating expenses incurred in the trucking industry is for fuel, second after expenses for labor.When the cost for fuel decreases, the trucking industry’s costs are decreased, so the savings helps the industry’s bottom line.
With this in mind, a prudent strategy for the next few months might be covered call investing in the trucking industry. Using PowerOptions stock options search tool SmartSearchXL to search for covered call investing positions in trucking companies on October 25, 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 25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| SWFT | 25.49 (-0.05) | SDUKE | 06 NOV 25.0 (24) | 1.50 | 5.9 | 4.2 | 4.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| XPRSA | 19.66 (-0.06) | SUAKD | 06 NOV 20.0 (24) | 0.75 | 3.8 | 4.0 | 5.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YRCW | 39.09 (+0.47) | YUXKH | 06 NOV 40.0 (24) | 1.20 | 3.1 | 3.2 | 5.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ABFS | 40.58 (-0.94) | FDQKH | 06 NOV 40.0 (24) | 1.70 | 4.2 | 2.9 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ODFL | 28.86 (-1.47) | QPSKF | 06 NOV 30.0 (24) | 0.80 | 2.8 | 2.9 | 6.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNW | 47.21 (+0.91) | CNWKW | 06 NOV 47.5 (24) | 0.95 | 2.0 | 2.1 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
Several trucking company covered call strategy stock options positions were returned with potential returns ranging from 2.1% to 6.9% (not bad for a 24 day investment) and downside protection ranging from 2% to almost 6%.
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% (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 SWFT and ABFS positions are 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 XPRSA, YRCW, ODFL and CNW positions. 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, option investing, poweroptions, stock options [/tags]