Will the Chinese turn from their black market wares and embrace the legal offerings of American companies? News Corp (20th Century Fox) (NWS) is betting on it and is planning to sell inexpensive DVDs to Chinese consumers. A similar concept turned many US consumers from free file sharing websites to legitimate download sites such as iTunes.
Many music and video companies have concluded the Chinese black market is hopeless and cannot be beaten. Fox is betting the Chinese consumer will want the higher quality of their legitimate product over the questionable quality of the black market product.
Fox is planning an alliance with a Chinese distributor with the intention of selling inexpensive DVDs to the Chinese. The Motion Picture Association of America has estimated the US loses nearly one-quarter billion dollars each year due to DVD piracy.
The affordability of a DVD is extremely important in the Chinese market. Fox is planning on selling DVDs for about three dollars a disc. The black-market discs are currently selling for a little over a dollar a disc.
Recently, Time Warner (TWX) has attempted a similar approach in China. Time Warner has been selling low cost DVDs to Chinese consumers soon after the theatrical releases. Many foreign businessmen consider the time is right for an idea like this to succeed. China has made attempts, under significant US pressure, to improve their enforcement of anti-piracy laws. Also, many feel the Chinese consumers want to buy legitimate DVDs but are often not given the opportunity.
Although it is difficult to predict if this will have any affect on News Corp.’s or Time Warner’s stock prices, we will consider several interesting covered calls for News Corp. and Time Warner using PowerOptions robust stock options search engine.
The PowerOptions stock options search tools are very easy to use. After logging into the PowerOptions website, the tools menu is displayed and then the StrategySearch summary is selected. There are lots of stock market investment strategies, and if we don’t know the strategy would like to employ this tool can help us. Using the StrategySearch summary tool, the user can input a stock symbol and the desired expiration month of the option. In this case we will look at covered call investing positions for both Time Warner and Fox for the month of December. Using the StrategySearch tool, we observed there weren’t any particularly desirable covered call trades available for December. However, both stocks have bull call debit spreads stock options positions available:
| Bull-Call Debit Spreads TIME WARNER INC (TWX) $19.99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SELL | Expiration/Strike | Opt. Bid |
BUY | Expiration/Strike | Opt. Ask |
%Return | Break Even |
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| TWXLT | 06 DEC 19.00 | $1.10 | TWXLS | 06 DEC 18.00 | $2.05 | 5.30% | $18.95 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spreads NEWS CORP DE CL B (NWS) $22.26 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SELL | Expiration/Strike | Opt. Bid |
BUY | Expiration/Strike | Opt. Ask |
%Return | Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NWSLX | 06 DEC 22.50 | $0.40 | NWSLW | 06 DEC 17.50 | $5.00 | 8.70% | $22.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Time Warner bull call debit spreads trade might be considered somewhat safer than the News Corp position giving the investor about 5% downside protection (difference between the breakeven price and current stock price). There is little or no downside protection with the NWS trade, and generally bull call debit spreads investors do not trade in-the-money positions, so the NWS bull call debit spreads position should probably be avoided.
Today’s blog explored how you can use the versatility of the PowerOptions website to find a trade to suit your needs. Perhaps a covered calls stock options position with a 2% return would appeal to you more than the bull call debit spreads stock options position – you can become a PowerOptions member today and find stock options positions suitable for your own personal risk/reward profile.
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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 bull call credit spreads investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing stock options positions.
PowerOptions’ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, iron condor and selling naked puts stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]iTunes, Motion Picture Association of America, DVD, NWS, News Corp., TWX, Time Warner Inc., bull call debit spreads, covered call investing, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock market investment strategies, stock option trading, stock options[/tags]