In article, “North Korea – Nuclear Bombs – Defense Contractors”, we analyzed the defense contractor industry for covered call stock options opportunities and all of the positions we selected were fully profitable with an average return of +3%. In article, “Defense Contractors Returns Booming +3% for Nov.”, we selected another defense covered calls stock options position for ManTech (MANT) and it was fully profitable returning a very nice +2.5% return in only 19 days.
We will once again search for defense contractor covered call stock options opportunities using PowerOptions SmartSearchXL tool for stock option investing opportunities expiring in January of 2007. The opportunities available are shown below:
|SmartSearchXL search on December 22|
|MANT||36.33 (-0.14)||UUNAG||07 JAN 35.0 (29)||2.05||5.6||2.1||2.1|
|HRS||45.44 (-0.28)||HRSAI||07 JAN 45.0 (29)||1.35||3.0||2.1||2.1|
|EDS||27.37 (-0.13)||EDSAY||07 JAN 27.5 (29)||0.60||2.2||2.2||2.7|
Competitors for MANT include: Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC), and Booz Allen Hamilton Inc. (private).
Competitors for HRS include: Alcatel-Lucent (ALU), General Dynamics Corp. (GD), and Motorola Inc. (MOT).
Competitors for EDS include: Accenture Ltd. (ACN), Computer Sciences Corp. (CSC), and IBM Global Services (private).
Two in-the-money [ITM] covered calls positions were found for MANT and HRS both with potential returns of +2.1% and with downside protections of +5.6 and +3.0% respectively in only 29 days. One out-of-the-money [OTM] covered calls position was found for EDS with a maximum potential return of +2.7% and +2.2% downside protection. Even if the stock price of EDS remains stagnant at options expiration, the position will still return +2.2%.
Covered calls ITM positions generally have less return and greater downside protection, as illustrated by the first two positions in the table above. Covered calls OTM positions generally have less downside protection and greater maximum profit potential, but require the underlying stock price to appreciate in order to realize the maximum potential profit. The last covered calls positions in the table above is OTM, as evidenced by its respective higher potential return and smaller downside protection.
The covered calls ITM/OTM tradeoff for potential returns versus downside protection illustrates the beauty of covered call investing, as it allows investors to tailor their investments to their own personal risk/reward profile.
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.
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]Booz Allen Hamilton Inc., IBM Global Services, ACN, Accenture Ltd. Class A, ALU, Alcatel-Lucent, CSC, Computer Sciences Corp., GD, General Dynamics Corp., LMT, Lockheed Martin Corp., MOT, Motorola Inc., NOC, Northrop Grumman Corp., covered call investing, covered call investment strategy, investment strategy, iron condor, option income, option investing, poweroptions, selling naked puts, stock option trading, stock options[/tags]