In article, “FedEx (FDX) Delivering Profits – Covered Calls” we analyzed the package delivery business in light of the declining cost of fuel. In article, “FedEx (FDX)/UPS – Covered Call Profits: +1.4% Dec 06”, we evaluated the performance of our selections and we selected new positions for expiration in February of 2007. All of the positions we selected for expiration in February of 2007 were profitable with an average return of +3.3% in only 58 days!
The two FDX positions we selected were fully profitable, and even though the price of UPS declined slightly, the UPS covered call position was profitable, returning +2.5%.
FDX/UPS still have lots of stuff to move and fuel is still cheaper, so we’re still bullish on FDX and UPS. Using PowerOptions stock options search tools, we found the following attractive covered calls stock options positions:
|PowerOptions Covered Calls for FDX – February 22|
|FDX||118.65 (-0.48)||FDXDD||07 APR 120.0 (58)||3.7||3.1||3.2||4.4|
|FDX||118.65 (-0.48)||FDXDC||07 APR 115.0 (58)||6.7||5.6||2.7||2.7|
The first FDX position is an out-of-the-money [OTM] covered calls stock options position. This position has downside protection of 3.1%, with a potential return of 3.2% (58 days) if the stock price of FDX remains unchanged and returns very nice 4.4% if the stock price of FDX increases above the $120 strike price of the call option.
Covered calls ITM positions generally have less return and greater downside protection, as illustrated by the 2nd FDX position.
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 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 bullish, bearish or neutral strategies 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, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.
[tags]covered call investing, covered call investment strategy, investment strategy, iron condor, option income, poweroptions, stock option trading, stock options[/tags]