Many Oil and Gas companies have looked attractive to investors for the last few months. Many have said the scarcity of the resource and the price insensitive demand will ensure profits well over the horizon.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_03_22_RDC.mp3
Rowan Companies (RDC) provides a range of onshore and offshore contract drilling services in the United States and internationally. This stock is down substantially this year. The company significantly increased their capital expenditures last year ($200M in 2005 to nearly $500M in 2006). Another telling factor is their Net Income, less than zero three years ago, increased 50% in 2006 to over $300M.
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For the year ended December 31, 2006, Rowan Companies, Inc. generated income from continuing operations of $317.0 million or $2.84 per share on revenues of $1,510.7 million, compared to income from continuing operations of $217.8 million or $1.97 per share on revenues of $1,068.8 million during 2005. Net income was $318.2 million or $2.85 per share in 2006, compared to $229.8 million or $2.08 per share in 2005.
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Today, the stock is up over 3% in midday trading and it has a respectable, when compared to industry competitors, 11.7 P/E. Also, the stock was listed as one of Motley Fool’s “Turnaround Stocks” because it was down over 23%, after reaching a high of nearly $48.00 in April of 2006, and shows signs of regaining steam.
If you believe this stock would make a solid long-term investment, you could turn to the PowerOptions website to evaluate potential option trades to find the position best suiting your strategy. Below we will look at a few covered call trades we found using the powerful tools offered by PowerOptions.
Competitors:
Competitors for RDC include: Diamond Offshore Drilling Inc. (DO), Ensco International Inc. (ESV), and Globalsantafe Corp. (GSF).
Potential Trades:
All of the following option trades have 58 days until expiration. Rowan Companies is currently trading at $33.30. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Rowan Companies (RDC) $ 33.30 (58) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RDCEF | 07 MAY $30.0 | $3.80 | 11.40% | 1.70% | 1.70% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RDCEZ | 07 MAY $32.5 | $2.05 | 6.20% | 4.00% | 4.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RDCEG | 07 MAY $35.0 | $0.90 | 2.70% | 2.80% | 8.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The three covered call trades mentioned above include two in-the-money covered calls and one out of the money covered calls. The in-the-money covered calls offer 6.2% and 11.4% downside protection and potential profits of 4% and 1.7% respectively. The out of the money position offers less in the way of downside protection at 2.7%, but comes with a potential reward of 8.0% if the stock ends above $35.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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‘ 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] Motley Fool, DO, Diamond Offshore Drilling Inc., ESV, ENSCO Intl. Inc., GSF, GlobalSantaFe Corp., RDC, Rowan Companies Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]