If another bad hurricane season were to hit the Eastern United States and the Gulf Coast it could be a boon for commercial construction as well as residential. Today, PowerOptions weblog will take a look at Home Depot (HD) and Lowes (LOW) covered call opportunities as the stocks have suffered tremendously recently and may receive a bump on the hurricane news.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_04_03_Storm.mp3
Top researchers at the Atmospheric Research Center in Boulder Colorado have warned the 2007 Atlantic hurricane season may be very active. They are predicting nine hurricanes and a good chance that at least one major hurricane will hit the U.S. coast.
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Forecaster William Gray, head of the Tropical Meteorology Project at Colorado State University, said he expects five major hurricanes with sustained winds of 111 mph or greater. The probability of a major a hurricane making landfall on the U.S. coast this year is 74%. This is a bump up from the average of 52% over the past century. Gray also stated he expects there will be 17 named storms this year. Gray has spent more than 40 years in tropical weather research.
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The record 2005 season brought the Gulf Coast 28 named storms, 15 of them hurricanes. Four of those hurricanes hit the U.S. coast, the worst among them Katrina, which devastated New Orleans and leveled parts of the Gulf Coast region.
Competitors:
Competitors for HD include: Lowe’s Companies Inc. (LOW), Menard, Inc. (private), True Value Company (private), Beacon Roofing Supply Inc. (BECN), Chemed Corp. (CHE), SCP Pool Corp. (POOL), and Tractor Supply Co. (TSCO).
Competitors for LOW include: Home Depot Inc. (HD), Menard, Inc. (private), Sears, Roebuck and Co. (private), and Beacon Roofing Supply Inc. (BECN).
Potential Trades:
All of the following option trades have 46 days until expiration. Home Depot is currently trading at $37.68. Lowes Companies (LOW) is currently trading at $31.89. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Home Depot (HD) $ 37.68 (46) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HDEU | 07 MAY 37.50 | $1.40 | 3.70% | 3.40% | 3.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Covered Call – Lowes (LOW) $ 31.89 (46) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOWEZ | 07 MAY 32.50 | $0.85 | 2.70% | 2.70% | 4.70% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Home Depot covered call trade, an in the money covered call, offers 3.7% downside protection and a potential profit of 3.4% if the stock remains unchanged or if the stock remains above the $37.50 strike price of the option. The break-even price of this trade is $36.26. The net cost of this trade, per 100 options, is $3,626.00.
The Lowes covered call trade, an out of the money covered call, offers 2.7% downside protection and a potential profit of 2.7% if the stock remains unchanged. If the stock rises above the $32.50 strike price, the potential profit becomes 4.7%. The break-even price of this trade is $31.00. The net cost of this trade, per 100 options, is $3,100.00.
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.
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[tags] United States, Atmospheric Research Center, Boulder, Colorado, Atlantic, William Gray, Colorado State University, Gulf Coast, Katrina, New Orleans, Menard, Inc., True Value Company, Sears, Roebuck and Co., BECN, Beacon Roofing Supply Inc., CHE, Chemed Corp., HD, Home Depot Inc., LOW, Lowes Cos Inc., POOL, SCP Pool Corp., TSCO, Tractor Supply Co., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]