In article, “China – Hot, Cold or Lukewarm – Covered Calls”, we scoped out investing in covered calls for Chinese companies. The Chinese covered calls strategy returned a juicy +7% return for April of 2007.
Nineteen of the twenty positions were profitable and sixteen of the twenty positions were fully profitable. The lone negative returning position was SINA, which got caught up in the recent Chinese stock market pullback. SINA’s rate of growth has slowed in the last few months but not significantly.
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The SINA position experienced a loss of -0.6%, which isn’t too bad when considering a long position in SINA, would have resulted a -3.8% loss.
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|ACTS||7.42 (-0.11)||UQBEU||07 MAY 7.5 (23)||0.20||2.7||2.8||3.9|
|ACH||29.63 (+0.48)||ACHEF||07 MAY 30.0 (23)||0.95||3.2||3.3||4.6|
|BIDU||108.31 (+3.63)||BDQEB||07 MAY 110.0 (23)||5.20||4.8||5.0||6.7|
|CHA||48.71 (-0.44)||CHAEJ||07 MAY 50.0 (23)||1.00||2.1||2.1||4.8|
|CYD||9.37 (+0.09)||CYDEB||07 MAY 10.0 (23)||0.25||2.7||2.7||9.6|
|CTRP||69.13 (+1.24)||QCTEN||07 MAY 70.0 (23)||2.30||3.3||3.4||4.8|
|FMCN||36.57 (-0.22)||QOHEU||07 MAY 37.5 (23)||1.15||3.1||3.2||5.9|
|FXI||109.33 (-0.62)||FJJEF||07 MAY 110.0 (23)||2.65||2.4||2.5||3.1|
|PGJ||21.93 (+0.04)||PGJEV||07 MAY 22.0 (23)||0.45||2.1||2.1||2.4|
|SINA||34.13 (+1.37)||NOQEG||07 MAY 35.0 (23)||1.20||3.5||3.6||6.3|
|SNP||89.73 (+0.43)||SNPER||07 MAY 90.0 (23)||2.30||2.6||2.6||2.9|
A few new covered calls positions were found this month: ACTS, CHA CYD and SNP.
The CYD position has the highest potential return of 9.6%. The 9.6% return requires the price of the CYD stock to increase to or above the $10 strike price of the call option.
The BIDU position has the largest downside protection of 4.8%. As long as the price of the BIDU stock does not decline more than 4.8% at options expiration, the position will remain profitable.
The BIDU position also has the largest % if unchanged potential return of 5%. Even if the price of BIDU’s stock remains unchanged at options expiration, the position will return 5%.
Competitors for ACTS include: Texas Instruments Inc. (TXN), NXP b.v. (private), and Samsung Corporation (private).
Competitors for BIDU include: Sina Corp. (SINA), Sohu.com Inc. (SOHU), and TOM Online Inc. (TOMO).
Competitors for CHA include: China Netcom Group Corp. (Hong Kong) Ltd. (CN), China Unicom Ltd. (CHU), and China Mobile Communications Corporation (private).
Competitors for CYD include: Cummins Inc. (CMI), Detroit Diesel Corporation (private), and Shanghai Automotive Industry Corporation (Group) (private).
Competitors for CTRP include: eLong Inc. (LONG), Expedia Inc. (EXPE), and Hotels.com, L.P. (private).
Competitors for FMCN include: Clear Media Limited (private), JCDecaux S.A. (private), and TOM Group Limited (private).
Competitors for SINA include: Netease.com Inc. (NTES), Sohu.com Inc. (SOHU), Yahoo! Inc. (YHOO), Baidu.com Inc. (BIDU), KongZhong Corp. (KONG), The9 Ltd. (NCTY), and Tom Online Inc. (TOMO).
Competitors for SNP include: CNOOC Ltd. (CEO), and PetroChina Co. Ltd. (PTR).
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[tags] NXP b.v., Samsung Corporation, China Mobile Communications Corporation, Detroit Diesel Corporation, Shanghai Automotive Industry Corporation (Group), Hotels.com, L.P., Clear Media Limited, JCDecaux S.A., TOM Group Limited, BIDU, Baidu.com Inc., CEO, CNOOC Ltd., CHU, China Unicom Ltd., CMI, Cummins Engine Co. Inc., CN, China Netcom Group Corp. (Hong Kong) Ltd., EXPE, Expedia Inc., KONG, KongZhong Corp., NCTY, The9 Ltd., NTES, Netease.com Inc. ADR, PTR, PetroChina Co. Ltd., SINA, Sina Corp., SOHU, Sohu.com Inc., TOMO, Tom Online Inc., TXN, Texas Instruments Inc., YHOO, Yahoo Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]