In article “Fertilizer is Smelling Good – Covered Calls” we looked at covered calls for fertilizer companies. The stocks for fertilizer companies have been doing very well with the emergence of ethanol as a potential competitor to gasoline derived from oil. We selected covered calls positions for fertilizer companies and every position selected was fully profitable experiencing a very nice +5.4% average return.
There’s been some recent background noise about the negative effects of ethanol. The growth of agricultural products destined for ethanol decrease not only the supply of the agricultural products for consumption, but also impact the supply of other agricultural products as more land is allocated to growing the agricultural products for ethanol than for non-ethanol destined agricultural products.
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|POT||186.60 (-2.54)||PVZER||07 MAY 190.0 (22)||4.80||2.6||2.6||4.5|
|AGU||40.95 (-0.75)||AGUEH||07 MAY 40.0 (22)||1.95||4.8||2.6||2.6|
|MOS||31.20 (-0.57)||MOSEF||07 MAY 30.0 (22)||1.85||5.9||2.2||2.2|
|TRA||19.80 (-0.37)||TRAED||07 MAY 20.0 (22)||0.65||3.3||3.4||4.4|
The covered calls positions found are essentially the same companies at last month minus a position for CF.
The POT position has the highest potential return at 4.5%. To achieve the 4.5% return, the stock price for POT must increase to or above the $190 strike price of the call option.
The MOS position has the highest downside protection at 5.9%. As long as the price of MOS’s stock does not decline more than 5.9% at options expiration, the position will be profitable.
The TRA position has the highest % if unchanged potential return of 3.4%. Even if the price of TRA remains at 19.8 at options expiration, the position will return 3.4%.
Competitors for POT include: BASF AG (BF), Mosaic Co. (MOS), Yara International ASA (private), Agrium Inc. (AGU), and Terra Indus. Inc. (TRA).
Competitors for AGU include: Potash Corp. of Saskatchewan, Inc. (POT), Terra Industries Inc. (TRA), Yara International ASA (private), CF Industries Hldgs. Inc. (CF), and Mosaic Co. (MOS).
Competitors for MOS include: Agrium Inc. (AGU), Potash Corp. of Saskatchewan, Inc. (POT), and Yara International ASA (private).
Competitors for TRA include: Agrium Inc. (AGU), CF Industries Holdings Inc. (CF), and Potash Corp. of Saskatchewan, Inc. (POT).
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[tags] Yara International ASA, AGU, Agrium Inc., CF, CF Industries Hldgs. Inc., MOS, Mosaic Co., POT, Potash Corp. of Saskatchewan Inc., TRA, Terra Indus. Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]