With the economy chugging along in first gear, maybe its time to consider covered calls for consumer staples, for example companies involved in the food industry.
Everybody eats, even when the U.S. economy is not performing well. But, maybe instead of USDA prime, we eat more hamburger or even chicken. Even when the economy isn’t doing so hot, companies involved in the food industry generally continue to perform ok.
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More corn being converted to ethanol is causing the price of corn to increase, and this gives companies in the food industry a valid excuse for raising the prices of their products. And, when a company is able to increase the prices of its products, many times its revenue increases, as well as its net income, which generally has a positive effect on the price of its stock.
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Using PowerOptions powerful stock options search tools we discovered the following covered call stock options positions.
| PowerOptions Covered Call Search | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot. |
%If Unch. |
%If Asgnd. |
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| ADM | 35.74 (+0.37) | ADMFG | 07 JUN 35.0 (38) | 1.55 | 4.3 | 2.4 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KFT | 32.78 (+0.12) | KFTFZ | 07 JUN 32.5 (38) | 1.00 | 3.1 | 2.3 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SLE | 17.09 (+0.10) | SLEFW | 07 JUN 17.5 (38) | 0.35 | 2.0 | 2.1 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Two positions found are in-the-money, ADM and KFT and one position is out-of-the-money SLE.
The SLE covered call stock options position has the highest potential return at 4.5%. To achieve the 4.5% return, the price of SLE’s stock must increase to or above the call options $17.5 strike price at stock expiration.
Even if the prices of ADM, KFT and SLE remain unchanged at options expiration, the positions will return 2.4%, 2.3% and 2.1%, respectively.
The ADM covered call stock options position has the highest downside protection as 4.3%. As long as the price of ADM’s stock has not decreased more than 4.3% at stock options expiration, the position will be profitable.
Competitors:
Competitors for ADM include: Bunge Ltd. (BG), Corn Products International Inc. (CPO), Cargill, Incorporated (private), Andersons Inc. (ANDE), Aventine Renewable Energy Inc. (AVR), Buckeye Techs. Inc. (BKI), MGP Ingredients Inc. (MGPI), Pacific Ethanol Inc. (PEIX), VeraSun Energy Corp. (VSE), and Xethanol Corp. (XNL).
Competitors for KFT include: ConAgra Foods Inc. (CAG), Sara Lee Corp. (SLE), Campbell Soup Co. (CPB), Groupe Danone ADS (DA), Dean Foods Co. (DF), General Mills Inc. (GIS), Hain Food Group Inc (HAIN), Kellogg Co. (K), Lancaster Colony Corp. (LANC), Lance Inc. (LNCE), PepsiCo Inc. (PEP), and Unilever NV (UN).
Competitors for SLE include: Interstate Bakeries Corp. (IBCIQ.PK), Kraft Foods Inc. (KFT), and Tyson Foods Inc. (TSN).
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[tags] USDA, Cargill, Incorporated, ANDE, Andersons Inc., AVR, Aventine Renewable Energy Inc., BG, Bunge Ltd., BKI, Buckeye Techs. Inc., CAG, ConAgra Inc., CPB, Campbell Soup Co., CPO, Corn Products International, DA, Groupe Danone ADS, DF, Dean Foods Co., GIS, General Mills Inc., HAIN, Hain Food Group Inc, K, Kellogg Co., KFT, Kraft Foods Inc., LNCE, Lance Inc., MGPI, MGP Ingredients Inc., PEIX, Pacific Ethanol Inc., PEP, PepsiCo Inc., SLE, Sara Lee Corp., TSN, Tyson Foods Inc. Class A, UN, Unilever NV, VSE, VeraSun Energy Corp., XNL, Xethanol Corp., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]