Investor’s Business Daily announces its top 100 stock picks each week using a proprietary formula. The PowerOptions weblog thought it might be interesting to take a look at the covered call possibilities.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_05_14_IBD_Top100.mp3
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How the List was formulated:
The list is generated based on criteria such as earnings growth, price performance, profit growth, and relative price performance over the past 12 months. These are all variables an investor can model using PowerOptions‘ patented online search criteria. Meaning an individual investor can develop a recipe for identifying stocks similar to the proprietary method used to generate the list.The top 5 rated stocks included Bolt Technologies (BTJ), Medtox Scientific (MTOX), Synalloy (SYNL), Terra Nitrogen (THN) and Amerigon (ARGN). Unfortunately, these 5 stocks do not offer options. However, two stocks listed in this week’s IBD’s top 10 do.
The PowerOptions blog provides examples of how the average investor can identify the most attractive option trade based on their view of whether a stock will rise or fall. You may choose to use a strategy like the one outlined in the IBD, or develop one base on your training and experience. However you choose to pick stocks and options, PowerOptions tools can help you make more informed decisions.
In this case the stocks listed below are looking bullish. An investor might choose to use a covered call investment strategy, but may also use a bull call debit spreads or bull-put credit spreads strategy in a situation where they feel the stock will rise. Conversely, if an investor believes a stock will fall, they might choose bear put debit spreads or bear-call credit spreads.
Two Optionable Stocks Listed in the Top Ten:
EDU:
New Oriental Education and Technology Group (EDU) – This company offers a range of educational programs, services, and products consisting primarily of English language training and test preparation courses with the aim of getting its customers admitted into an English language university in the UK or United States. The company operates primarily in China.
Competitors for EDU include: Princeton Review Inc. (REVU), and Kaplan, Inc. (private).
BWLD:
Buffalo Wild Wings Inc. (BWLD) – This company operates restaurants and offers franchises primarily in the United States. Buffalo Wild Wings provides quick casual and casual dining service and alcoholic beverages.
Competitors for BWLD include: Applebee’s International Inc. (APPB), Carlson Restaurants Worldwide, Inc. (private), and Hooters of America, Inc. (private).
Potential Trades:
All of the following option trades have 33 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call search IBD top 100 (33 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EDU | $48.35 | EDUFJ | 07 JUN $45.00 | $1.80 | 3.70% | 3.90% | 7.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BWLD | $79.65 | UICEK | 07 JUN $80.00 | $3.20 | 4.00% | 4.20% | 4.60% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EDU- New Oriental Education and Technology Group. This trade involves the June $45 call option and offers 3.7% downside protection and 7.4% potential profit if the stock is above the $45 strike price at the end of the option period.
BWLD- Buffalo Wild Wings Inc. This trade involves the June $80 call option and offers 4.0% downside protection and 4.6% potential profit if the stock is above the $80 strike price at the end of the option period.
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] Kaplan, Inc., Carlson Restaurants Worldwide, Inc., Hooters of America, Inc., APPB, Applebees International Inc., BWLD, Buffalo Wild Wings Inc., EDU, New Oriental Educ. & Tech. Group Inc., bear put debit spreads, bear-call credit spreads, bull call debit spreads, bull-put credit spreads, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]