The PowerOptions WeBlog accurately predicted the following trades in the articles “Entrepreneur Magazine Announces Top Franchises for 2007” and “Berkshire Hathaway Buys up Rail Stocks – A look at Covered Calls in the Railroad Sector”:
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An audio podcast of this article is available at: poweropt.com/podcasts/2007_05_22_May_Results.mp3
| May Expiration Covered Call Results | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
Actual Return % |
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| JTX | $29.11 | JTXEF | 07 MAY $30.00 | $0.60 | 2.10% | 2.10% | 5.20% | 5.20% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MCD | $45.23 | MCDEI | 07 MAY $45.00 | $1.35 | 3.00% | 2.60% | 2.60% | 2.60% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PZZA | $29.68 | ZZQEF | 07 MAY $30.00 | $1.15 | 3.90% | 4.00% | 5.20% | 5.20% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UPS | $68.88 | UPSEN | 07 MAY $70.00 | $1.75 | 2.50% | 2.60% | 2.70% | 2.70% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ARII | $29.63 | UKUEF | 07 MAY $30.00 | $1.30 | 4.40% | 4.60% | 5.90% | 5.90% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WAB | $34.33 | WABEG | 07 MAY $35.00 | $1.10 | 3.20% | 3.30% | 5.30% | 5.30% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FLA | $63.93 | FLAEM | 07 MAY $65.00 | $1.95 | 3.10% | 3.10% | 4.90% | 4.90% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GBX | $23.13 | GBXEX | 07 MAY $22.50 | $1.45 | 6.30% | 3.80% | 3.80% | 3.80% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Although the covered call results above are outstanding, it is interesting to note the price trends in the rail industry. Looking at the railway stocks mentioned above alone, there have been remarkable advances.
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| Railroad Stock Performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock | Then $ |
Now $ |
% Gain |
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| ARII | $29.63 | $40.38 | 36.28% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WAB | $34.33 | $38.26 | 11.45% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FLA | $63.93 | $83.25 | 30.22% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GBX | $23.13 | $28.47 | 23.09% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ARII – American Railcar WAB – Westinghouse Air Brake Technologies FLA – Florida East Coast Industries GBX -Greenbrier Companies It may be these stocks will continue to provide investors with solid returns, but it may be unwise to pursue additional profits in a market with such lofty recent gains. With the exception of GBX, the stocks mentioned above are currently at or near a 52-week high with higher than average P/Es. The franchise trades, however, have seen more modest returns and may provide a more fertile ground for investors.
| Franchise Stock Returns | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock | Then $ |
Now $ |
% Gain |
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| JTX | $29.11 | $30.07 | 3.30% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MCD | $45.23 | $52.27 | 15.56% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PZZA | $29.68 | $31.57 | 6.37% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UPS | $68.88 | $70.31 | 2.08% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
These more modest gains may indicate the stocks still have room to grow. This PowerOptions blog entry is an example of how the average investor can identify the most attractive option trade based on their view of whether a stock will rise or fall. If an investor’s view is bullish, they might choose to use a covered call investment strategy, bull call debit spreads or bull-put credit spreads to make money off their hunch. If an investor believes a stock will fall, they might choose bear put debit spreads or bear-call credit spreads.Potential Trades:
All of the following June option trades have 26 days until expiration and the July option trades have 61 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call Franchises (26 or 61 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JTX | $ 30.07 | JTXFF | 07 JUN $30.00 | $0.95 | 3.20% | 3.00% | 3.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MCD | $ 52.27 | MCDFX | 07 JUN $52.50 | $1.00 | 1.90% | 2.00% | 2.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PZZA | $ 31.57 | ZZQGF | 07 JUL $30.00 | $2.40 | 7.60% | 2.80% | 2.80% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UPS | $ 70.31 | UPSGN | 07 JUL $70.00 | $2.35 | 3.30% | 3.00% | 3.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
JTX
JTX – Is the ticker symbol of the Jackson Hewitt Tax Service. This trade involves the June $30 call option and offers 3.2% downside protection and 3.0% potential profit if the stock is above the $30.00 strike price at the end of the option period. The stock is currently trading at $30.07.
Competitors for JTX include: H&R Block, Inc. (HRB), Intuit Inc. (INTU), and Liberty Tax Service (private).
MCD
MCD – Is the ticker symbol of the famous McDonald’s Restaurant chain. This trade involves the June $52.50 call option and offers 1.9% downside protection and 2.0% potential profit if the stock is above the $52.50 strike price at the end of the option period. The stock is currently trading at $52.27.
Competitors for MCD include: Burger King Corporation (BKC), Yum! Brands Inc. (YUM), Doctor’s Associates Inc. (private), CKE Restaurants Inc. (CKR), Jack in the Box Inc. (JBX), Sonic Corp. (SONC), Tim Hortons Inc. (THI), and Wendys Intl. Inc. (WEN).
PZZA
PZZA – Is the ticker symbol of the Papa Johns Pizza chain. This trade involves the July $30 call option and offers 7.6% downside protection and 2.8% potential profit if the stock is above the $30.00 strike price at the end of the option period. The stock is currently trading at $31.57.
Competitors for PZZA include: Dominos Pizza Inc. (DPZ), Little Caesar Enterprises, Inc. (private), and Pizza Hut, Inc. (private).
UPS
UPS – Is the ticker symbol of United Parcel Service. This trade involves the May $70 call option and offers 3.3% downside protection and 3.0% potential profit if the stock is above the $70.00 strike price at the end of the option period. The stock is currently trading at $70.31.
Competitors for UPS include: FedEx Corporation (FDX), Deutsche Post AG (private), United States Postal Service (private), and Stamps.com Inc. (STMP).
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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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] Liberty Tax Service, Doctor’s Associates Inc., Little Caesar Enterprises, Inc., Pizza Hut, Inc., Deutsche Post AG, United States Postal Service, BKC, Burger King Holdings Inc., CKR, CKE Restaurants Inc., DPZ, Dominos Pizza Inc., FDX, Federal Express Corp., HRB, H&R Block Inc., INTU, Intuit Corp., JBX, Jack in the Box Inc., SONC, Sonic Corp., STMP, Stamps.com Inc., THI, Tim Hortons Inc., WEN, Wendys Intl. Inc., YUM, Yum Brands 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]