Rail Sector and Franchises Deliver Profits of 2.6% to 5.9% in May Covered Calls

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”:

Audio Podcast:
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
%
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%
(For more details click the ticker symbol above)
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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
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%
(For more details click the ticker symbol above)

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
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%
(For more details click the ticker symbol above)

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%
(For more details click the ticker symbol above)

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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