Even though the residential housing industry is in the dumps, the commercial/industrial construction business is on fire. The world economy is booming with developing and transitioning economies turning in GDP’s in the 5% to 6% range. Infrastructures like roads/highways, water, electric power generation/transmission, waste treatment, etc. have to be built in order to support the burgeoning growth of developing and transitioning economies.
When there’s big construction project in the works, the likes of Terex (TEX), Manitowoc (MTW), Deere (DE) and Caterpillar (CAT) get a lot of customers wanting to purchase their construction equipment products.
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The stock prices of construction machinery companies have been blazing over the last year or so, and with the continued high flying growth of developing and transitioning economies this situation isn’t going to change any time soon.
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Using PowerOptions elegant stock options search tools we discovered the following potentially attractive covered call investment strategy positions for expiration in August of 2007.
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| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| MTW | 84.07 (+1.65) | MTWHQ | 07 AUG 85.0 (38) | 3.90 | 4.6 | 4.9 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TEX | 93.23 (+3.19) | TEXHS | 07 AUG 95.0 (38) | 4.30 | 4.6 | 4.8 | 6.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DE | 125.76 (+1.88) | DEHF | 07 AUG 130.0 (38) | 3.40 | 2.7 | 2.8 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAT | 82.22 (+1.00) | CATHQ | 07 AUG 85.0 (38) | 1.94 | 2.4 | 2.4 | 5.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The maximum potential returns for the covered call investment strategy positions range from 5.9% to 6.8% with TEX exhibiting the largest potential return. To achieve the 6.8% return for TEX, it’s stock price must increase to or above the $95 short strike price of the call option. Even if the price of TEX’s stock remains stagnant, the covered call investment strategy positions will return a very nice %if unchanged return of 4.8%, in only 38 days.
The downside protections for the covered call investment strategy positions range from 2.4% to 4.6% with MTW and TEX exhibiting the largest downside protections of 4.6%. As long s the stock prices of MTW and/or TEX do not decline more than 4.6%, the covered call investment strategy position will remain profitable.
Competitors:
Competitors for MTW include: Hitachi Ltd. (HIT), Terex Corp. (TEX), Enodis Corporation (private), and Reddy Ice Hldgs. Inc. (FRZ).
Competitors for TEX include: Caterpillar Inc. (CAT), Deere & Co. (DE), and Manitowoc Company Inc. (MTW).
Competitors for DE include: Caterpillar Inc. (CAT), CNH Global NV (CNH), Kubota Corp. (KUB), AGCO Corp. (AG), ASV Inc. (ASVI), Blount Intl. Inc. (BLT), and The Toro Co. (TTC).
Competitors for CAT include: CNH Global NV (CNH), Volvo AB (VOLV), Astec Industries Inc. (ASTE), Blount Intl. Inc. (BLT), Cummins Engine Co. Inc. (CMI), Capstone Turbine Corp. (CPST), Deere & Co. (DE), Ingersoll-Rand Co. (IR), Joy Global Inc. (JOYG), and Terex Corp. (TEX).
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] GDP, Enodis Corporation, AG, AGCO Corp., ASTE, Astec Industries Inc., ASVI, ASV Inc., BLT, Blount Intl. Inc., CAT, Caterpillar Inc., CMI, Cummins Engine Co. Inc., CNH, CNH Global NV, CPST, Capstone Turbine Corp., DE, Deere & Co., FRZ, Reddy Ice Hldgs. Inc., HIT, Hitachi Ltd. ADR, IR, Ingersoll-Rand Co., JOYG, Joy Global Inc., MTW, Manitowoc Company Inc., TEX, Terex Corp., TTC, The Toro Co., VOLV, Volvo Group AB ADR, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]