There has recently been a spate of media reports detailing the danger of chasing Jim Cramer recommendations. Ignoring this potentially sage advice to stay away, we dive headlong into the sometimes-erroneous hyperkinetic world of Jim Cramer to look at potential covered call trades on stocks he has recently plugged. (Note: Jim Cramer does not endorse any of the option strategies based on his stock selections illustrated in this article or on blog.poweropt.com)
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_08_27_Cramer.mp3
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Below is a table of possible option trades on Cramer’s stock picks. But more than focusing on any one stock pick, this article hopes to show how you can get potentially high returns on investments using the covered call technique. Visit the Power Options website to learn more about investing strategies, investing in stock options and how to write covered calls.
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Cramer’s Financial Picks:
Cramer believes the sub-prime correction has unfairly targeted good companies. “What to buy? Exactly what everyone was shorting: the big holdings of the hedge funds that people were trying to break. There was never a real case against this stuff short-term except that the hedge funds owned the stuff,” The pundit intoned on his daily TV program.
Three of the financial stocks Cramer likes are: Citigroup(C), Goldman Sachs (GS), and NYSE Euronext (NYX).
The Motley Fool commented last week on the same three stocks saying, “When you hold liabilities that are short-term in nature, you need to roll them every few months, and amidst a halt in the credit markets, that was impossible to do. Creditors called in their loans, and these companies essentially had to sell their assets at rock-bottom prices to satisfy those loans.”
Cramer on Construction:
Cramer said Friday on his show, “Long-term construction and engineering contracts continue to get let, and the result is a return of the bull market in infrastructure.”
Foster Wheeler(FWLT):
On Wednesday of last week, the Nasdaq 100 rose in no small part due to gains in Foster Wheeler shares. Foster Wheeler, which provides engineering and construction services, added 7.9 percent, to $108.25.
McDermott (MDR)
Lately news surrounding this company has focused on how they may be poised to benefit from international oilfield drilling growth. Other companies competing in the oilfield market benefiting from international growth include Haliburton (HAL), Schlumberger (SLB), and Tidewater (TDW).
Fluor – FLR
The Fluor Group provides engineering, procurement, construction and maintenance services worldwide.
The Fluor Group president, David Constable, was reported to have sold approximately $900K of stock last week at around $121 a share. As far as their balance sheet, the company’s assets and income continue to grow without significant liability growth and 07 EPS numbers are predicted to jump around 25%. The stock price is up around 50% as it started the year at $81.86. It could be Mr. Constable is hedging his bets, diversifying or maybe he needs a new boat. Depending on your point of view, Cramer has either picked a fundamentally strong stock with continued growth potential or an overpriced has-been.
Looking at this news from an options trading perspective:
Below we look at September and October options trades on Cramer’s recommendations. One of the many advantages of the covered call investing strategy is it can offer profits on winning, stagnant or even slightly dipping stock prices.
For more information about the covered call investing strategy or any other option trading questions, visit the website at www.poweropt.com or call us at 877-992-7971
Potential Trades:
All of the following option trades have either 29 or 57 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
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| Company Name |
Symbol | Stock Price |
OPTION | Strike Info |
Option Bid |
Net Debit |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| McDermott Intl. Inc. | MDR | 88.12 (+5.01) | MDRJR | 07 OCT 90.0 (57) | $4.90 | $83.22 | 5.6 | 5.9 | 8.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foster Wheeler Ltd. | FWLT | 114.10 (+4.22) | UFBJC | 07 OCT 115.0 (57) | $7.60 | $106.50 | 6.7 | 7.1 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Citigroup Inc. | C | 48.50 (+0.15) | CJJ | 07 OCT 50.0 (57) | $1.50 | $47.00 | 3.1 | 3.2 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fluor Corp. | FLR | 123.55 (+2.70) | FLRJE | 07 OCT 125.0 (57) | $6.10 | $117.45 | 4.9 | 5.2 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goldman Sachs Group | GS | 179.73 (+2.23) | GPYJP | 07 OCT 180.0 (57) | $10.50 | $169.23 | 5.8 | 6.2 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYSE Group Inc. | NYX | 74.72 (+0.24) | NYXJO | 07 OCT 75.0 (57) | $4.00 | $70.72 | 5.4 | 5.7 | 6.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foster Wheeler Ltd. | FWLT | 114.10 (+4.22) | UFBJB | 07 OCT 110.0 (57) | $10.20 | $103.90 | 8.9 | 5.9 | 5.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McDermott Intl. Inc. | MDR | 88.12 (+5.01) | MDRIR | 07 SEP 90.0 (29) | $2.90 | $85.22 | 3.3 | 3.4 | 5.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| McDermott Intl. Inc. | MDR | 88.12 (+5.01) | MDRJQ | 07 OCT 85.0 (57) | $7.50 | $80.62 | 8.5 | 5.4 | 5.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foster Wheeler Ltd. | FWLT | 114.10 (+4.22) | UFBIC | 07 SEP 115.0 (29) | $4.90 | $109.20 | 4.3 | 4.5 | 5.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goldman Sachs Group | GS | 179.73 (+2.23) | GPYJO | 07 OCT 175.0 (57) | $13.50 | $166.23 | 7.5 | 5.3 | 5.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goldman Sachs Group | GS | 179.73 (+2.23) | GPYIP | 07 SEP 180.0 (29) | 7.6 | $172.13 | 4.2 | 4.4 | 4.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fluor Corp. | FLR | 123.55 (+2.70) | FLRJD | 07 OCT 120.0 (57) | 8.8 | $114.75 | 7.1 | 4.6 | 4.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fluor Corp. | FLR | 123.55 (+2.70) | FLRIE | 07 SEP 125.0 (29) | 3.9 | $119.65 | 3.2 | 3.3 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Citigroup Inc. | C | 48.50 (+0.15) | CJW | 07 OCT 47.5 (57) | 2.9 | $45.60 | 6 | 4.2 | 4.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYSE Group Inc. | NYX | 74.72 (+0.24) | NYXIO | 07 SEP 75.0 (29) | 2.5 | $72.22 | 3.3 | 3.5 | 3.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foster Wheeler Ltd. | FWLT | 114.10 (+4.22) | UFBIB | 07 SEP 110.0 (29) | 7.8 | $106.30 | 6.8 | 3.5 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NYSE Group Inc. | NYX | 74.72 (+0.24) | NYXJN | 07 OCT 70.0 (57) | 7 | $67.72 | 9.4 | 3.4 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goldman Sachs Group | GS | 179.73 (+2.23) | GPYIO | 07 SEP 175.0 (29) | 10.5 | $169.23 | 5.8 | 3.4 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Competitors:
Competitors for MDR include: Global Industries Ltd. (GLBL), Hyundai Heavy Industries Co., Ltd. (private), and National Oilwell Varco Inc. (NOV).
Competitors for FWLT include: Fluor Corporation (FLR), Halliburton Company (HAL), Bechtel Group, Inc. (private), Fuel Tech NV (FTEK), and Jacobs Engineering Group Inc. (JEC).
Competitors for C include: Bank of America Corporation (BAC), Deutsche Bank AG (DB), JPMorgan Chase & Co (JPM), AXA ADR (AXA), Bank of New York Co. Inc. (BK), BanPonce Corp. (BPOP), Commerce Bancorp Inc. (CBH), CompuCredit Corp. (CCRT), Bancolombia S.A. (CIB), CIT Group Inc. (CIT), Comerica Inc. (CMA), Credit Suisse Group (CS), CapitalSource Inc. (CSE), First Marblehead Corp. (FMD), Freddie Mac Corp. (FRE), General Electric Co. (GE), HSBC Hldgs. PLC (HBC), ING Group NV ADS (ING), Mellon Financial Corp. (MEL), Mitsubishi UFJ Financial Inc. (MTU), Nelnet Inc. (NNI), Net.Bank Inc. (NTBK), Prudential Financial Inc. (PRU), Torchmark Corp. (TMK), Union Bank of California Corp. (UB), UBS AG (UBS), and Wachovia Corp. (WB).
Competitors for FLR include: ABB Ltd. (ABB), Foster Wheeler, Ltd. (FWLT), Bechtel Group, Inc. (private), and Jacobs Engineering Group Inc. (JEC).
Competitors for GS include: JPMorgan Chase & Co (JPM), Merrill Lynch & Co. Inc. (MER), Morgan Stanley (MS), Bear Stearns Companies Inc. (BSC), Cowen Group Inc. (COWN), Lazard Ltd. (LAZ), and Lehman Brothers Hldgs. Inc. (LEH).
Competitors for NYX include: NASDAQ Stock Market, Inc. (NDAQ), American Stock Exchange LLC (private), London Stock Exchange plc (private), and Knight Trading Group Inc. (NITE).
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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