What’s Up with EZCORP?

Stock and option volume for EZCORP (EZPW) was significantly up yesterday, probably due to their pending earnings conference call scheduled for today at 3:30pm CST.

EZCORP is basically in the pawn shop/short term credit business with 294 pawn stores and 477 signature loan stores in the U.S. and 38 pawn stores in Mexico. With the economy in the doldrums and consumers looking for cash, EZCORP should be raking in the profits. Competitors to EZCORP include First Cash Financial Services (FCFS) and Cash American International (CSH). Interestingly all three of these companies are based in the state of Texas.

EZCORP’s stock has been very volatile over the last year and had been in a trading range between $10 and $14 over the last seven months. A large spike in volume for EZCORP’s stock occurred yesterday.

A significant amount of stock options volume was observed for the November 12.50 and the 2010 March 15 call options yesterday. The November 12.50 call option is in-the-money and the 2010 November March 15 call option is out-of-the-money. Apparently somebody out there thinks EZCORPs earnings conference call will be very positive today.

A covered call investing position for EZPW for November looks attractive with a % if unchanged potential return of 2.9% and the time frame for realizing the return is only 46 days. This covered call investing position has nice downside protection of 10.3%, so even if the stock price were to drop less than 10.3%, the covered call investing position would remain profitable. The call option to sell for this covered call investing position is ULPKS (NOV 12.50).

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To enter the covered calls position an investor would purchase the stocks in multiples of 100 shares and sell one call option for each 100 shares of stock purchased.

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[tags] pawn shop, short term credit, pawn stores, signature loan stores, Mexico, economy, consumers, Texas, out-of-the-money, earnings conference call, CSH, Cash America Intl. Inc., EZPW, Ezcorp Inc., FCFS, First Cash Financial Services Inc. [/tags]