Call option volume for Force Protection (FRPT) was significantly up yesterday, and there does not appear to be any related news. Force Protection’s stock price was also up about 5% yesterday.
Force Protection manufactures ballistic and blast-protected vehicles for military applications. Having problems with land mines, no problem, Force Protection has just the vehicle for you. Force Protection’s Buffalo MPCV (Mine Protected Clearance Vehicle) is one of the most advanced mine resistance vehicles in the world.
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Force Protection’s competitors include General Dynamics (GD), Lockheed (LMT), BAE Systems Land & Armaments (private), Oshkosh (OSK) and Textron (TXT).
Force Protection’s stock price took a bit hit on July 1 when it was announced that the U.S. DOD ordered bomb resistant vehicles from Oshkosh instead of Force Protection. Force Protection is struggling right now, so what’s the deal?
The Force Protection call options seeing significant action yesterday were OCT 5, OCT 7.5, NOV 7.5 and DEC 12.5. It was not all bullish yesterday for Force Protection as there was some interest in Force Protection’s DEC 7.5 put options, but this could be considered bullish as a DEC 7.5 naked put was yielding 4.1%.
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Force Protection business performance and outlook have been pretty dismal of late, but it’s call option volume indicates Force Protection has a bright future. Maybe General Dynamics, Lockeed or another manufacture of military products is thinking about acquiring Force Protection?
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Most of the available covered call investing plays for Force Protection are not all that attractive. Probably the best play would be a covered calls position with the December 5 call option which is yielding 4.1% with 23% downside protection. Time frame for realizing the potential return is 71 days and Force Protection’s stock price could drop all the way to $3.6 and still return a profit. The ticker symbol for the December 5 call option is QFZLA. Even with the downside protection, this is a risky position, so tread carefully.
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To enter the covered call investing 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] blast-protected vehicles, military, Buffalo, Mine Protected Clearance Vehicle, mine resistance, BAE Systems Land & Armaments, U.S. DOD, FRPT, Force Protection Inc., GD, General Dynamics Corp., LMT, Lockheed Martin Corp., OSK, Oshkosh Truck Corp., TXT, Textron Inc. [/tags]