Coinstar’s (CSTR) call option volume was significantly up on Friday and its stock price was down almost 9%.
If you’re looking to rent a DVD or get rid of all of your pocket change, then Coinstar is the company for you. Coinstar provides DVD rental kiosks and self-service coin counting machines.
Coinstar’s primary competitors are Blockbuster (BBI) and Netflix (NFLX).
Blockbuster provides DVD’s via the standard brick-and-mortar retail stores and also provides movies for download via the Internet. Netflix provides DVD’s via mail and via the Internet.
Coinstar’s recent earnings report wasn’t as good as the analysts expected, but still turned in a revenue increase of 46% over the previous year, which is pretty good considering the economical environment over the last year.
Coinstar has some issues going forward with some of the large movie producing studios, Universal Studios, 20th Century Fox and Warner Brothers, as they have decided not to provide Coinstar’s Redbox kiosks with DVDs on the day they are released to retail. This is a setback for Coinstar, but one that can be worked around.
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Coinstar’s stock price took quite a haircut after their earnings report. Coinstar’s stock price is up almost 100% from its low in December of 2008 and well off of its two-year price around $39.
Coinstar’s stock price is currently below is 50 and 200 day moving averages, its most recent support level and it’s lower Bollinger band.
Coinstar’s out-of-the-money call options experienced high volume on Friday of last week. The November 30 call option had significant action and the November 35 and December 30 call options also had some action.
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Coinstar looks like it has been thrown out with the bathwater and a covered call investing position for Coinstar for December looks attractive with a %if unchanged potential return of 3.8% and a potential %if assigned potential return of 7.4%. The timeframe for realization of the potential profit is 40 days and the call option of interest to sell would be the December 30 with ticker symbol QLRLF.
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To enter the covered call investing position an investor would purchase the stocks in multiples of 100 shares for their trading portfolio and sell one call option for each 100 shares of stock purchased for their personal stock portfolio.
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[tags] Internet, Universal Studios, 20th Century Fox, Warner Brothers, Redbox, kiosks, DVD, BBI, Blockbuster Inc., CSTR, Coinstar Inc., NFLX, Netflix Inc. [/tags]