To get things started in this new subject, let me tell you about my current plays and the plays that I am lookng at right now.
Recently, I entered into a covered call on Global Marine. This is a stock that is in the business of leasing drilling ships to oil exploration companies. The stock has been severely beaten recently because the price of oil is way down. Investors apparently believe that the earnings of this company will suffer because of the low oil prices. However, the earnings continue to grow as the dayrates for oil drilling equipments continues to grow. The company's CEO continues to say that earnings will not suffer unless the price of oil rises so fast that consumption is driven down.
So, in light of the above, I like this stock and feel that it is a good long term hold. However, recently the price has been stuck in the range of 22 to 25. Last week on April 27, the price fell from the high 22's down to 22. I bought throughout the day and got 400 shares at an average price of 22 9/32. I then waited for a small pop back up. I got that two days later on the 29th. The stock got up over 23 and I then wrote 4 June 25 calls. I got a premium of 7/8. (in retrospect, had I waited a few more days I could have gotten 1 5/8 as the stock continnued to climb up to near 25, but such is life). After commissions I walked away with $308, which gives me a small 3.45% return if the call expires, but a nice 15.4% return if called. As it looks right now, I am likely to be called. Not a bad return for about 50 days of investment. If not called, I am happy to hold onto this stock; if I am called, I am happy with the nice return and will look for something else to do with my money. Nice either way.
In that vain, I am looking for other potential plays. I would rather not put all of my covered call money into one sector, so am shopping. This is where I think this forum could come in handy for others as well. We could share tips on potential stocks...investigate them together and track our results.
I currently find potential candidates at two free web sites that offer information on covered calls. The links are below:
coveredcalls.com
securitytrader.com
These are databases that provide tips on stocks currently offering options with high premiums. From these lists, I look for candidates that meet my goals. Do any of you know of other free sites out there for this sort of information? Let us know.
Three stocks that I am currently looking at as potential plays include: Computer Learning Centers (CLCX), Seattle Filmworks (FOTO) and Ashanti Gold (ASL).
CLCX Jun 12.5's offer a return of 13.5% if not called and 24% if called. I need to investigate this one a little more as it seems a little more risky that I am interested in. Any other insight here?
ASL Jun 10's would currently offer returns of 11.4% and 14.9%, respectively. This stock is stuck in a trading range due to the depressed price of gold. However, the company is profitable at the current gold prices and so the risk seems comparatively light to me. If the market were to crash due to signs of inflation, this one would probably soar. On our present bull market, this stock will probably continue to languish in the area of 9-12. Looks like a nice potential candidate to me.
FOTO is probably down right now due to fears that the INTC/EK collaboration will hurt them. Earnings were not spectacular and so the stock is being dumped. However, they are making a profit which is not the case with most internet stocks and this could be considered in the same arena as CDNW and AMZN. I need more info on this one and would welcome other opinions. The similar returns for this one would be: 8.25% and 13%.
Is there anyone else out there interested in sharing data as above. If so, I propose using this forum to share our ideas.
Jeff MacQuarrie |
