Wednesday, October 7, 2009

Initial Transaction - Fluor (FLR)

After seeing a position opened by the Covered Call Advisor (coveredcalladvisor.blogspot.com) in Fluor, I decided to take a look at the company. When I looked at the company I found some very nice features for a covered call position. The first thing I noticed was the chart which showed FLR oscillating around $50/share for the past 4 months. The second thing that made this a good company for a covered call position was the fact that it paid a dividend. Although small, dividends can add alot to covered call positions. Thirdly, the company is poised to benefit from what I foresee as a rebound in construction of large infrastructure projects over the next few years. Specifically, the recent run-up in oil prices as well as my belief that oil prices will most likely continue to move higher in the long-term would be a boon to FLR as it is one of the larger EPC's which operates in the oil & gas space. For these reasons as well as a recent drop in the share price under $50 I decided to open a CC position. The profit/loss info is below:

10/7/2009 -- Bought 100 FLR @ 47.07
10/7/2009 -- Sold To Open 1 FLR November $50 Call @ 1.70

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Cost Basis: $4537.00

Potential Gain: 9.16%

Potential Annualized Gain If Called At Expiration (11/21/2009): 74.30%

Downside Protection: 3.6%

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