This position is in Encana Corporation, a Canadian-based natural gas company. Encana is focused on developing unconventional natural gas formations including shale, tight-gas, and coal-bed methane. The company yields almost 3%, and has generated an average operating margin of about 25% over the past 5 years, with a number of years nearing 50%. The company also has a very intriguing chart which in my opinion demonstrates the perfect type of chart for covered calls investing. The stock has remained rangebound between $26 and $35 for the past year. So essentially, while you receive call premium for holding the stock your also being paid a nice dividend. This has resulted in a potential annualized gain of 20% since the stock was originally purchased in August. The profit/loss info is below:
Based on the current cost basis, the potential annualized return for this position if called at expiration in January would be 20.21%.
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