A Foster Wheeler (FWLT) covered call position was established on March 2, 2009. The rationale behind this purchase is based upon this investor's opinion that infrastructure stocks as a whole have been battered as a result of the decrease in construction spending around the world, as well as a lack of focus within the recent stimulus bill on infrastructure spending as was originally intended. In regards to this stock specifically, Foster Wheeler had recently touched a new 52-week low in part due to its large decrease in backlog orders. Although a drop in the stock may have been warranted due to this fact, it should have already been priced into the stock, as it is simply a fact of the recession. However, this investor at the time this trade was executed was unsure if the economy would get even worse before it gets better, and so a relatively long position was established with an in-the-money call:
3/2/2009 -- Bought 100 FWLT @ 15.295
3/2/2009 -- Sold To Open 1 FWLT August $12.50 Call @ 4.95
The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $1529.50
Downside Coverage: 32.4%
Possible Max Upside: 13.8%
Annualized Max Upside: 27.6%
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