Monday August 27, 2012
by Marvin Appel, editor Systems & ForecastsWith our signals still overall neutral-to-bullish and VIX so low, we are recommending several new covered call positions with
Peabody Energy (
BTU) and
Helmerich & Payne (
HP) for our growth & income portfolio.
Since the middle of May, Peabody Energy has stopped falling and appears to be in a bottoming pattern. However, as with many economically sensitive stocks, the shares of BTU have been very volatile.
The good news is that this volatility has resulted in relatively generous option premiums. I recommend Peabody Energy on expectations that natural gas prices will not turn back down and that BTU will at the least continue to move sideways if not recover its May losses.
We suggest buying Peabody shares and writing covered calls expiring on 9/22/12 at the strike price with the most time value.
Helmerich & Payne is a contract drilling company that operates on land and on offshore rigs. Demand for its services rises when oil prices are expected to rise, and vice versa. HP stock has been in a two-month uptrend, in tandem with rising oil prices.
The company had a favorable second quarter earnings report on July 27, resulting in a 6% jump in the stock price. Since then, the stock has climbed another 1%.
We recommending buying shares of HP and writing covered calls expiring on 9/22/12 at the strike price with the most time value. The option strikes for this stock are spaced far apart, so there is a good chance that the best call will be one that is in the money.
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