Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘United rentals’

Covered Call Trade of the Month

Investors seeking income in this volatile market can still sell covered call trades for both income and downside protection.  In the past month, the S&P 500 produced a return of 0.73%.  However, subscribers to the Get Rich Monthly Income Plan made off with a 4.7% return by trading a covered call on United Rentals (URI).  Here is the trade posted in July:

Covered Call on United Rentals (URI)

STRATEGY: Look at the August 55 covered call. For each 100 shares of United Rentals (URI) stock you buy, sell one August 55 covered call option for a $52.53 (55.63 – 3.10) debit or better.

Actions: URI is currently trading at $55.01 so the 55 call we sold is ATM.  These shares and call options should be closed on Friday (08/16) for a 4.70% assigned return.

 

Learn more here:

http://getrichinvestments.com/monthly-income-newsletter/

How to Make Monthly Income in a Sideway Moving Market

Expectations for the third quarter earnings were dismal, with forecasts for a decline in profits from a year ago.  But a recent flurry of high-profile reports has investors scowling at the weak revenue numbers, adding to worries about the state of the U.S. economy and the outlook for corporate America.

IBM, General Electric and Microsoft fell short of revenue expectations, creating a sour mood early in the third-quarter reporting period.  This has led to a market that is moving nowhere too soon.  For the last month (Sept 24 – Oct 19), the benchmark S&P 500 Index is only up 0.4% while the PowerShares S&P 500 BuyWrite Portfolio (PBP) is down 0.95%.

Where can income investors go for monthly income in a sideway moving market?

One option is to look at a covered call strategy for monthly income.  A covered call strategy provides income from the premium received when a call option is sold against 100 shares of a stock.  In general, a covered call makes money when the stock price goes nowhere (like today’s market), when the stock price increases and provides downside protection when a stock slightly declines in price.

Subscribers to the Monthly Income Plan had exceptional returns from the monthly covered call trades.  We enter 4 monthly covered call trades on September 24 2012 for trades to expire on October 19 2012.  This is a total of 26 calendar days for these covered call trades.

The results included:

a 6.75% monthly return on the United Rentals, Inc. NYSE: URI covered call;

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6.57% on the USG Corporation NYSE: USG covered call;

5.09% on the Royal Caribbean Cruises NYSE:RCL covered call;

and a 5.4% return on the SanDisk Corporation NASDAQ: SNDK covered call.

This is an average return of 5.95% in one month on these 4 covered call trades.  For comparison purposes, this is an annualized return of 83.6%.

These trades significantly beat the S&P 500 and PBP Buy-Write for the last month.  For income investors, they made $595 for every $10,000 invested in these 4 combined covered call trades.

Click here to subscribe to the Monthly Income Plan to get new covered call trades each month for only $19.95 per month.

 

United Rentals (URI) – Covered Call Trade

STRATEGY:

 Look at the December 22 covered call. For each 100 shares of United Rentals (URI) stock you buy, sell one December 22 covered call option for a 20.46 (24.81 – 4.35) debit or better. That’s potentially a 7.5% assigned return.

The technicals for URI are bearish with a weak downward trend. The stock is under accumulation with support at 21.98. S&P rates this stock 5 STARS (out of five) – strong buy.

RISK:  The stock has to drop 17.5% to threaten the breakeven point. This trade rates 4 keys out of 5 – low relative risk.

 
S&P reiterates strong buy opinion on shares of United Rentals (URI) .  Q2 operating EPS of $0.40, vs. $0.18, is a penny below our estimate and misses consensus of$0.44 from Capital IQ. Rates and time utilization continued to improve, which we find encouraging. URI expects its operating environment to remain robust for the rest of the year. We have raised our ’11 and ’12 EPS estimates to $1.46 and $3.09 from $1.33 and $2.95. However, on lagging improvement in non-residential construction, we trim our 12-month target price to $44 from $50, 14X our ’12 EPS estimate, towards the high end of URI’s historical P/E range.
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