Peabody Energy (NYSE: BTU) today reported first quarter income from continuing operations of $140.5 million with related earnings per share of $0.50 missing consensus estimates of 93 cents. Revenues for the quarter rose 15 percent over the prior year, and EBITDA increased 16 percent to $325.4 million.
“At a time when many companies are straining to remain profitable, Peabody delivered higher year-over-year revenues, EBITDA, earnings and cash flows,” said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. “We had great results despite customer deferrals and multiple longwall moves, which show the depth and diversity of the portfolio. Peabody is weathering current market challenges with a strong balance sheet and cash flows, heavily contracted position and tight capital discipline. We are also aggressively evaluating investments to capitalize on unique market opportunities.”
Wednesday, April 15, 2009
Sunday, April 5, 2009
Covered calls: A primer for layman investors (Part II)
In this part, I will discuss how to set up a covered call by an example.
Let us assume that I bought 100 shares of CMI @ 29.70 per share with a total investment of $2970.00 on Friday April 03, 2008. I can sell a call option for $3.30 per share netting $330.00 per contract for the expiry in month of May with a strike price of $30.00. One contract of option consists of 100 shares. My net cost per share will be 26.40 that is break even point for this contract, totaling $2640.00 per contract.
What are the possible scenarios at the expiry date.
1. If the value of stock rises above $30.00, I will make 3.60 per share and option will be exercised thus creating a net return of 13.63% for little over month (Expiry date is May 16).
2. If value of stock remains between $29.70 and $30.00 then the option will expire worthless and I will be able to keep 3.30/share free, that is, a return of 12.50% minimum.
3. If value of stock falls below $29.70 then a call premium will help to reduce my losses up to $26.40/share. My loss will start if stock falls below $26.40.
Summing up, this strategy does not eliminate the risk of investment completely but it does help to reduce the risk when prices are falling and enhances the returns when prices are stagnant.
Let us assume that I bought 100 shares of CMI @ 29.70 per share with a total investment of $2970.00 on Friday April 03, 2008. I can sell a call option for $3.30 per share netting $330.00 per contract for the expiry in month of May with a strike price of $30.00. One contract of option consists of 100 shares. My net cost per share will be 26.40 that is break even point for this contract, totaling $2640.00 per contract.
What are the possible scenarios at the expiry date.
1. If the value of stock rises above $30.00, I will make 3.60 per share and option will be exercised thus creating a net return of 13.63% for little over month (Expiry date is May 16).
2. If value of stock remains between $29.70 and $30.00 then the option will expire worthless and I will be able to keep 3.30/share free, that is, a return of 12.50% minimum.
3. If value of stock falls below $29.70 then a call premium will help to reduce my losses up to $26.40/share. My loss will start if stock falls below $26.40.
Summing up, this strategy does not eliminate the risk of investment completely but it does help to reduce the risk when prices are falling and enhances the returns when prices are stagnant.
Covered calls: A primer for layman investors (Part I)
Covered call is a call option strategy for an investor who owns option-able stocks.In this strategy, an investor tries to increase his/her income on the stocks that he/she already owns by selling call options. It is considered the most conservative strategy in options trading. It is mostly suitable for investors who has neutral outlook for the stock.
In next part, I will discuss how to set up a covered call.
In next part, I will discuss how to set up a covered call.
Friday, January 23, 2009
Weekend Readings
Congratulations to President Barrack H. Obama being 44th president of United States of America. We hope that his presidency will bring peace, prosperity and economic stability to USA and rest of the world.
To know more about Obama and his economic policy read:
The Audacity of Hope: Thoughts on Reclaiming the American Dream (Vintage)
For personal biography of Barack Obama, read the following:
Dreams from My Father: A Story of Race and Inheritance
To know more about Obama and his economic policy read:
The Audacity of Hope: Thoughts on Reclaiming the American Dream (Vintage)
For personal biography of Barack Obama, read the following:
Dreams from My Father: A Story of Race and Inheritance
Sunday, January 18, 2009
Covered Call Portfolio Update January 16/2009
Is our "covered call" portfolio performed better than our "buy and hold" portfolio?
January options are expired on the Friday, January 16, 2009. Let us evaluate if a "covered call portfolio" performed better than a "buy and hold" portfolio or it provided us a greater "downward protection" in volatile markets.
Our original investment of $119,636.00 would have been decreased to $81,505.00 if we have applied "buy and hold strategy" only, that is, a decrease of 31.87%. On the other hand, a "covered call portfolio" has resulted in a value of $96,155, that is, a decrease of only 19.63% thus beating our "buy and hold portfolio" by a margin of 12.25%.
It must be remembered that this strategy is based on one time portfolio setup in a month and is for a "layman investor" only. A more "sophisticated investor" would have rolled down its calls twice in this month thus resulting even a better performing portfolio.
We are are also ignoring the re-investment of cash in hand, that is, grown up to now "$17,130.00". A re-investment of cash in hand would have created a better return.
Related posts:
Starting portfolio as on 9/19/2008
January options are expired on the Friday, January 16, 2009. Let us evaluate if a "covered call portfolio" performed better than a "buy and hold" portfolio or it provided us a greater "downward protection" in volatile markets.
Our original investment of $119,636.00 would have been decreased to $81,505.00 if we have applied "buy and hold strategy" only, that is, a decrease of 31.87%. On the other hand, a "covered call portfolio" has resulted in a value of $96,155, that is, a decrease of only 19.63% thus beating our "buy and hold portfolio" by a margin of 12.25%.
It must be remembered that this strategy is based on one time portfolio setup in a month and is for a "layman investor" only. A more "sophisticated investor" would have rolled down its calls twice in this month thus resulting even a better performing portfolio.
We are are also ignoring the re-investment of cash in hand, that is, grown up to now "$17,130.00". A re-investment of cash in hand would have created a better return.
Related posts:
Starting portfolio as on 9/19/2008
What will Obama do to Economy?
The Audacity of Hope: Thoughts on Reclaiming the American Dream (Vintage)
For personal biography of Barack Obama, read the following:
Dreams from My Father: A Story of Race and Inheritance
For personal biography of Barack Obama, read the following:
Dreams from My Father: A Story of Race and Inheritance
Saturday, January 17, 2009
BOOK REVIEW: SNOWBALL
The Snowball: Warren Buffett and the Business of Life
Written by Alice Schroeder, this books brings life to mostly hidden, less discussed and the complex nature of Warren Buffett's personal life and his relationships with his family members especially his mother, the ladies in his life and his children.
It discusses in detail his love and affection for his mentor Ben Graham and his relationships with Washington Post’s Kay Graham, Charlie Munger and Bill Gates (calling him his third son).
This book reveals Warren Buffett’s life being a shy kid who had passion about numbers and money from his childhood. As well, how he started building his youth business venture and saved money for the larger ventures to come later on in his life. It also examines his methods of investment partnerships, business decisions and countless problems he faced during his business ventures throughout his life in developing such an iconic empire what is now called “Berkshire Hathaway”.
For Value Investors, the book discusses the idea of Ben Gram's idea of “Cigarette butts” and his parting ways from Graham’s philosophy of value investing in “Cigarette butts” and proposing Buffett's investment philosophy to “buy a great business at a fair price than a fair business at a great price”.
His "Twenty Punches" approach to investing also makes you think very carefully as he said, "if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. You'd resist the temptation to dabble. You'd make more good decision and you'd make more big decisions."
Overall, this is a wonderful biography and enjoyable reading. It should be kept by every person who loves Buffett's way of investing, wants to teach his/her children how to start savings and investments. It is a great book for the students of business and investments who want to be future leaders in business world.
For USA
For Canadians
Written by Alice Schroeder, this books brings life to mostly hidden, less discussed and the complex nature of Warren Buffett's personal life and his relationships with his family members especially his mother, the ladies in his life and his children.
It discusses in detail his love and affection for his mentor Ben Graham and his relationships with Washington Post’s Kay Graham, Charlie Munger and Bill Gates (calling him his third son).
This book reveals Warren Buffett’s life being a shy kid who had passion about numbers and money from his childhood. As well, how he started building his youth business venture and saved money for the larger ventures to come later on in his life. It also examines his methods of investment partnerships, business decisions and countless problems he faced during his business ventures throughout his life in developing such an iconic empire what is now called “Berkshire Hathaway”.
For Value Investors, the book discusses the idea of Ben Gram's idea of “Cigarette butts” and his parting ways from Graham’s philosophy of value investing in “Cigarette butts” and proposing Buffett's investment philosophy to “buy a great business at a fair price than a fair business at a great price”.
His "Twenty Punches" approach to investing also makes you think very carefully as he said, "if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. You'd resist the temptation to dabble. You'd make more good decision and you'd make more big decisions."
Overall, this is a wonderful biography and enjoyable reading. It should be kept by every person who loves Buffett's way of investing, wants to teach his/her children how to start savings and investments. It is a great book for the students of business and investments who want to be future leaders in business world.
For USA
For Canadians
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