By Braunie: TNK was one I liked as they have pre-sold much of their 2009 and 2010 capacity and they seem to be in reasonable financial shape in a very beaten-down industry. Even in a depression, oil must be shipped from here to there right? While they did cut their quarterly dividend by 18%, the next dividend is scheduled to be 59-cents and we are already past Q1 earnings. While an 18% dividend cut may have disappointed existing shareholders and sent the stock back down to $11.09, .56 times 4 is $2.24 a year - that’s a 21% dividend! The stock bottomed out at $7 on March 9th and if we plan on doubling down should it get that low again, then our average entry on 400 shares would be $9.17. Let’s say they cut the dividend in half to $1.12 a year as they struggle through the depression - that’s STILL a 12% ROI without even selling any options. Sound interesting? Let’s see how we can improve our odds: Buying 200 Shares at $11.09 Selling Nov $10 calls for $2.33 and Nov $10 puts for $1.57 nets $7.19 ($1,438). If called away at $10 in November ($2,000), the profit would be $562 (39%). If the stock is put to us below $10 on Nov 20th, our average cost of entry on 400 shares would be $8.60 so a total potential commitment if $3,440 Complete And Original Article Found Here: http://www.themarketguardian.com/2009/05/hedging-your-way-to-...
$11.5303 (05/26/09)
