Stocks to Collar
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Created by Barrons
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Date updated:05-26-2007
From Barron's 5-28-07
When Records Prove Elusive.
"Speaking of options, here's a handy strategy with stocks straining at record peaks. "Collars" allow conservative investors to participate in rallies up to a certain target but limit downside risk should the market slide. You accomplish this by selling out-of-the-money calls and using the proceeds to buy protective puts, so collars require little or no out-of-pocket expense."
The following stocks offer great opportunites for collars.
-
AAPL
Apple Inc. - $202.98
- +0.75%
- $201.07
"Take the upwardly mobile Apple (AAPL), for example. With shares near 112.50, selling a 130-strike call that expires January 2009 can generate enough to buy a 110-strike put of similar duration. That allows investors to participate in a rally up to 130 but protects against declines below 110 -- or a potential annualized gain of 17.7% with potential downside of just 0.4% (thanks to a slight credit from the collar)."
-
AMGN
Amgen Inc. - $54.10
- -1.48%
- $54.92
"An Amgen (AMGN) collar, for instance, allows potential gains of 29% versus downside risk of 8%"
-
NEM
Newmont Min Cp (h - $50.46
- -0.20%
- $50.35
"Newmont Mining (NEM) has potential upside of 30% with 9% downside."
-
SPY
S&p Dep Receipts - $109.59
- +0.02%
- $109.31
"With the S&P Depositary Receipts (SPY) near 152, selling 175-strike calls that expire December 2008 will buy 135-strike puts, leaving room for an annualized gain of 10% with 5% downside risk. Here, the upward pricing slant still works in your favor but is less lopsided, since broad-market puts already are in heavier demand."
-
COP
Conocophillips - $53.58
- +1.38%
- $52.57
No Analysis added
-
LTD
Limited Brands In - $18.73
- 0.00%
- $18.65
No Analysis added
-
BEN
Franklin Res Inc - $113.57
- -0.30%
- $113.79
No Analysis added
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