A Conservative Approach to Covered-Calls
This week's example is Premiere Global Services (NYSE:PGI). The company's stock has recently turned bullish in the wake of a positive earnings report. Revenues in 2007 increased 12.7% to $559.7 million, compared to $496.5 million in 2006 and diluted EPS totaled $0.52, compared to $0.37 in 2006. Going forward, the company appears poised for higher valuations as revenue growth in 2008 is expected to be greater than 10%. In addition, the technical outlook for the stock suggests downside support (for any near-term consolidation) is likely to emerge somewhere between $13 and $14.
The position listed in the long-term portfolio is:
Buy PGI Stock: Last Price = $15.19
The target entry price in this example trade will be:
Net Debit = $13.75
We'll monitor this position in the coming week to determine if an entry is possible. A stop-loss transaction (or position adjustment) should be triggered if PGI's share price falls below $13.25 - $13.75, depending on each individual investor's risk versus reward tolerance.