McDermott International (NYSE:MDR) is the parent company of J. Ray McDermott, McDermott Incorporated, Babcock & Wilcox Investment Company, BWX Technologies, and The Babcock & Wilcox Company. The Company operates in three business segments: Marine Construction Services, Government Operations and Power Generation Systems. Marine Construction Services includes the results of operations of JRM, which supplies services to offshore oil and gas field developments. Government Operations supplies nuclear components to the United States Government and provides services to the United States Government. Power Generation Systems includes the results of operations of the Company's Power Generation Group.
McDermott is one of the many company's plagued by asbestos litigation issues, so it's not surprising the company's stock soared Tuesday on favorable news regarding the U.S. Senate's consideration of a trust fund asbestos liability bill. Now the stock is back in a recent "comfort zone" near $21 and with a short-term (technical) support level near the sold put strike price, this position offers reasonable risk versus reward potential for speculative traders.
Fundamentals Chart Earnings Dates Analyst Ratings
Suggested (Bullish) Option Position:
Sell Put JUN 20.00 MDR-RD
Target Price = $0.40 Open Interest = 1023
Potential Profit (5 contracts @ $0.40) = $200
Initial Margin (5 contracts) = $3,535
Return on Investment (max) = 7.2%
Cost Basis in Stock = $19.60
Days to Expiration = 24