A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
lighten one and richjoy403-
richjoy403, thanks for the detailed descriptions. "lighten one," I'd like to add the following:
Yes, all analysts see the same data released by a company. These analysts also have access to guidance given by management about will happen in the future. Many, but not all, companies, issue guidance or forecasts. In addition, some analysts have access to non-public in-house research reports or independent research studies about the industry or a specific company.
However, one must recognize that analysts are basing recommendations on the future results of a company and how that will affect the share price in the future. They first need to decide how a company will perform relative to its guidance, and then how to forecast the price of the stock. Most analysts use a projection of the earnings per share (EPS) and then apply a "multiple" to get to the future stock price.
Even though the starting point of the multiple is usually based on the industry where the company does business, analysts can have very different views as to whether the individual company should be priced at the average industry multiple. An individual analyst may decide that company XYZ is gaining market share and growing much faster than the industry, and therefore deserves a higher multiple. Other analysts may see a competitive threat to XYZ and give it a lower multiple.
Then there are issues with earnings and quality of earnings. Will earnings be achieved, and even if they are, will it be through revenue growth or cutting expenses? Usually revenue growth is far more important.
The bottom line is that analysts have very different perceptions about what will occur in the future,
Golden Star Resources: A Golden Opportunity [View article]
As an update to the strategy outlined in this article, and in the interests of disclosure, the January calls expired worthless. I had executed a trade on 9/15 where I bought 2100 shares for $2.26 and simultaneously sold 21 Jan $2.50 calls for $0.41 at a net outlay of just over $1.85 per share including all commissions.
There was an opportunity on Friday to close the position at about $2.20, for a profit of about 19% in just over 4 months. Even though I initially intended to get out after 4 months, I instead chose to sell August $2 calls, but the trade did not go through on Friday.
Today I sold $2 Jan 2013 calls for $0.50. This will yield a net of nearly 50% if the shares are called at $2 in August.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
racerkeith-
My original reaction when I saw the release was similar to yours about good news vs. bad news, but I just don't know. It takes a bit of time and effort to close the books, have everything prepared for a board meeting and get the board together.
I'm trying to recall the company's comments about integrating the financial systems. It's possible that things went more smoothly then expected and they will just have everything ready sooner.
Anyway, I'm hoping that FTR will be giving my wife a nice gift on her birthday. :-)
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
MUDDUCK POWER BROKER-
Not sure how a deal with Sprint would work. FTR just entered into a 3 year agency agreement with T to sell their wireless.
As to what the shorts are doing, there could have been a lot of covering on Thursday and especially on Friday when it dropped below $4. The two days traded a total of 100 million shares or 3 times the daily volume.
B&G Foods May Surprise With Q4 Earnings [View article]
montrachet-
I assume you are referencing the following from the press release a couple of weeks ago: "B&G Foods has determined that of such distributions, approximately 70.4% (or $0.5634 per share) will be treated as a taxable dividend and approximately 29.6% (or $0.2366 per share) will be treated as a return of capital."
It can be a royal pain for some shareholders with the additional record keeping requirements, especially for those that reinvest dividends. Fortunately, I hold all my shares in a variety of IRA's where there are no tax implications.
I still think you have started your analysis with the wrong relationship of new car to used car transactions through dealers, let alone the relationship of "quality" used car sales to new car sales. Too many of the transactions are either through used car only dealers of private transactions.
Step 1. Assuming AN is typical - and you haven't made a case that they aren't (and it's difficult to simply accept waterinfo's anecdotal evidence) - they sell less than one used car for each new car, regardless of whether or not it is a "quality" used car. In fact, over the past several years, the ratio of used to new sales at AN was less than 0.75 to 1.
Step 2. Using your assumption that one of every two used cars sold is a quality used car, then less than half the AN sales would be quality used cars. Even if I assume that AN and other OEM dealers sell an overwhelming percentage of quality used cars, I am reasonably certain that it is not 100%. Even if the percentage of quality used cars sold is 90% of the total used cars sold by dealers, there is a significant impact to your figures.
Using AN as a proxy for OEM dealers in terms of the ratio of new to used and an assumption that only 90% of OEM dealers used car sales are "quality" used cars, your numbers come down significantly.
14 million new car sales translates to 10.5 million used car sales through dealers. Assuming 90% of those are quality used cars drops the total to 9.5 million. 45% penetration drops the number to 4.3 million. 15% dealer participation drops the number to 638 thousand. And 35% conversion brings the number down to 223 thousand. That's nearly 100,000 less than your estimate, and I think my using nine out of 10 used car sales as quality used car sales by the dealers was overly generous.
I believe the used car program is a great idea, but I sure would like to see some hard data from Sirius before assuming too much of an impact on 2012.
Somewhat boring, but here goes... I'm from NJ and like most high school seniors, I had no clue about what to do with an education. I was classified as an underachiever - high IQ/math whiz with mediocre grades. I would rather spend time reading SciFi than study. My mother decided I needed to undergo one of these intensive career guidance/psych testing programs, AFTER I had applied to schools. I originally thought about being a history major - fascinated by the Civil War and Lincoln, Grant, Lee and the colorful southern generals - which was part of the reason for choosing BU. The testing was run by Stevens Institute of Tech. The lead counselor told me to aggressively pursue an engineering degree because of the discipline that he thought it would impose and wanted me to come to Stevens. His logic was that regardless of my eventual career, engineering would provide a great foundation - law, medicine, any of the sciences... BU had a unique engineering program with most of the classes in the first 2 years being taught at CLA - Physics, Calc, Chem, English, etc.
I had some family in the Boston area, liked the college atmosphere of the entire metro area, etc., so I called up BU and asked if they would permit me to enter the College of Engineering instead of CLA. So, that's how I wound up at BU. Two reasons I later gravitated to finance... The first was an engineering economy course where we used DCF and IRR models to analyze engineering projects. The second is far more complex and a much longer story.
Northeastern was considered a much easier school at the time, and I think they had these 5 year work/study curricula. I wasn't thinking of going an extra year. I probably should have tried for an investment banking career.
"If you even have to talk about cash flow coverage of a dividend, then its not a safe dividend. If they have to pay out of cash flow that hasn't been earned, the equity declines and safety deteriorates with every payment. "
Cash flow is the metric I use to evaluate any company. My background taught me to use DCF models to compare projects and companies. Ultimately, cash is all that matters. The issue of earnings is a red herring. Use of the bonus depreciation drives earnings down.
Sorry that you feel looking at a company's public disclosures is insufficient. I don't have insider info and I don't have the resources to analyze the FCC 600 page document which hasn't even been finalized. Nor do I have the resources to do independent market studies or satisfaction surveys. That said, here's some points that I posted on another article and I used to make a decision.
At recent conferences and CC, the CEO, CFO and Treasurer said:
+ the residual cash flow would grow in 2012 + at the time of the merger, 2011 and 2012 payout ratios in the mid-70% range were expected + cap-ex [750-780M]] would decline in 2012 to the low 700's + cap-ex of 18-19% of revenues expected to return to 10-11% when broadband rollout is completed later this year + remaining nine states expected to be converted in 1H 2012 + S/W license fee of $94 million goes away when the remaining nine states convert + there are 140 additional synergy-related cost saving projects
If the company can make the improvements in the four recently converted states and the nine soon to be converted states that they made in West Virginia, there will be no problems in maintaining the dividend. As a point of reference, WV was the first converted property. It has achieved a 24% broadband penetration compared to about 15% in the other 13 states. In addition, the WV churn has been reduced and is now significantly below the other VZ properties. The conversion and cap-ex programs to upgrade the infrastructure are supposed to yield results in those areas. Also helping revenue should be some promos that will be going to regular pricing in Q4 2011 and 2012.
On the spending side, cap-ex should decline by 7-9% of revenue in 2013 and the $94M S/W license fee also goes away. Those savings should help drive the dividend payout ratio towards 50%. There is no debt to be refinanced this year, and the company has $250M in cash and an unused $750M revolver.
FTR has a goal of also getting the leverage down to 2.5-2.6 from the current 3.1-3.2. Is it a perfect stock? Of course not. Will they cut the dividend because of a potential S&P downgrade? Not if the company achieves its business plans.
There are a number of wild cards that I have noted earlier: pension plan performance (low interest rates don't help here), the final FCC regulations to be delivered in March (currently expected to be a small net positive), the economy and even weather related events (mild winter to this point would seem to be a positive).
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
In the interests of disclosure, I just sold the 1000 shares I picked up this morning at $4.29. It was money I had allocated for a covered call position with SIRI but had seen an opportunity for a quick profit. I expect I may regret selling, but my portfolio was already overweight FTR before the buy.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
chechequa-
I don't know if day trading pushed the price down, but I would doubt it. The volume was very heavy at the open because of S&P revising its outlook for the debt rating from stable to negative. After dropping to $3.81 in the first half hour, the stock bounced to the mid $4.30's before trading in a narrower range around $4.23. Volume has "slowed" down this afternoon.
The stock price dropping can feed on itself, but my own view is that share price should not influence management. They should be managing the company and not the share price. But that may be a bit too idealistic.
I may have misinterpreted (and someone will probably correct me if I'm wrong) the compensation section of the proxy, but consider this. Management gets their bonus in February. Much of that is in the form of restricted stock grants. It is to their benefit, I think, to have a low share price for a few weeks.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
webmind-
"Why would a company struggling with revenue and profits be able to afford a 16% dividend when world-class dividend champion stocks reach for 3%?"
Two very separate questions. The dividend champions have consistently GROWN their dividends for many years. There is not that expectation from FTR.
As to why they pay out such a high percentage rate dividend, that's currently a function of a decline in the share price and the stock market pricing in a dividend cut. FTR has had a traditionally high dividend payout, focusing on returning money to shareholders through dividends. As to the dividends relative to profits, the answer is far more complex. One must recognize that the FTR profits have been dramatically reduced by the use of an accelerated depreciation provision that was part of one of the economic stimulus plans. Note that the depreciation, a non-cash expense, through 3 quarters of 2011 is nearly double that of the comparable period in 2010.
The payout would still be high without the bonus depreciation, but is not out of line with the company's expectation. The risk is on the revenue side. That was the focus of the S&P negative outlook. One can register on the S&P web site for free and read the report.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
webmind-
I am not sure how you define "no time premium." I had replied to a similar comment from you earlier on another http://seekingalpha.co... At that time you wrote
"I see virtually no option premium in the calls. How can you make money selling them? 16 Jan, 12:27 PM "
And my reply was:
"webmind-
I'm not sure which options you are examining, but check out these two articles:
They will go into a bit more detail, but the main idea was that these were safer plays for investors looking for income but concerned about a dividend cut. The idea is to buy the stock and simultaneously sell a covered call. Friday the stock closed at $5.05 and the January 2013 call was trading at $0.50 bid.
Ignore commissions... Buy the stock and sell the call and your net cost is $4.65. If the shares are called away before any dividend is paid your return is 7.5% in less than 3 months. That equates to an annualized yield of more than 30%. If it never gets called - highly unlikely in my view - you get the $0.75 dividend. The 0.75 div on the net cost gives a yield of more than 16% (.75/4.65= 16.1%).
If the dividend is cut by one third - which is huge and frees up $250 million of FCF - the dividend yield is even more sustainable, and the yield on cost is is still in double digits... 0.50/4.65= 10.8%.
I proposed this as a safe play for income hungry investors. I also used the strategy in my daughter's IRA. She is somewhat conservative in her investing (check out my instablog) and so far it turns out to have been a good move from her perspective.
On December 7th I bought 1100 shares at $5.31 and simultaneously sold the $5 January 2013 LEAP (the name for an option more than nine months out) for $0.75 for a net cost of $5032.31 (including all commissions and fees) or $4.575 per share. I don't need to worry about her complaining that her shares are down almost 5%.
Hope that helps. "
The S&P downgrade has affected the price, but there are still large premiums. May $4 in the money calls are selling at $0.50 bid with the stock trading at $4.23. Will the stock trade below $4 at May expiration or will the dividend be cut? The assumption was based on a simultaneous buy the stock and sell the call transaction. If one further assumes that the shares are called, you receive $4 on an net outlay of $3.73, or a bit over 7% in less than three months. Annualized it is approximately a 30% return, not counting any dividends.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
cognitorex-
Thanks for the information, although I really don't pay very close attention to the moves by institutional investors. Some have strict guidelines on holdings below certain price points, ratios or specific dividend requirements, etc.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
richjoy403, thanks for the detailed descriptions. "lighten one," I'd like to add the following:
Yes, all analysts see the same data released by a company. These analysts also have access to guidance given by management about will happen in the future. Many, but not all, companies, issue guidance or forecasts. In addition, some analysts have access to non-public in-house research reports or independent research studies about the industry or a specific company.
However, one must recognize that analysts are basing recommendations on the future results of a company and how that will affect the share price in the future. They first need to decide how a company will perform relative to its guidance, and then how to forecast the price of the stock. Most analysts use a projection of the earnings per share (EPS) and then apply a "multiple" to get to the future stock price.
Even though the starting point of the multiple is usually based on the industry where the company does business, analysts can have very different views as to whether the individual company should be priced at the average industry multiple. An individual analyst may decide that company XYZ is gaining market share and growing much faster than the industry, and therefore deserves a higher multiple. Other analysts may see a competitive threat to XYZ and give it a lower multiple.
Then there are issues with earnings and quality of earnings. Will earnings be achieved, and even if they are, will it be through revenue growth or cutting expenses? Usually revenue growth is far more important.
The bottom line is that analysts have very different perceptions about what will occur in the future,
Golden Star Resources: A Golden Opportunity [View article]
There was an opportunity on Friday to close the position at about $2.20, for a profit of about 19% in just over 4 months. Even though I initially intended to get out after 4 months, I instead chose to sell August $2 calls, but the trade did not go through on Friday.
Today I sold $2 Jan 2013 calls for $0.50. This will yield a net of nearly 50% if the shares are called at $2 in August.
The shares are currently trading at $2.14.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
My original reaction when I saw the release was similar to yours about good news vs. bad news, but I just don't know. It takes a bit of time and effort to close the books, have everything prepared for a board meeting and get the board together.
I'm trying to recall the company's comments about integrating the financial systems. It's possible that things went more smoothly then expected and they will just have everything ready sooner.
Anyway, I'm hoping that FTR will be giving my wife a nice gift on her birthday. :-)
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
Not sure how a deal with Sprint would work. FTR just entered into a 3 year agency agreement with T to sell their wireless.
As to what the shorts are doing, there could have been a lot of covering on Thursday and especially on Friday when it dropped below $4. The two days traded a total of 100 million shares or 3 times the daily volume.
B&G Foods May Surprise With Q4 Earnings [View article]
I assume you are referencing the following from the press release a couple of weeks ago:
"B&G Foods has determined that of such distributions, approximately 70.4% (or $0.5634 per share) will be treated as a taxable dividend and approximately 29.6% (or $0.2366 per share) will be treated as a return of capital."
It can be a royal pain for some shareholders with the additional record keeping requirements, especially for those that reinvest dividends. Fortunately, I hold all my shares in a variety of IRA's where there are no tax implications.
AutoNation Reports Strong Q4, Offers Clues To Sirius XM Deal [View article]
I still think you have started your analysis with the wrong relationship of new car to used car transactions through dealers, let alone the relationship of "quality" used car sales to new car sales. Too many of the transactions are either through used car only dealers of private transactions.
Step 1. Assuming AN is typical - and you haven't made a case that they aren't (and it's difficult to simply accept waterinfo's anecdotal evidence) - they sell less than one used car for each new car, regardless of whether or not it is a "quality" used car. In fact, over the past several years, the ratio of used to new sales at AN was less than 0.75 to 1.
Step 2. Using your assumption that one of every two used cars sold is a quality used car, then less than half the AN sales would be quality used cars. Even if I assume that AN and other OEM dealers sell an overwhelming percentage of quality used cars, I am reasonably certain that it is not 100%. Even if the percentage of quality used cars sold is 90% of the total used cars sold by dealers, there is a significant impact to your figures.
Using AN as a proxy for OEM dealers in terms of the ratio of new to used and an assumption that only 90% of OEM dealers used car sales are "quality" used cars, your numbers come down significantly.
14 million new car sales translates to 10.5 million used car sales through dealers. Assuming 90% of those are quality used cars drops the total to 9.5 million. 45% penetration drops the number to 4.3 million. 15% dealer participation drops the number to 638 thousand. And 35% conversion brings the number down to 223 thousand. That's nearly 100,000 less than your estimate, and I think my using nine out of 10 used car sales as quality used car sales by the dealers was overly generous.
I believe the used car program is a great idea, but I sure would like to see some hard data from Sirius before assuming too much of an impact on 2012.
Why Investors Should Appreciate Frontier Communications' 15% Dividend Yield [View article]
Somewhat boring, but here goes... I'm from NJ and like most high school seniors, I had no clue about what to do with an education. I was classified as an underachiever - high IQ/math whiz with mediocre grades. I would rather spend time reading SciFi than study. My mother decided I needed to undergo one of these intensive career guidance/psych testing programs, AFTER I had applied to schools. I originally thought about being a history major - fascinated by the Civil War and Lincoln, Grant, Lee and the colorful southern generals - which was part of the reason for choosing BU. The testing was run by Stevens Institute of Tech. The lead counselor told me to aggressively pursue an engineering degree because of the discipline that he thought it would impose and wanted me to come to Stevens. His logic was that regardless of my eventual career, engineering would provide a great foundation - law, medicine, any of the sciences... BU had a unique engineering program with most of the classes in the first 2 years being taught at CLA - Physics, Calc, Chem, English, etc.
I had some family in the Boston area, liked the college atmosphere of the entire metro area, etc., so I called up BU and asked if they would permit me to enter the College of Engineering instead of CLA. So, that's how I wound up at BU. Two reasons I later gravitated to finance... The first was an engineering economy course where we used DCF and IRR models to analyze engineering projects. The second is far more complex and a much longer story.
Northeastern was considered a much easier school at the time, and I think they had these 5 year work/study curricula. I wasn't thinking of going an extra year. I probably should have tried for an investment banking career.
Why Investors Should Appreciate Frontier Communications' 15% Dividend Yield [View article]
"If you even have to talk about cash flow coverage of a dividend, then its not a safe dividend. If they have to pay out of cash flow that hasn't been earned, the equity declines and safety deteriorates with every payment. "
Cash flow is the metric I use to evaluate any company. My background taught me to use DCF models to compare projects and companies. Ultimately, cash is all that matters. The issue of earnings is a red herring. Use of the bonus depreciation drives earnings down.
Sorry that you feel looking at a company's public disclosures is insufficient. I don't have insider info and I don't have the resources to analyze the FCC 600 page document which hasn't even been finalized. Nor do I have the resources to do independent market studies or satisfaction surveys. That said, here's some points that I posted on another article and I used to make a decision.
At recent conferences and CC, the CEO, CFO and Treasurer said:
+ the residual cash flow would grow in 2012
+ at the time of the merger, 2011 and 2012 payout ratios in the mid-70% range were expected
+ cap-ex [750-780M]] would decline in 2012 to the low 700's
+ cap-ex of 18-19% of revenues expected to return to 10-11% when broadband rollout is completed later this year
+ remaining nine states expected to be converted in 1H 2012
+ S/W license fee of $94 million goes away when the remaining nine states convert
+ there are 140 additional synergy-related cost saving projects
If the company can make the improvements in the four recently converted states and the nine soon to be converted states that they made in West Virginia, there will be no problems in maintaining the dividend. As a point of reference, WV was the first converted property. It has achieved a 24% broadband penetration compared to about 15% in the other 13 states. In addition, the WV churn has been reduced and is now significantly below the other VZ properties. The conversion and cap-ex programs to upgrade the infrastructure are supposed to yield results in those areas. Also helping revenue should be some promos that will be going to regular pricing in Q4 2011 and 2012.
On the spending side, cap-ex should decline by 7-9% of revenue in 2013 and the $94M S/W license fee also goes away. Those savings should help drive the dividend payout ratio towards 50%. There is no debt to be refinanced this year, and the company has $250M in cash and an unused $750M revolver.
FTR has a goal of also getting the leverage down to 2.5-2.6 from the current 3.1-3.2. Is it a perfect stock? Of course not. Will they cut the dividend because of a potential S&P downgrade? Not if the company achieves its business plans.
There are a number of wild cards that I have noted earlier: pension plan performance (low interest rates don't help here), the final FCC regulations to be delivered in March (currently expected to be a small net positive), the economy and even weather related events (mild winter to this point would seem to be a positive).
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
I don't know if day trading pushed the price down, but I would doubt it. The volume was very heavy at the open because of S&P revising its outlook for the debt rating from stable to negative. After dropping to $3.81 in the first half hour, the stock bounced to the mid $4.30's before trading in a narrower range around $4.23. Volume has "slowed" down this afternoon.
The stock price dropping can feed on itself, but my own view is that share price should not influence management. They should be managing the company and not the share price. But that may be a bit too idealistic.
I may have misinterpreted (and someone will probably correct me if I'm wrong) the compensation section of the proxy, but consider this. Management gets their bonus in February. Much of that is in the form of restricted stock grants. It is to their benefit, I think, to have a low share price for a few weeks.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
I have no idea if it is to get out good news or bad news. Typically the company announces the dividend one to 6 days before earnings are released.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
"This was an uncommonly well-reasoned and effective reply to a question on the minds of many FTR shareholders. Thank you. "
If the comment is directed at me, you're welcome.
BTW, I like to think all of my comments are well reasoned and effective. LOL!!! ;-)
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
"Why would a company struggling with revenue and profits be able to afford a 16% dividend when world-class dividend champion stocks reach for 3%?"
Two very separate questions. The dividend champions have consistently GROWN their dividends for many years. There is not that expectation from FTR.
As to why they pay out such a high percentage rate dividend, that's currently a function of a decline in the share price and the stock market pricing in a dividend cut. FTR has had a traditionally high dividend payout, focusing on returning money to shareholders through dividends. As to the dividends relative to profits, the answer is far more complex. One must recognize that the FTR profits have been dramatically reduced by the use of an accelerated depreciation provision that was part of one of the economic stimulus plans. Note that the depreciation, a non-cash expense, through 3 quarters of 2011 is nearly double that of the comparable period in 2010.
The payout would still be high without the bonus depreciation, but is not out of line with the company's expectation. The risk is on the revenue side. That was the focus of the S&P negative outlook. One can register on the S&P web site for free and read the report.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
I am not sure how you define "no time premium." I had replied to a similar comment from you earlier on another http://seekingalpha.co... At that time you wrote
"I see virtually no option premium in the calls. How can you make money selling them?
16 Jan, 12:27 PM "
And my reply was:
"webmind-
I'm not sure which options you are examining, but check out these two articles:
http://seekingalpha.co...
http://seekingalpha.co...
They will go into a bit more detail, but the main idea was that these were safer plays for investors looking for income but concerned about a dividend cut. The idea is to buy the stock and simultaneously sell a covered call. Friday the stock closed at $5.05 and the January 2013 call was trading at $0.50 bid.
Ignore commissions... Buy the stock and sell the call and your net cost is $4.65. If the shares are called away before any dividend is paid your return is 7.5% in less than 3 months. That equates to an annualized yield of more than 30%. If it never gets called - highly unlikely in my view - you get the $0.75 dividend. The 0.75 div on the net cost gives a yield of more than 16% (.75/4.65= 16.1%).
If the dividend is cut by one third - which is huge and frees up $250 million of FCF - the dividend yield is even more sustainable, and the yield on cost is is still in double digits... 0.50/4.65= 10.8%.
I proposed this as a safe play for income hungry investors. I also used the strategy in my daughter's IRA. She is somewhat conservative in her investing (check out my instablog) and so far it turns out to have been a good move from her perspective.
On December 7th I bought 1100 shares at $5.31 and simultaneously sold the $5 January 2013 LEAP (the name for an option more than nine months out) for $0.75 for a net cost of $5032.31 (including all commissions and fees) or $4.575 per share. I don't need to worry about her complaining that her shares are down almost 5%.
Hope that helps. "
The S&P downgrade has affected the price, but there are still large premiums. May $4 in the money calls are selling at $0.50 bid with the stock trading at $4.23. Will the stock trade below $4 at May expiration or will the dividend be cut? The assumption was based on a simultaneous buy the stock and sell the call transaction. If one further assumes that the shares are called, you receive $4 on an net outlay of $3.73, or a bit over 7% in less than three months. Annualized it is approximately a 30% return, not counting any dividends.
A Closer Look Into Frontier Communications At Its 52-Week Low [View article]
Thanks for the information, although I really don't pay very close attention to the moves by institutional investors. Some have strict guidelines on holdings below certain price points, ratios or specific dividend requirements, etc.