Wednesday, October 8, 2014

BHP Billiton covered call for more income

BHP Billiton, symbol BHP, is an often unloved stocks.  It is a limited partnership that has to pay our all its earnings.  This makes evaluating BHP’s fundamentals a little more difficult than your basic corporation.  Using MSN’s investing information site, you can dig into the financials to learn that BHP makes a nice amount of money to fund their dividend payout.  

BHP is a resources company and demand and utilization of resources varies substantially which is why earnings and stock price can vary all over the place.

BHP Billiton pays dividends twice a year.   This year their yield is over 4%.   I am long BHP and underwater.   I will add to my position today at about $57.75 and will sell January $62.50 call for a $1.10 per contract.   A contract is equal to 100 shares.

Take a look at the covered call table below for an analysis of this trade.