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You create a bull put spread when you write a put (usually out-of-the-money) and cover the risk of this short put by buying another put at an even lower strike price.  Since the put you wrote has a higher premium than the one you bought, the spread gives you a net credit of premium.  As long as the stock ends above the higher strike price, you get to keep your entire credit of premium at expiration with no close-out transactions. We used our Option Screener to find out-of-the-money puts on moderate risk stocks with above average price and earnings momentum.  We also used our Spread Search software to find favorably priced spreads that expire over the intermediate term. Our search found more than 40 spreads, among them the following.

 

Company

Stock Ticker

 Stock Price***

  Days to Expiration 

Percent Out-of-the-Money *

Required Funds on One Spread

Return on Spread   **

Ann Taylor Stores Corp

ANN

         25.54

              54

18%

          185

8%

ConocoPhillips

COP

         60.17

              19

4%

            464

8%

Hewlett Packard Co

HPQ

         42.25

              19

8%

            382

5%

Penn National Gaming Inc

PENN

         34.60

              19

5%

            185

8%

Time Warner Cable Inc

TWC

         61.13

              54

10%

           945

6%

* Percent Written Option is Out-of-the-Money

 

 

 

 

** Return from premium as Percent of Funds on One Spread (Not Annualized) *** Prices as of Monday, November 29, 2010

 

 

 

AnnTaylor Stores (ANN) operates 907 stores throughout the U.S., D.C., & P.R., incl. 506 moderate-priced LOFT stores and 92 factory stores (as of 1/10). Sells better-quality women's apparel, accessories, and shoes (leased depts. until '93). Most fashions are exclusive and sold under the Ann Taylor label. Stores are mainly located in upscale malls and specialty retail ctrs.

ConocoPhillips (COP) was formed on Aug. 30, 2002, when Phillips Petroleum acquired Conoco. It is an integrated oil and petrochemicals company with assets across the globe. Primary operating segments incl.: Exploration & Production (25% of '09 sales), Midstream (3%), Refining & Marketing (71%), Chemicals/Emerging Bus./Other (1%).

Hewlett-Packard Company (HPQ - Free Hewlett-Packard Stock Report) provides computing and imaging solutions and services to consumers and businesses. Operates in 6 segments. Rev. as a % of total (and % of op. earnings) in '09: Imaging & Printing, 21% (32%); Personal Systems, 30% (12%); Enterprise Storage & Servers, 13% (11%); Services, 30% (38%); Financing, 2% (2%); Software, 3% (5%); Other, 1% (NMF).

Penn National Gaming, Inc. (PENN) operates gaming and pari-mutuel properties. It currently owns or operates 19 facilities in 14 U.S. states and Ontario. The majority of the company's revenues are derived from gaming on slot machines and table games. Other rev. are derived from mgmt. service fees from Casino Rama, hotel, dining, retail, concessions, and racing operations.

Time Warner Cable Inc. (TWC) is the second largest cable operator in the U.S. (approximately 12.7 million subscribers), with technically-advanced, well-clustered systems located mainly in five geographic areas New York, the Carolinas, Ohio, Southern California, and Texas. Jointly (with Comcast) acquired substantially all the assets of Adelphia Communications in 2006.