This Chemical Company Options Trade Has 51% Annualized Return Potential

Shares of this Delaware-based specialty chemical outfit have gained more than 23% since the start of July. Even though there is no upcoming dividend, the next earnings report is in November, which providing us a convenient window to write some calls for a potential profit of 5.1% over the next 36 days.

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Wilmington, Del.-based Chemours (CC) produces titanium dioxide, refrigerants and industrial resins used in plastics and coatings, refrigeration and air conditioning, general industrial, electronics, mining, and oil refining. Revenue this year is expected to grow 12.3% to $7.1 billion, and earnings are expected to grow 40.3% to $5.61 per share, giving the stock a 6.6 price-earnings ratio. That’s 5.7% lower than the 7.0 average P/E over the past five years.

Here is the buy write: Buy 100 CC ($37.05 current price), and sell to open one contract of $37 September 30 calls. Execute the trade for a net debit of $35.20 or lower.

If CC closes above $37 at expiration on September 30, we would be forced to sell at $37, and we’d earn $1.80 per share on $35.20 at risk, or 5.11%. On an annualized basis, that would be 51.8% for the 36-day holding period. If CC closes at or below $37 at expiration, we will still own the stock at a cost basis of $35.20.

Options income for this trade: We earn $185 selling 1 CC September 30 $37 call contract. Click here for updated bid-ask and return characteristics.

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John Dobosz is editor of Forbes Dividend Investor, which provides a weekly portfolio of high-yielding, value-priced income stocks, REITs and MLPs, and Forbes Premium Income Report, which sends out options-selling trade recommendations on two dividend-paying stocks every Tuesday and Thursday.

NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2022 by Forbes Media LLC.

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