Chemical Company Options Trade Has 51% Annualized Return Potential

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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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Chemours (CC) – Buy Write

Buy 100 CC

Sell to Open 1 September 30 $37 Calls

Execute for Net Debit of $35.20 or lower

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.

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.

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