Going Green With This Global Power Company For Potential 47% Annualized Gain

Last Friday, we had the calls we had written on AES
AES
Corp. (AES) expire out of the money, so we still own the stock, which has shown quite a bit of momentum since early August when the Inflation Reduction Act, which heavily subsidizes green energy, passed the Senate. With shares trading just above $26 this afternoon, you could sell the stock and realize your profit, or you could sell another round of covered calls. If you do not own, AES, a buy write today looks attractive, with the potential for a one-month annualized return of 47%.

Please email me ([email protected]) at any time with questions about how to use Forbes Premium Income Report. — J.D.

AES Corp. (AES) – Buy Write

Buy 200 AES

Sell to Open 2 October 21 $26 Call

Execute for Net Debit of $25.00 or lower

Covered Call Write (If you already own 200 AES)

Sell to Open 2 October 21 $26 Call @ $1.05 or higher

Arlington, Va.-based AES Corp. (AES) is AES is a global power company operating across 14 countries and four continents. Its current generation portfolio as of year-end 2021 consists of over 31 gigawatts of generation, with the generation mix composed of renewables (43%), gas (32%), coal (23%), and oil (2%). The company has 3.5 gigawatts of generation under construction. AES has majority ownership and operates six electric utilities distributing power to 2.6 million customers.

Revenue this year is expected to grow 3.2% to $11.5 billion, with earnings up 6.4% to $1.62 per share.

There next earnings report and the next ex-dividend date are both the first week of November.

If you already own 200 shares of AES, sell to open two contracts of $26 October 21 calls for at least $1.00 apiece.

Here is the buy write: Buy 200 AES ($26.05 current price), and sell to open two contracts of $26 October 21 calls. Use a net debit (stock price minus premium) of $25.00 or lower.

On the buy write, if AES closes above $26 at expiration, you would be assigned, which means selling the shares at $26. If this is the case, you would earn $1.00 per share on $25.00 at risk, or 4%. Over a 31-day holding period, that would be an annualized return of 47%. If AES closes at or below $26.00 on October 21, you would still own the stock at a cost basis of $25 per share.

Options income for this trade: We earn $210 selling 2 AES October 21 $26 call contracts. Click here for updated bid-ask and return characteristics.

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.