I bought back my Itron, Inc. (ITRI) October 60 covered calls on Friday, but waited until today to have access to the December options to sell new calls. I think ITRI is on the come back and so this time I aimed higher with my strike. While ITRI was trading at $62.46 this morning I sold one ITRI December 65 covered call at $2.60 and received $259.29 after commissions. With more the strike being more than $2.50 out of the money and taking in over $2.50 per share I am giving myself more than 8% of upside potential with this trade. I also cushion my fall by 4% to the downside.
ITRI is due to announce earnings next week which helps the premiums perk up some. Although the have a trailing P/E ratio of 45.36, their forward P/E is only 15.28 with a PEG of only 0.59. That gives a slight leeway for their earnings to miss and not cause the stock price to plummet. Any slight dip will probably be bought. I see the downside limited to around $55.00 which wouldn’t be a small drop, but also wouldn’t be the end of the world. I based this on what I see as a reasonable P/E for their growth prospects and ITRI’s historical performance in that range. I see key upside hurdles at $65.00, $67.50 and $70.00. I don’t see ITRI getting back to my original purchase price of $80 in the near term, but as long as I can continue to sell rich premiums I’ll be fine. If ITRI does shoot up above my strike plus premium in the next nine weeks I’ll probably let it go and will wait for it to drop back down before getting in again.