Trade Westport Innovations

www.marketwire.com

Westport Innovations Inc. provides natural gas engines for medium and heavy-duty vehicles. The Company researches, develops, and markets low-emission engines and fuel injection systems that utilize alternative gaseous fuels such as natural gas, liquefied petroleum, biogas, and hydrogen.

via Morningstar

The world currently faces major challenges that are significantly impacted by transportation growth:

• oil supply and energy security, and the peak in global oil production,
• rising air pollution levels in the world’s rapidly growing cities, and
• increasing greenhouse gas emissions linked to global climate change.

Vehicle growth and oil demand in China alone are expected to increase by more than 300% over the next 25 years. These oil supply challenges are driving the rapid development of alternatives globally, including natural gas as a fuel for commercial transportation.

Westport Innovations is a global leader in alternative fuel, low-emissions transportation technologies. Leveraging a capital efficient business model to develop and commercialize natural gas engines in key vertical markets, Westport has grown substantially in revenue and stature. Helping drive the underlying value for Westport is a set of unique characteristics including:

• strong market fundamentals including environmental benefits and savings in fuel cost between diesel and natural gas driving growth of natural gas engines;
• valuable strategic and business alliances with some of the world’s largest engine and vehicle manufacturers creating significant barriers to entry;
• a highly capital efficient business model leveraging the manufacturing capabilities of our strategic partners;
• a deep and rich intellectual property base establishing a leadership position and licensing capabilities; and
• a solid and experienced senior management team.

 via westport.com

The option strategy I intend to use when trading WPRT is a covered call.

If WPRT trades above $27 on Feb 16, 2013

• I will be required to sell 100 shares at $27 ($2,700)
• Keep the option premium of $145
• Incur a loss of $70

If WPRT trades below $27 on Feb 16, 2013

• My options will expire worthless
• Keep the option premium of $145

If my options expire worthless I will instantly sell another set of covered calls on Westport Innovations, with a purchase price of $26.30 I will have a hard stop at $19.72.

I know some people may think risking $2,770 to receive $75 is foolish but let me point a couple things out.

• From now until Feb 16, 2013 is approximately 5 weeks.
• 52 weeks divided by 5 weeks = 10
• $75 divided by $2,770 = 2.7% return on investment (ROI)
• If I were to conduct this type of trade 10 times a year it would = 27.07% return on my money a year.

Here’s to our Wealth!