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Final Term Paper
Fin 461: Financial derivativesSec: 01
A Financial Overview on Chevron Corporation
Submitted By
Souvik Ghosh 0520238Md. Fazle Rabbi 0310125
Syed Zubayer Alam 0420007
Submitted to:
C. R. MohsinInstructor, FinanceSchool of Business
Independent University, Bangladesh1st May 2008
Table of Contents
Company profile
Competitors
Income statement of three years
Balance sheet of three years
Options Chain data with expiration
Ratio analysis and financial trend
1. Net profit margin 2. Gross profit margin 3. Return on assets 4. Return on equity 5. Current ratio 6. Acid test ratio 7. Total debt to equity ratio 8. Total debt to total asset ratio 9. Interest coverage 10. Inventory turnover 11. Asset turnover
Summary for three year cash flow
NASDAQ analysis and recommendation
Option Valuation Model with calculation and comparison
Current and future stock chart
Recommended option strategy and rational
Company Profile
Chevron Corp.is one of the largest integrated energy companies of the world. It is, in fact,
one of the world's six "supermajor" oil companies and the fifth largest global energy
company, which has it's headquarter in San Ramon, California, USA and active in more than
180 countries.
The company was founded in 1879. It was previously known as "Standard Oil Company of
California" and changed its name to "Chevron Corporation" in 1984. Further, it changed its
name to "ChevronTexaco Corporation" in 2001 and finally to "Chevron Corporation" in
2005.
Chevron corp. employs approximately 59,000 people worldwide (of which 27,000 are U.S.-
based) and had approximately 12 billion barrels (1.9 km³) of oil-equivalent net proved
reserves at December 31, 2003. Daily production in 2003 was 2.5 million net oil-equivalent
barrels (400,000 m³) per day.
Chevron Corporation operates as an integrated energy company worldwide. The company is
engaged in every aspect of the oil and gas industry, which include power generation, coal
mining, e xploration and production, refining, chemicals manufacturing and sales, marketing
crude oil and products derived from petroleum, transporting crude oil, natural gas and
petroleum products by pipeline, marine vessel, motor equipment, and rail car and some other
activities like insurance, and real estate activities.
In addition, the company has a worldwide marketing network in 84 countries with
approximately 24,000 retail sites. The company also has interests in 13 power generating
assets in the United States, Asia, and Europe. Chevron Corp. also has gas stations in Western
Canada.
Chevron Corp. is the only brand of gas used by several automakers when testing vehicles,
including General Motors and Toyota. (Ford does as well despite a strategic alliance with
BP.) Chevron Corp. also has often had one of the highest brand loyalty rates for gasoline in
America.
Finally, Chevron Corp. is the owner of the "Standard Oil" trademark in a 16-state area of the
western and southeastern United States. To maintain ownership of the mark, the company
owns and operates one Standard-branded Chevron station in each state of its area. "Standard
Oil" was a predominant integrated oil producing, transporting, refining, and marketing
company which was dissolved by the United States Supreme Court in 1911. Chevron Corp.
also is currently the owner of the trademark rights to Texaco brand gasoline.
Chevron Corp. achieved the highest annual earnings in the company’s history of $18.7 billion
in 2007. It has increased the quarterly stock dividend by 11.5 percent and has invested $20
billion in the company’s businesses. The companies focus continues on exploration and
production activities and upgrades to the refinery network.
Chevron Corp. also has reduced total debt by $2.6 billion and thus reduced the ratio of debt to
debt-plus-equity from 12.5 percent to 8.6 percent.
It achieved Sales and other operating revenues of $214.1 billion. The Net income was $18.7
billion. The Return on capital employed 23.1%, Return on average stockholders’ equity was
25.6%. Cash dividends were $2.26 per share and Total stockholder return was 30.5% in 2007.
Competitors
Chevron Corp. has 2 major competitors present in the market; Exxon Mobil corp. and Bp
p.l.c. Apart from these 2 companies there are other 3 companies from the "supermajors", non
state-owned energy companies, who are also competing with chevron corp.
Exxon Mobil Corporation:
Exxon Mobil Corporation is an American oil and gas corporation formed in 1870 also known
as ExxonMobil. ExxonMobil is the world's largest company by revenue, at $404.5 billion for
the fiscal year of 2007. It is the largest of the six oil supermajors with daily production of
4.18 million BOE (barrels of oil equivalent) in 2007.
Exxon Mobil Corporation engages in the exploration, production, transportation, and sale of
crude oil and natural gas and also engages in the manufacture of petroleum products, and
transportation and sale of crude oil, natural gas, and petroleum products.
Exxon Mobil also has interests in electric power generation facilities. The company operates
in the United States, Canada, Europe, Africa, Asia-Pacific, the Middle East, Russia/Caspian
region, and South America.
Bp P.l.c. :
The BP P.l.c, formerly known as "British Petroleum", is one of the main competitors of
Chevron corp. It has it's headquarter in London, England, UK and founded in 1889. The
company has market capital of $ 218.09 Billion and the revenue was $ 284.37 Billion last
fiscal year. The quarterly revenue growth is 28.90% and finally the net income was $ 20.84
Billion.
BP p.l.c. provides fuel for transportation, energy for heat and light, retail services, and
petrochemicals products. It operates in two segments, Exploration and Production, and
Refining and Marketing. It has exploration and production activities in the United States, the
United Kingdom, Angola, Azerbaijan, Canada, Egypt, Russia, and Trinidad and Tobago, as
well as in Asia Pacific, Latin America, and the Middle East.
The Refining and Marketing segment engages in the supply and trading, refining, marketing,
and transportation of crude oil, petroleum, and chemical products to wholesale and retail
customers under the Amoco and BP brands.
Royal Dutch Shell p.l.c.:
Royal Dutch Shell plc is a multinational oil company of British and Dutch origins. It is one of
the largest private sector energy corporations in the world, and one of the six "supermajors".
The company engages in the exploration, production, and trading of various energy resources
worldwide. Royal Dutch Shell plc is based in The Hague, the Netherlands.
It operates in five segments: Exploration and Production, Gas and Power, Oil Sands, Oil
Products, and Chemicals. Shell's revenues of $318.8 billion in 2006 made it the third-largest
corporation in the world by revenues behind only ExxonMobil and Wal-Mart. Its 2006 gross
profits of $26 billion made it the world's second most profitable company, after ExxonMobil
and before BP. Forbes Global 2000 in 2007 ranked Shell the eighth largest company in the
world.
The Royal Dutch/Shell Group of companies was created in February 1907.
Total S.A.:
The Total S.A is another of the "supersix" oil company headquartered in Paris, France. Its
businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and
production to power generation, transportation, refining, petroleum product marketing, and
international crude oil and product trading. Total is also a large-scale chemicals
manufacturer.
Total operates in more than 130 countries and has over 111,000 employees. It was formed in
March 28, 1924.
ConocoPhillips Company:
ConocoPhillips Company is another international energy corporation with its headquarters
in Houston, Texas. It was created through the merger of Conoco Inc. and the Phillips
Petroleum Company on August 30, 2002. It is one of the six "supermajor" vertically
integrated oil companies.
ConocoPhillips employs approximately 32,700 people worldwide in nearly 40 countries. In
addition, as of 2006, their 12 U.S. refineries had a combined crude processing capacity of
2,208,000 barrels per day (351,000 m³/d) (BPD) making it the second-largest refiner in the
United States.
Another significant competitor present in the market is,
PetroChina Co. Ltd.:
PetroChina Company Limited, together with its subsidiaries, engages in petroleum and
natural gas related activities in the People's Republic of China.
It operates in four segments: Exploration and Production, Refining and Marketing, Chemicals
and Marketing, and Natural Gas and Pipeline.
As of December 31, 2006, the company had estimated proved reserves of approximately
11,618 million barrels of crude oil and approximately 53,469.2 billion cubic feet of natural
gas, as well as operated 18,207 units of service stations.
It owned and operated 20,590 kilometers of natural gas pipeline networks, 9,620 kilometers
of crude oil pipeline, and 2,413 kilometers of pipeline for refined products. The company was
founded in 1988 and is headquartered in Beijing, China.
Income Statement of Three Years
(Figures in Millions)
Particulars\Years 2007 2006 2005
Revenues and Other Income:
Sales and Other Operating Revenues:
Upstream and Downstream:
Refined Products:
Gasoline 47,074 42,639 39,491
Jet fuel 16,333 15,577 13,606
Gas oils and kerosene 32,170 31,647 27,572
Residual fuel oils 7,348 7,086 6,681
Other refined products 5,886 5,723 4,726
Total Refined Products 108,811 102,672 92,076
Crude oil and condensate 61,542 61,842 66,552
Natural gas 24,437 22,515 18,248
Natural gas liquids 4,483 3,488 3,211
Other petroleum revenues 2,460 2,862 3,145
Excise taxes 9,959 9,486 8,705
Total Upstream and Downstream 211,692 202,865 191,937
Chemicals 1,582 1,395 1,117
All Other 817 632 587
Total Sales and Other Operating
Revenues214,091 204,892 193,641
Income from equity affiliates 4,144 4,255 3,731
Other income 2,669 971 828
Total Revenues and Other Income 220,904 210,118 198,200
Income Statement Continues…
…Income Statement Continued
Costs and Other Deductions:
Purchased crude oil and products 133,309 128,151 127,968
Operating expenses 16,932 14,624 12,191
Selling, general and administrative
expenses5,926 5,093 4,828
Exploration expenses 1,323 1,364 743
Depreciation, depletion and amortization 8,708 7,506 5,913
Taxes other than on income 22,266 20,883 20,782
Interest and debt expense 166 451 482
Minority interests 107 70 96
Total Costs and Other Deductions 188,737 178,142 173,003
Income From Continuing
Operations Before Income
Tax Expense
32,167 31,976 25,197
Income tax expense 13,479 14,838 11,098
Net Income 18,688 17,138 14,099
Balance sheet of three years
(Figures in Millions)
Particulars\Years 2007 2006 2005
Assets:
Current Assets:
Cash and cash equivalents 7,362 10,493 10,043
Marketable securities 732 953 1,101
Accounts and notes receivable 22,446 17,628 17,184
Inventories:
Crude oil and petroleum products 4,003 3,586 3,182
Chemicals 290 258 245
Materials, supplies and other 1,017 812 694
Total inventories 5,310 4,656 4,121
Prepaid expenses and other current assets 3,527 2,574 1,887
Total Current Assets 39,377 36,304 34,336
Long-Term Assets:
Long-term receivables, net 2,194 2,203 1,686
Investments and advances 20,477 18,552 17,057
Properties, Plants and Equipments:
Properties, plant and equipment, at cost 154,084 137,747 127,446
Less: Accumulated depreciation, depletion and
amortization75,474 68,889 63,756
Net properties, plant and equipment 78,610 68,858 63,690
Total Long Term Assets 101,281 89,613 82,433
Deferred charges and other assets 3,491 2,088 4,428
Goodwill 4,637 4,623 4,636
Total Assets 148,786 132,628 125,833
Balance Sheet Continues…
…Balance Sheet Continued
Particulars\Years 2007 2006 2005
Liabilities and Stockholders’ Equity:
Liabilities:
Current Liabilities:
Short-term debt 1,162 2,159 739
Accounts payable 21,756 16,675 16,074
Accrued liabilities 5,275 4,546 3,690
Federal and other taxes on income 3,972 3,626 3,127
Other taxes payable 1,633 1,403 1,381
Total Current Liabilities 33,798 28,409 25,011
Long Term Liabilities:
Long-term debt and capital lease obligations 6,070 7,679 12,131
Deferred credits and other non current obligations 15,007 11,000 10,507
Non current deferred income taxes 12,170 11,647 11,262
Reserves for employee benefit plans 4,449 4,749 4,046
Minority interests 204 209 200
Total Long Term Liabilities 71,698 63,693 63,157
Total Liabilities 71,698 63,693 63,157
Stockholders’ Equity 77,088 68,935 62,676
Total Liabilities and Stockholders’
Equity
148,786 132,628 125,833
Options Chain Data
May 2008, Expiration At 17th
Call Options
Released At March 17th 2008
Strike Symbol Last Chg Bid Ask Vol Open Int
70 CVXEN.X 16 0 N/A N/A 5 5
75 CVXEO.X 16 0 N/A N/A 114 157
80 CVXEP.X 13 0 N/A N/A 1 613
85 CVXEQ.X 8.1 0 N/A N/A 24 2,120
90 CVXER.X 4.1 0 N/A N/A 494 11,020
95 CVXES.X 1.5 0 N/A N/A 1,268 7,451
100 CVXET.X 0.3 0 N/A N/A 748 1,992
105 CVXEA.X 0.1 0 N/A N/A 100 9
Put Options
Released at March 17th 2008
Strike Symbol Last Chg Bid Ask Vol Open Int
70 CVXQN.X 0.05 0 N/A N/A 2 18
75 CVXQO.X 0.05 0 N/A N/A 107 469
80 CVXQP.X 0.1 0 N/A N/A 118 1,453
85 CVXQQ.X 0.4 0 N/A N/A 7,344 18,809
90 CVXQR.X 1.5 0 N/A N/A 4,060 6,260
95 CVXQS.X 3.9 0 N/A N/A 571 1,417
100 CVXQT.X 8.2 0 N/A N/A 213 139
105 CVXQA.X 13 0 N/A N/A 1 4
September 2008, Expiration At 20th
Call Options
Released at 20th January
Strike Symbol Last Chg Bid Ask VolOpen
Int
60 CVXIL.X 27.1 0 N/A N/A 1 126
65 CVXIM.X 21.7 0 N/A N/A 0 460
70 CVXIN.X 23.2 0 N/A N/A 2 313
75 CVXIO.X 18.8 0 N/A N/A 44 648
80 CVXIP.X 14.7 0 N/A N/A 11 5,775
85 CVXIQ.X 10.4 0 N/A N/A 1,035 1,728
90 CVXIR.X 7.5 0 N/A N/A 8 4,909
95 CVXIS.X 4.77 0 N/A N/A 155 3,356
100 CVXIT.X 2.89 0 N/A N/A 61 9,164
105 CVXIA.X 1.65 0 N/A N/A 150 1,951
110 CVXIB.X 0.9 0 N/A N/A 293 826
Put Options
Released at 20th January
Strike Symbol Last Chg Bid Ask Vol Open Int
60 CVXUL.X 0.3 0 N/A N/A 10 3,054
65 CVXUM.X 0.4 0 N/A N/A 15 8,282
70 CVXUN.X 0.7 0 N/A N/A 10 3,827
75 CVXUO.X 1.2 0 N/A N/A 13 2,560
80 CVXUP.X 1.9 0 N/A N/A 13 8,248
85 CVXUQ.X 3.2 0 N/A N/A 55 1,192
90 CVXUR.X 4.8 0 N/A N/A 10 2,688
95 CVXUS.X 7.3 0 N/A N/A 108 808
100 CVXUT.X 10 0 N/A N/A 216 537
105 CVXUA.X 14 0 N/A N/A 30 406
110 CVXUB.X 25 0 N/A N/A 0 698
January 2009, Expiration at 17th January
Call Options
Released at 17th June 2007
Strike Symbol Last Chg Bid Ask Vol Open Int
65 VCHAM.X 26 0 N/A N/A 4 3,314
70 VCHAN.X 24.4 0 N/A N/A 6 10,284
75 VCHAO.X 17.9 0 N/A N/A 25 4,608
80 VCHAP.X 17.2 0 N/A N/A 23 19,464
85 VCHAQ.X 13.6 0 N/A N/A 10 10,013
90 VCHAR.X 10.7 0 N/A N/A 19 28,363
95 VCHAS.X 8 0 N/A N/A 43 13,760
100 VCHAT.X 5.71 0 N/A N/A 56 11,318
105 VCHAA.X 4 0 N/A N/A 95 2,991
110 VCHAB.X 2.8 0 N/A N/A 100 6,486
120 VCHAD.X 1.15 0 N/A N/A 3 1,173
Put Options
Released at 17th June 2007
Strike Symbol Last Chg Bid Ask Vol Open Int
65 VCHMM.X 1.35 0 N/A N/A 3 7,362
70 VCHMN.X 1.85 0 N/A N/A 12 16,790
75 VCHMO.X 2.4 0 N/A N/A 5 4,205
80 VCHMP.X 3.6 0 N/A N/A 2 24,695
85 VCHMQ.X 5.1 0 N/A N/A 5 8,988
90 VCHMR.X 7.1 0 N/A N/A 6 20,923
95 VCHMS.X 9.3 0 N/A N/A 1 788
100 VCHMT.X 12.4 0 N/A N/A 10 1,566
105 VCHMA.X 15.1 0 N/A N/A 17 323
110 VCHMB.X 21 0 N/A N/A 1 288
120 VCHMD.X 36.1 0 N/A N/A 1 302
Ratio analysis and financial trend
PROFITABILITY RATIOS:
Net Profit Margin = Net income
Revenue
For 2007, Net Profit Margin = 18,688,000,000/220,904,000,000 = 0.085
For 2006, Net Profit Margin = 17,138,000,000/210,118,000,000 = 0.082
For 2005, Net Profit Margin = 14,099,000,000/198,200,000,000 = 0.071
Net profit margin tells us about how much of the revenue generated by a company can
be kept as profit for the company. From the data above, it can be seen that the net profit
margin of Chevron Corporation is increasing since their net income has increased over the
past three years. Although the revenue also increased but the margin of increase in revenue
was comparatively low. However, the marginal profit in 2007 was less compare to the
previous two years, which is due to less increase in net income from 2006 to 2007 than it was
from 2005 to 2006.
Gross Profit Margin = Revenue – Cost of goods sold
Revenue
For 2007, Gross Profit Margin = (220,904,000,000-134,632,000,000)/220,904,000,000
= 0.391
For 2006, Gross Profit Margin = (210,118,000,000-144,139,000,000)/210,118,000,000
= 0.314
For 2005, Gross Profit Margin = (198,200,000,000-140,902,000,000)/198,200,000,000
= 0.289
Gross Profit Margin allows us to see the profit after operating expenses only have
been taken into account. This ratio of the company has a positive trend as well and it
increased by a good margin in 2007 where the cost of goods sold has decreased.
MANAGEMENT EFFECTIVENESS:
Return on Assets = Net income
Total Assets
For 2007, Return on Assets = 18,688,000,000/148,786,000,000 = 0.126
For 2006, Return on Assets = 17,138,000,000/132,628,000,000 = 0.129
For 2005, Return on Assets = 14,099,000,000/125,833,000,000 = 0.112
Return on Assets shows the profitability of a company relative to its total assets. This
ratio of Chevron, however, has fluctuated in the past three years. Although the net income
and total assets of Chevron has increased but in the last year, the net income has increased by
smaller margin compare to the previous two years due to higher expenses. The total asset has
also increased but by a large margin than the previous years. So, the ROA ratio increased in
2006 from 2005 but fell in 2007.
Return on Equity = Net income
Total Equity
For 2007, Return on Equity = 18,688,000,000/77,088,000,000 = 0.242
For 2006, Return on Equity = 17,138,000,000/68,935,000,000 = 0.249
For 2005, Return on Equity = 14,099,000,000/62,676,000,000 = 0.225
Return on Equity shows the profit per dollar earned from the investors’ investments. This
ratio also fell in the last year in comparison to the previous years, as said earlier, due to less
marginal increase in net profit in 2007 and, in this case, much higher total stockholders’
equity.
FINANCIAL STRENGTH/ SOLVENCY RATIOS:
Current Ratio = Current Assets
Current Liabilities
For 2007, Current Ratio = 39,377,000,000/33,798,000,000 = 1.165
For 2006, Current Ratio = 36,304,000,000/28,409,000,000 = 1.278
For 2005, Current Ratio = 34,336,000,000/25,011,000,000 = 1.373
The current ratio tells us how well a company is able to pay off its short-term debt using its
most liquid assets. This ratio is definitely not good for Chevron as it is decreasing, which
demonstrate that financial solvency of the company is weakening. Although, both the current
assets and current liabilities have increased in the past three years, the marginal increase in
current liability was higher than that of current assets as cash and marketable securities have
decreased under current assets.
Quick/ Acid Test Ratio = Current Assets – Inventory
Current Liabilities
For 2007, Quick/Acid Test Ratio = (39,377,000,000-5,310,000,000)/33,798,000,000
= 1.008
For 2006, Quick/Acid Test Ratio = (36,304,000,000-4,656,000,000)/28,409,000,000
= 1.114
For 2005, Quick/Acid Test Ratio = (34,336,000,000-4,121,000,000)/25,011,000,000
= 1.208
This ratio is much like current ratio but as inventory is subtracted, this ratio becomes better
test of liquidity of a company. Like current ratio, this ratio also decreasing due to same reason
stated above in current ratio section. Here, another reason can be found and that is inventory.
The amount of inventory of Chevron is increasing, which indicates that the sales of Chevron
are not reaching up to the company’s own expectation and that is why the inventory is pilling
up.
Total Debt-to-equity Ratio = Total Liabilities
Total Equity
For 2007, Total Debt-to-equity Ratio = 71,698,000,000/77,088,000,000 = 0.930
For 2006, Total Debt-to-equity Ratio = 63,693,000,000/68,935,000,000 = 0.924
For 2005, Total Debt-to-equity Ratio = 63,157,000,000/62,676,000,000 = 1.008
Debt-equity ratio determines the financial leverage of a company. This ratio shows the
amount of financing activity done by investors and the amount of loan taken by the company.
The lower the ratio, the better is the financial leverage of the company. In 2006, the ratio was
the lowest due to less marginal increase in total liability but the ratio increased in 2007 where
both the total liability and the equity increased but the marginal liability increased higher than
the equity. So the ratio is slightly higher than 2006.
Total Debt-to-Total Asset Ratio = Total Liabilities
Total Assets
For 2007, Total Debt-to-Total Asset Ratio = 71,698,000,000/148,786,000,000 = 0.482
For 2006, Total Debt-to-Total Asset Ratio = 63,693,000,000/132,628,000,000 = 0.480
For 2005, Total Debt-to-Total Asset Ratio = 63,157,000,000/125,833,000,000 = 0.502
This ratio is almost similar to Debt-equity ratio but here the ratio shows how much of
the company’s assets are financed through debts.
Interest Coverage = EBITDA
Interest Expense
For 2007, Interest Coverage = 32,440,000,000/166,000,000 = 195.422
For 2006, Interest Coverage = 32,497,000,000/451,000,000 = 72.055
For 2005, Interest Coverage = 25,775,000,000/482,000,000 = 53.475
This ratio shows how well a company can cover its interest payments. Since, the ratio has
increased over the past three years due to decrease in the interest expense; it can be stated that
Chevron’s ability to pay its debt has grown up significantly.
EFFICIENCY RATIOS:
Inventory Turnover = Cost of goods sold
Average inventory
For 2007, Inventory Turnover = 134,632,000,000/4,983,000,000 = 27.02
For 2006, Inventory Turnover = 144,139,000,000/4,388,500,000 = 32.84
For 2005, Inventory Turnover = 140,902,000,000/3,552,000,000 = 39.67
Inventory turnover ratio tells us how fast a company can sell its products, usually in a year. In
this case, however, the ratio has regularly decreased in the last three years, which indicates
that the company’s sales are going down, resulting in a higher average inventory.
Asset Turnover = Revenue
Total Assets
For 2007, Asset Turnover = 220,904,000,000/148,786,000,000 = 1.485
For 2006, Asset Turnover = 210,118,000,000/132,628,000,000 = 1.584
For 2005, Asset Turnover = 198,200,000,000/125,833,000,000 = 1.575
The asset-turnover ratio shows how much of revenue is generated from every unit of assets.
This ratio, also, has decreased in the last year due to lower marginal increase in revenue in
comparison to marginal increase in total assets, which indicates that, the company’s
efficiency has decreased now than it was in the previous two years.
Summary for three year cash flow
(Figures in Millions)
Particulars\Year 2007 2006 2005
Operating Activities
Net income 18688 17138 14099
Adjustments:
Depreciation, depletion and amortization 8708 7506 5913
Dry hole expense 507 520 226
Distributions (less) than income from equity affiliates(1439
)(979) 1304
Net before-tax gains on asset retirements and sales(2315
)(229) (134)
Net foreign currency effects 378 259 62
Deferred income tax provision 261 614 1,393
Net decrease (increase) in operating
working capital composed of:
(Increase) decrease in accounts and notes receivable(3867
)17
(3164
)
(Increase) decrease in inventories (749) (536) (968)
(Increase) decrease in prepaid expenses and other current
assets(370) (31) (54)
Increase in accounts payable and accrued liabilities 4930 1246 3851
Increase (decrease) in income and other taxes payable 741 348 281
Net decrease (increase) in operating working capital 685 1044 (54)
Minority interest in net income 107 70 96
(Increase) decrease in long-term receivables (82) (900) (191)
(Increase) decrease in other deferred charges (530) 232 668
Cash contributions to employee pension plans (317) (449)(1022
)
Other 326 (503) 353
Net Cash Provided by Operating Activities2497
7
2432
3
2010
5
Cash Flow Continues…
…Cash Flow Continued
Particulars\Year 2007 2006 2005
Investing Activities
Cash portion of Unocal acquisition,
net of Unocal cash receivedN\A N\A (5934)
Repayment of loans by equity affiliates 21 463 57
Proceeds from asset sales 3338 989 2681
Marketable securities purchased (1975) (1271) (918)
Marketable securities sold 2160 1413 1254
Net sales (purchases) of marketable securities 185 142 336
Net purchases of other short-term investments (799) N\A N\A
Net Cash Used for Investing Activities(13933
)
(12219
)
(11561
)
Financing Activities
Net (payments) borrowings of short-term obligations (345) (677) (109)
Repayments of long-term debt
and other financing obligations(3343) (2224) (966)
Net (purchases) sales of treasury shares (6389) (4491) (2597)
Cash dividends – Common stock (4791) (4396) (3778)
Dividends paid to minority interests (77) (60) (98)
Redemption of preferred stock by subsidiaries N\A N\A (140)
Proceeds from issuances of long-term debt 650 N\A 20
Net Cash Used for Financing Activities(14295
)
(11848
)(7668)
Effect of Exchange Rate Changes 120 194 (124)
on Cash and Cash Equivalents
Net Change in Cash and Cash Equivalents (3131) 450 752
Cash and Cash Equivalents at January 1 10493 10043 9291
Cash and Cash Equivalents at December 31 7,362 10,493 10,043
Summary
The first thing that can easily be noticeable from the cash flow of Chevron corp. is, the net
income has raised to $ 18688 million in 2007, a $ 1000 million higher than 2006. Then the
next noticeable item is from "The operating activities, cash flows provided by or used in"
section. It is the change in account receivables. In 2007 the amount is very high than in 2006.
But the amount of changes in account receivables was highest in 2005 to $ 191 million. The
A/R change in 2007 is very high because of probably the long term payment facilities
provided by Chevron corp. or management error. The change in liabilities also increased in
2007 while it was a positive $ 1594 million in 2006.
So, finally total cash flow from operating activities rose to, 3 years high at $ 24977 million, in
2007.
Chevron and its partners made a final investment decision in 2007 for the 5.2 million metric-
ton-per-year onshore Angola LNG project and investments are also made in Agbami in
Nigeria and Blind Faith in the U.S. Gulf of Mexico. Hence, the capital expenditure and
investment rose respectively to $ 16678 million and $ 593 million in 2007, which were also 3
years high. The important thing to notice is that, the other cash flows from investing activities
increased to $ 3338 million, while it was $ 989 million in 2006 and negative $ 3253 million
in 2005.
The total cash flow from investing activities was 3 years high in 2007 at $ 13933 million.
The “Financing Activities, Cash Flows Provided By or Used In” shows some important
information like, dividend payment, sale purchase of stock and net borrowings and finally all
in sum, total cash flows from financing activities, was high in 2007 at respectively $ 4868
Million $ 6389, $ 3038 million and $ 14295, these all are 3 years high in comparison between
2005-06-07. All these figures denote that the company is doing better business and giving
more dividends to the stockholders and increasing sale purchase of stocks.
The effect of exchange rate changes impacted the whole economy since 2001. In 2007
Chevron corp. had positive $ 120 million effect of exchange rate changes that is bit lower
than in 2006, $ 194 million. But this figure was negative in 2005.
Overall the change in cash and cash equivalents was negative in 2007 of minus $ 3131
million, mainly due to heavy investments in different businesses all across the world.
NASDAQ analysis and recommendation
Consensus Recommendation Detailed Analyst Recommendation
Each recommendation received from contributors is mapped to one of the I/B/E/S standard
ratings. A consensus recommendation is determined by an average of the numeric values,
rounding that mean value to the nearest integer. This area currently displays US research
coverage only. In many cases, non-US related research coverage can be accessed from the
homepage of the respective company.
12 Month Price Target Range Earnings Surprise
Consensus
100
55
92.5
Previous Close
116
Price targets are calculated by estimating
future earnings per share and then applying a
price-to-earnings multiple, known as the P/E
ratio.
2.29
1.72
1.15
0.58
Sep06Dec06Mar07Jun07Sep07Dec07
Estimate Reported Earning
Momentum (4 Weeks)
12/2008 17 of 22 estimates changed
Up:
10
Down:
7
12/2008 EPS Mean % change
4.685%
9.691 1 Month
Ago
10.145 Current
Estimate momentum measures changes in analyst sentiment over time and may be an
indicator of future price movements.
Detailed Estimates Submitted
Earnings Growth (12/2008) Price/Earnings (12/2008)
CVX 21.5%
Industry*25.83
%
*OIL
CVX 9.12
Industry* 12.
4
Earnings Growth is the measure of year on
year earnings per share (EPS) growth from the
prior fiscal year, expressed as a percentage.
*OIL
Price/Earnings ratio is a widely used stock
evaluation measure.
Consensus Earnings Forecasts PEG Ratio
8.35 10.14/2210.22/21
2007A 2008 2009
The actual reported earnings per share for
12/2007 for CVX was 8.35. For the fiscal year
12/2008, the consensus mean EPS is 10.14,
derived from a total of 22 estimates.
The PEG ratio is the Price Earnings ratio
divided by the growth rate. In this case we use
the forecasted earnings over the next 12
months and the long term forecasted growth
rate (based on the consensus of professional
analysts.)
Chevron Corp. Technical Chart
Last Trade: 92.70
Trade Time: Apr 21
Change: 0.00 (0.00%)
Prev Close: 92.50
Open: N/A
Bid: N/A
Ask: N/A
1y Target Est: 98.17
Day's Range: N/A - N/A
52wk Range: 76.40 - 95.50
Volume: 0
Avg Vol (3m): 11,848,100
Market Cap: 192.09B
P/E (ttm): 10.55
EPS (ttm): 8.77
Div & Yield: 2.32 (2.50%)
Fundamental Analysis
From the consensus and analyst recommendation we can see that most of the analysts are
suggesting holding the stock and buy them. The price target is calculated at $ 100 while it is
now $ 92.5. Thus, the consensus is estimating the price will go up in future.
The earnings surprise graph shows that, in 2007 the estimated and reported earning are
almost close to each other while most of the time the reported earnings are lower than
estimated. But the difference is very little.
17 of 22 analyst estimates have been changed in recent 4 weeks. 10 of them now changed
their opinion to buy, hold or strong buy the stocks while 7 of them changed their opinion to
opposite.
The earnings per share mean's percentage change is currently 10.146, while it was 9.691 last
month. Thus it increased a bit in a month.
From the earnings growth we can see that, chevron corp. earning growth is bit lower than the
oil industry, 21.5% and 25.83%, but this is not a significant difference. The P/E ratio for
chevron corp. is 9.12 and for the industry it is 12.40. This not a big difference in a market
containing only 5-6 major competitors.
The next thing to watch is the consensus earnings forecast. This graph shows that the
earnings are expected to rise in near future.
The PEG ratio shows that the stocks are overvalued as the P/E is greater than the growth.
Finally we get a mixed idea about the company from the fundamental analysis, as the
"Earnings surprise" and "P/E" graphs did not favor much the idea of buying or holding the
stocks while, on the other hand, "12 Month Price Target Range", "EPS Mean % change" and
"Consensus Earnings Forecasts" parts are suggesting to hold or buy the stock.
Technical Analysis
The 2 years Chevron Corp. technical chart shows that it is upward rising from 2006 but there
are some falls in the chart. The interesting thing to notice is that despite the U.S. recession
and downfall of the world economy the graph is still upward rising and the 1 year estimate is
$ 98.17, while it is now $ 92.50. Despite two falls in mid February and March, the chart is
uprising since January 2008.
And from the chart we can see that in 2007, the chart was moving upward during May, June,
July and August. So the historic analysis provides support that the chart may move upward
during the month of May and later on.
From the technical chart we can thus get the idea that the stock price will move up in May but
there is risks of short falls as it already occurred twice this year.
Cash flow and Options Chain Analysis
From the cash flow of Chevron corp. it can be seen that, the net income has been raised to $
18688 million in 2007, a $ 1000 million higher than 2006. The change in liabilities also
increased in 2007 while it was a positive $ 1594 million in 2006.The total cash flow from
operating activities rose to $ 24977 million, in 2007.
The other cash flows from investing activities increased to $ 3338 million, while it was $ 989
million in 2006 and negative $ 3253 million in 2005. The total cash flow from investing
activities was $ 13933 million.
The “Financing Activities, Cash Flows Provided By or Used In” shows some important
information like, dividend payment, sale purchase of stock and net borrowings and finally all
in sum, total cash flows from financing activities, was high in 2007 at respectively $ 4868
Million $ 6389, $ 3038 million and $ 14295, these all are 3 years high in comparison between
2005-06-07. All these figures denote that the company is doing better business and giving
more dividends to the stockholders and increasing sale purchase of stocks.
Overall the change in cash and cash equivalents was negative in 2007 of minus $ 3131
million, mainly due to heavy investments in different businesses all across the world.
The option chain data for May and September 2008 and January 2009 is presented here. From
the chain data, we can see that,
In May, the highest number of open interest for the call option is $ 90 and for put option, it is
$ 85. The call option highest number of interest is below current stock price $ 92.50.
Probably because people are estimating a short fall in the price of the stock because of recent
U.S. recession and economic slowdown all across the worlds. The second highest number of
open interest is at $ 95. At this rate people are expecting the market will not fall and the rise
in the stock price will continue.
In September, the highest number of open interest for the call option is at $ 100 and for put
option, it is $ 80. The gap is $ 20, which is very huge and it is obvious that investors are very
confused about the market situation.
In January 2009, the highest number of open interest for the call option is at $ 90 and for put
option, it is $ 80. The second highest rate is $ 80 for call option. This denotes that people are
expecting a fall in the stock price and thus making the call option below current spot price of
$ 92.40.
Finally, after doing the fundamental, technical and cash flow and option chain data analysis
we suggest that, chevron corp. stocks should be bought and hold as there is possibilities of
market to go up in near future. And also we suggest doing a put option now at price range of
$ 85-90 for at least 6 months and at most 9 months, to avoid the risk of price fall.
Option Valuation Model with Calculation and Comparison
Option Valuation Model with Calculation
Options Selected For Valuation from the Options Chain Data:
First and Second Highest Open Interest Considered.
Options S.I. Month Release ExpirationTime to
MaturityStrike Last
Open
Int.
Calls
1
May 2008
17th
March
2008
17th May
20082 Month
95 1.5 7451
2 90 4.1 11020
3September
2008
20th
January
2008
20th
September
2008
8 Month
90 7.5 4909
4 100 2.89 9164
5 January
2009
17th June
2007
17th January
200919 Month
80 17.2 19264
6 90 10.7 28363
Puts
7
May 2008
17th
March
2008
17th May
20082 Month
90 1.5 6260
8 85 0.4 18809
9September
2008
20th
January
2008
20th
September
2008
8 Month
80 4.8 8248
10 65 0.4 8282
11 January
2009
17th June
2007
17th January
200919 Month
90 7.1 20923
12 80 3.6 24695
Formula Used for Option Valuation (Non-European Dividend Paying Company):
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
d(2) = d(1) - σ * t^0.5
Call Option:
C(t) = S * e^(-dt) * N{d(1)} – X * e^(-rt) * N{d(2)}
Put Option:
P(t) = X * e^(-rt) * N{-d(2)} - S * e^(-dt) * N{-d(1)}
Formula Explanation:
C(t) = Value of Call Option’s Premium
S = Underlying Stock Price (Last Closing Price of 21th April 2008)
e = Exponential
d = Dividend Yield
t = Time to Maturity
N = Tabular Value
X = Strike Price
r = Real Risk Free Rate
σ = Standard Deviation of the Options for This Year
P(t) = Value of Put Option’s Premium
Calculation of σ (Standard Deviation)
Adjusted last prices of Jan 1, 2008 to April 21, 2008 considered
Date Adj Close4/21/2008 92.74/18/2008 93.184/17/2008 91.994/16/2008 91.934/15/2008 90.174/14/2008 89.34/11/2008 88.84/10/2008 89.64/9/2008 89.954/8/2008 89.284/7/2008 88.274/4/2008 88.054/3/2008 87.724/2/2008 87.514/1/2008 86.743/31/2008 85.363/28/2008 84.53/27/2008 84.43/26/2008 84.963/25/2008 84.543/24/2008 84.013/20/2008 83.213/19/2008 81.893/18/2008 86.123/17/2008 84.193/14/2008 85.343/13/2008 87.043/12/2008 86.733/11/2008 88.163/10/2008 84.733/7/2008 85.263/6/2008 87.83/5/2008 88.793/4/2008 86.733/3/2008 87.22/29/2008 86.662/28/2008 89.022/27/2008 88.222/26/2008 88.12
2/25/2008 87.182/22/2008 85.422/21/2008 84.782/20/2008 86.342/19/2008 84.832/15/2008 83.62/14/2008 82.842/13/2008 82.122/12/2008 80.542/11/2008 79.852/8/2008 78.692/7/2008 78.182/6/2008 76.962/5/2008 79.172/4/2008 81.432/1/2008 81.91/31/2008 82.651/30/2008 82.631/29/2008 82.011/28/2008 82.271/25/2008 81.231/24/2008 83.071/23/2008 80.871/22/2008 80.671/18/2008 82.861/17/2008 82.161/16/2008 85.631/15/2008 87.641/14/2008 90.261/11/2008 90.021/10/2008 91.241/9/2008 91.911/8/2008 90.31/7/2008 91.471/4/2008 92.681/3/2008 93.931/2/2008 92.79
Standard Deviation (σ) 0.03979031
General information of all options:
S = $92.7
d = 2.32% = 0.0232
r = 5% = 0.05
σ = 0.03979031
1.
X = $95
t = 2 Month = 2/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
= { ln ( 92.7 / 95 ) + (0.05 – 0.0232 + 0.5 * 0.03979031^2) * (2/12)}/{0.03979031 * (2/12)^0.5 }
= (-0.024508419 + 0.004598605) / 0.016244326
= -1.2256
d(2) = d(1) - σ * t^0.5
= -1.2256 - 0.03979031 * (2/12)^0.5
= -1.2418
C(t) = S * e^(-dt) * N{d(1)} – X * e^(-rt) * N{d(2)}
= 92.7 * e^{-0.0232 * (2/12)} * N(-1.2256) – 95 * e^{-0.05*(2/12)} * N(-1.2418)
= 92.34225209 * 0.110136 – 94.2116228 * 0.107158
= 0.074676557
2.
X = $90t = 2 Month = 2/12
D1 =
ln (92.7/90) + [(0.05-0.0232+(0.5*0.001583)]*2/12
0.03979 * (2/12)
D1 =
D1 = 2.1047
D2 = D1 - t
= 2.1047 – 0.016244 = 2.0885
N(D1) = N(2.1047) = N(2.10) + 0.47[N(2.11) - N(2.10)]
= 0.9821 + 0.47 (0.9826 - 0.9821)
= 0.9823
N(D2) = N(2.0885) = N(2.08) + 0.85[N(2.09) – N2.08)]
= 0.9812 + 0.85(0.9817 – 0.9812)
N(D2) = 0.9816
(Ct) = (92.7* e-(0.0232)2/12 *0.9823) – (90* e-(0.05)2/12 *0.9816)
= 90.71 – 87.61 = $3.1
3.
X = 90
t = 8 Month = 8/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
{ln (92.7 / 90) + (0.05 - 0.0232 + 0.5 * 0.03979031^2) * (8/12)} / {0.03979031 * (8/12)^0.5}
= (0.029558802 + 0.018394422) / 0.032488652
= 1.4760
0.0296 + 0.00459
0.016244
d(2) = d(1) - σ * t^0.5
= 1.4760 - 0.03979031 * (8/12)^0.5
1.4435
C(t) = S * e^(-dt) * N{d(1)} – X * e^(-rt) * N{d(2)}
= 92.7 * e^{-0.0232 * (8/12)} * N(1.4760) - 90 * e^{-0.05 * (8/12)} * N(1.4435)
= 91.2772708 * 0.93004 – 87.04944904 * 0.92559
= 4.319413398
4.
X = $100
t = 8 Month = 8/12
D1 =
D1 =
D1 = -1.7662
D2 = -1.7662 – [0.03979*(8/12)] = - 1.7987
N(D1) = N(-1.7662) = N(-1.76) – 0.62[N(-1.76) - N(-1.77)]
= 0.0392 – 0.62[0.0392 – 0.0384] = 0.0387
N(D2) = N(-1.7987) = N(-1.79) – 0.87[N(-1.79) – N(-1.80)]
= 0.0367 – 0.87*[0.0367 – 0.0359] = 0.0360
C(t) = (92.7* e-(0.0232)8/12 *0.0387) – (100* e-(0.05)8/12 *0.0360)
ln (92.7/100) + [(0.05-0.0232+(0.5*0.001583)]*8/12
0.03979 * (8/12)
-0.0758 + 0.0184
0.0325
= 3.53 – 3.48 = $0.05
5.
X = $80
t = 19 Month = 19/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
= {ln (92.7 / 80) + (0.05 – 0.0232 + 0.5 * 0.03979031^2) * (19/12)} / {0.03979031 * (19/12)^0.5}
= (0.147341837 + 0.043686754) / 0.050068375
= 3.8153
d(2) = d(1) - σ * t^0.5
= 3.8153 - 0.03979031 * (19/12)^0.5
= 3.7652
C(t) = S * e^(-dt) * N{d(1)} – X * e^(-rt) * N{d(2)}
N3.81+0.53[n3.82-n3.81]
92.7 * e^{-0.0232 * (19/12)} * N(3.8153 - 80 * e^{-0.05*(19/12)} * N(3.7652)
= 89.356603 * 0.9999– 73.91087445 * 0.9999
= 15.44572855
6.
X = $90
t = 19 Month = 19/12
D1 =
ln (92.7/90) + [(0.05-0.0232+(0.5*0.001583)]*19/12
0.03979 * (19/12)
0.0296 + 0.0437
0.0501
D1 =
D1 = 1.4631
D2 = 1.4631 – (0.03979*(19/12)) = 1.4130
N(D1) = N(1.4631) = N(1.46) + 0.31[N(1.47) – N(1.46)] = 0.9279 + 0.31[0.9292-0.9279]
= 0.9283
N(D2) = N(1.4130) = N(1.41) + 0.30[N(1.42)-N(1.41)] = 0.9207 + 0.30[0.9222-0.9207]
= 0.9212
(Ct) = (92.7* e-(0.0232)19/12 *0.9283) – (90* e-(0.05)19/12 *0.9212)
= 82.95 – 76.59 = $6.36
7.
X = 90
t =2 Month = 2/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
{ ln (92.7 / 90) + (0.05 - 0.0232 + 0.5 * 0.03979031^2) * (2/12)} / {0.03979031 * (2/12)^0.5}
= (0.029558802 + 0.004598605) / 0.015473875
= 2.2074
d(2) = d(1) - σ * t^0.5
= 2.2074 - 0.03979031 * (2/12)^0.5
= 2.1911
P(t) = X * e^(-rt) * N{-d(2)} - S * e^(-dt) * N{-d(1)}
= 90 * e^{-0.05 * (2/12)} * N(-2.1911) - 92.7 * e^{-0.0232 * (2/12)} * N(-2.2074)N(2.20)-0.74(n20-n21)
= 89.25311634 * 0.014256 – 92.34225209 * 0.013678
= 0.009335102
8.
X = $85
t = 2 Months = 2/12
D1 =
D1 =
D1 = 5.6357
D2 = 5.6357 – 0.0162 = 5.6195
Value is not available in the table for N (x).
9.
X = $80
t = 8 Month = 8/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
= { ln (92.7 / 80) + (0.05 – 0.0232 + 0.5 * 0.03979031^2) * (8/12)} / {0.03979031 * (8/12)^0.5}
= (0.147341837 + 0.01839442) / 0.032488652
Ln (92.7/85) + [(0.05-0.0232+(0.5*0.001583)]*2/12
0.03979 * (2/12)
0.0867 + 0.0045986
0.0162
= 4.1652
d(2) = d(1) - σ * t^0.5
= 4.1652 – 0.032488652 * (8/12)^0.5
= 4.1386
P(t) = X * e^(-rt) * N{-d(2)} - S * e^(-dt) * N{-d(1)}
= 80 * e^{-0.05 * (8/12)} * N(-4.1386) – 92.7 * e^{-0.0232 * (8/12)} * N(-4.1652)
= 80 * e^{-0.05 * (8/12)} * 0 - 92.7 * e^{-0.0232 * (8/12)} * 0
= 0
10.
X = $65
t = 8 Month = 8/12
D1 =
D1 =
= 11.4862
Value is not available in the table for N (x).
11.
X = $90
t = 19 Month = 19/12
d(1) = { ln ( S / X ) + ( r - d + 0.5 * σ^2) * t } / (σ * t^0.5)
= {ln (92.7 / 90) + (0.05 – 0.0232 * 0.03979031^2) * (19/12)} / {0.03979031 * (19/12)^0.5}
Ln (92.7/65) + [(0.05-0.0232+(0.5*0.001583)]*8/12
0.03979 * (8/12)
0.3549 + 0.0184
0.0325
= (0.029558802 + 0.079108507) / 0.050068375
= 2.1730
d(2) = d(1) - σ * t^0.5
= 2.1730 - 0.03979031 * (19/12)^0.5
= 2.1229
P(t) = X * e^(-rt) * N{-d(2)} - S * e^(-dt) * N{-d(1)}
= 90* e^{-0.05 * (19/12)} * N(-2.1229) - 92.7 * e^{-0.0232 * (19/12)} * N(-2.1730)
N2.17-0.3[n2.17-n2.18]
= 83.14973376 * 0.016884 – 89.356603 * 0.01488
= 0.074273852
12.
X = $80
t = 19 Months = 19/12
D1 =
D1 =
D1 = 3.8132
Ln (92.7/80) + [(0.05-0.0232+(0.5*0.001583)]*19/12
0.03979 * (19/12)
0.1473 + 0.0437
0.0501
D2 = 3.8132 – 0.0501 = 3.7631
N(-D1) = N(-3.8132) = N(-3.81) - 0.32[N(-3.81) – N(-3.82)] = 0.0001 + 0.32[0.0001-0.0001]
= 0.0001
N(-D2) = N(-3.7631) = N(-3.76) - 0.31[N(-3.76) – N(-3.77)] = 0.0001 - 0.31[0.0001-0.0001]
= 0.0001
(Pt) = (80* e-(0.05)19/12 *0.0001) – (92.7* e-(0.0232)19/12 *0.0001) = 0.007391 – 0.008936
= -0.001545
Valuation Comparison
S.I Open Int. Last Actual Value Comparison
1. 7451 1.5 0.07 Overvalued
2. 11020 4.1 3.1 Overvalued
3. 4909 7.5 4.32 Overvalued
4. 9164 2.89 0.05 Overvalued
5. 19264 17.2 15.45 Overvalued
6. 28363 10.7 6.36 Overvalued
7. 6260 1.5 0.01 Overvalued
8. 18809 0.4 0 Overvalued
9. 8248 4.8 0 Overvalued
10. 8282 0.4 0 Overvalued
11. 20923 7.1 0.074 Overvalued
12. 24695 3.6 -0.002 Overvalued
Current and Future Stock Chart
Current Stock Chart
Future Stock Chart
Call Option
0
20
40
60
80
100
120
May May Sept. Sept. Jan Jan
Month
Price Series1
Put Option
Recommended Option Strategy
After doing all our analysis and valuation we suggest the "Strap" strategy under current
market circumstances for Chevron Corp. The reasons are,
1. The stock price of chevron is uprising since 2006 with no major depression. Thus we
are suggesting buying two call options at current market price for next 3-6 months.
2. There are some price falls in the chart and a major price fall occurred too recently in
February. So we are suggesting doing a put option at lower price than the market for
next 3-6 months to hedge the risk of price fall.
3. We are suggesting doing both calling and putting option for only 3-6 months and not
more than that, as the market are very uncertain now with recent U.S. recession risk
and inflations in euro zone. Making long term options can be more risky.
010
20304050
607080
90100
May May Sept. Sept. Jan Jan
Month
Price Series1
4. We are not recommending any long term option strategy and recommending short
term strategies. Because, time is required to let the market be stable.