Goldman Sachs Recommends British American Tobacco Covered Calls

Source from:  Bloomberg 01/19/2009

Jan. 16 (Bloomberg) -- British American Tobacco Plc shareholders should take advantage of higher options prices by selling calls, according to Goldman Sachs Group Inc. The New York-based brokerage advised clients to sell June call option with a strike price of 1,900 pence, using a so-called covered call strategy. Implied volatility, a key gauge of options prices, for six- month at-the-money options is near historical highs, Jason Cuttler, an equity derivatives analyst at Goldman Sachs, wrote in a report dated Jan. 15. The bank lowered its recommendation on British American Tobacco shares to "neutral" from "buy" on Jan. 13, citing the recent rally in the stock. British American Tobacco closed 0.2 percent higher at 1,742 pence in London yesterday. Call options give investors the right to buy a security for a certain amount, the strike price, by a given date. Puts convey the right to sell. Enditem