Invest in your vacation


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Kevin Kersten 07/14/2014

Summer vacations is here. It is time to get away from work and relax a little bit.

Well, relax may have been what you did before you had kids, now vacation is more exciting than it used to be. You can relax when you get back to work. Now it's all the kids and you in the car on a road trip to see some amusement parks.

It's not just you though; your money can also get some action at theme parks. Sure, you've always had the option to buy theme parks in one way or another with Disney, Universal, Busch Gardens, Six Flags or Cedar Lane. One classic theme park that may be new to investors is Seaworld Entertainment ( SEAS ). Created in April 2013 when InBev split Busch's beer and entertainment divisions, Blackstone bought the theme parks and built one of the largest operators of regional theme parks in the world out of Sea World, Busch Gardens, and Sesame Place.

Seaworld had revenues of $1.4 billion, which seems like a lot of money until you remember you have to feed 86,000 animals every day. Given what a whale eats, they were able to feed it and still make profits of $0.57 per share in 2013. Given the extra focus on profits, operations have been improving under CEO Jim Atchison, with earnings expected to rise to about 1.41 this year. The company is paying a 2.88% dividend yield.

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If an investor buys Sea World ( SEAS ) for $28.66, they could sell a September 30 call for $0.95. That would give the position 3.3% of downside protection and an 8.3% simple assigned rate. If you annualize that over the 72 days this position is open, that is a 41.6% return (for comparison purposed only). In order to be assigned the stock would need to appreciate about 4.6% and if the stock stays at the current price the covered call would add 3.3% simple return to the stock. A covered call steadies out the returns on a stock, taking some of the excitement and downside away from it, but as with any stock there is always potential for a big drop.  These calculations do not include commissions or account for changing market conditions that might happen by the time you read this. It would be really cool to tell the kids you owned a piece of Shamu though.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options

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