International Paper Company (NYSE: IP) operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, and North Africa. Its industrial packaging segment manufactures container boards.

Last earnings IP posted one of its strongest reports in more than 10 years. And with IP set to report next week we expect for the company to announce another strong earnings number. Recent improvements in industry fundamentals, product demand, and volume should generate solid earnings. The stock also raised its dividend 40% to 26 cents a share.

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The sector is highly cyclical and capital intensive, so it can be risky, however IP should benefit as the global economic recovery gains steam. Company valuations have improved and we find the outlook to be positive.

With the stock trading near $29.75, an investor could purchase stock at this level and sell the IP June 31 Calls for .75, earning the investor $0.75 of premium. International  Paper’s 52-week high is $31. If the stock remains in its current trading range, it’s likely the calls could finish worthless by its Friday, June 17 expiration, and the investor keeps the premium.  Should the stock pull back the investors breakeven would be $29.00 ($29.75 – $0.75).

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As with any buy-write trade, if the stock rises above the strike price the investor will see his stock called away. In this case, if IP rises above $31 before June expiration, the stock will be called away and the investor will not share in any upside above that price.

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