It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
All, For anyone who has followed the Apple trade in this post I would Sell to close the Feb $500 put protection purchased at $62.13. I am still evaluating rolling options on the Call and put but feel that $425 is a technical bottom that should hold for the time being.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
TFCAB, Options are a great investment tool when used properly. I don't understand why SA made such a decision and perhaps will realize the mistake soon. Likely they confuse option strategies that buy options with lots of risk. My use of options is to limit risk and create an additional yield while holding fundamentally sounds companies. Until such time I will always publish on http://bit.ly/YdvO62 and always anwser any and all questions at sbrown@sabrient.com or in my inbox on SA. Best to you and you are on the right path with learning how to use options to your advantage.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
I want to apologize to anyone who has followed the Dark Horse Trader's Hedge on SA for the last 2 years. Thank all of you for the dialogue. I submitted the continuation of this portfolio to SA for the January 2013 options last night. I was informed that they have adopted a new policy denying articles that in their opinion are "mostly options". Those of you who have followed my articles know that I try to present the thesis behind each trade and advise on the options to increase the return and manage the risk.
I made 4 attempts to resolve the editor misunderstanding but was unsuccessful. It is apparent that SA no longer wishes to have articles such as Dark Horse Trader's Hedge on their site. Anyone wishing to contact me or read the posts can find them at http://bit.ly/YdvO62 . I will continue to monitor my inbox for a while on SA so feel free to contact me here or my email of sbrown@sabrient.com.
I apologize again but don't have any control over the decisions made at SA.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Hi djohnson, I agree that the intraday support is at $505 and remains to be seen if we have a close below $529 (which appears likely at this point in the day but had the same set up on 11/16/12 intraday).
I would love to see your charts so please do post. If we break the close level of $529 I will look to take a profit and roll the Feb $500 put bought in this trade to capture profit on the down draft but still believe the long case will play out in January.
I always appreciate discussion on all sides of positions so thanks for the dialogue.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Agreed on patent suits Financehulligan. Nokia and a few others have won some recent cases causing Apple to add some additional royalty payments. I need to dig into the balance sheet to determine any reserves Apple likely has to cover these results. They don't alter my thesis that Apple has been oversold and support remains solid at $529. A break of that support would be a negative in the short term. I have a strong belief that Q4 and Q1 2013 results will be ahead of expectations after 2 consecutive misses. The supply issue in Q3 has been corrected which will allow those sales not reported in Q3 to be recognized in Q4. By the end of Q1 we should have more transparency on the success in China and plans for Apple TV.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Hi Joe,
I am sorry cash and lack of debt aren't a part of your program. I believe that balance sheet analysis is key and comparing accounting based earnings to cash flow. It is a starting point in my analysis but no an ending point. The market share, margin extraction or contraction, forward P/E, growth in EPS, etc. all play a role.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Hi djohnsonhot, There are a multitude of option strategies that can be used depending on the investor belief for the underlying security. I believe that $529 is providing solid support for Apple and so my objective is to set up a trade with limited cash, reduced margin over simply selling a put and a trade that has incrementally positive returns as Apple moves higher.
All down-drafts are one upward break out away from being an up-draft :). I believe (all things being equal in Washington) that Apple is going to go higher from here. Therefore the purchase of the call provides participation in that up-draft. Obviously, if I am wrong and Apple trades lower or even sideways then I made a bad recommendation.
Riding The Storm Out With Freeport-McMoRan: Option Review [View article]
Westietn, The acquisitions yesterday certainly came out of left field. I have discussed it with many on Wall Street and it is a divided bunch. Some think there is great value and some think it smells from here to China. Those who argue it is a "bargain" on these Gulf oil properties lose me when I compare it to Apple deciding there is a "bargain" on some Ralph Lauren brand assets in the clothing business and making the acquisition because it is a "good deal". I have always considered FCX equivalent to an ETF that is a proxy for exposure to Copper. I am still undecided on the Oil additions. There is definite arbitrage going on just over the deal so now isn't necessarily the time to sell. For Dark Horse Traders' Hedge we have sold calls and puts which will provide some income while this is digested. Best and I will keep you updated on my thoughts as things develop.
Riding The Storm Out With Freeport-McMoRan: Option Review [View article]
Thanks DJohnson, I very appreciate your comments and clearly you are well versed in the technical studies of equities. I have studied them for 20+ years and believe they are quite valid for choosing entry and exit. My ideas start based on valuation and growth with a dash of cash flow analysis. Once I like the stock on that basis I study the charts recognizing that it is nearly impossible to pick the exact high or low. I agree 100% with you that SELLING premium on both sides is a key to successful investing.
I see the underlying assets of FCX improving with Copper and Gold without consideration for the technical stock chart. In theory, growing earnings and cash flow will trump technical support and resistance lines. I see that the 200 day MA has been holding recently as support since 9/7.
My recommendations are based on the idea that I felt FCX was undervalued in March 2012 and feel that way today. You may be correct in that we may not have hit the bottom yet. My point is that I was willing to own the shares at $40 (less premium) in March. That hasn't happened by rolling put positions and earning premiums. I am still willing to hold the other 1/2 of the position at $40 (less premiums) in January but feel it is unlikely given the rise in Copper fundamentals especially.
I believe your system of technical analysis works for you because you obviously have a disciplined approach and rules you follow. I just put more weight into value and growth which is what makes all trading systems unique.
Market Moves Into The Great Wide Open, Option Review September [View article]
Thanks so much for the thoughful note 22thoroughbred. You and I began trading at the same age :). Options are very useful since you almost always have the option to roll forward to a different month and strike while earning premium. GCI for example in 2011 was a value buy at $13 and the stock really never moved the entire year. We used the call and put scenario to roll 4 times and ended up with a cost basis of just above $3 on a stock that really didn't move. In the cases like STX where there is a nice move to the upside which the call covered us at $24, the premium from the put gave us virtually the same return with the stock at $30 with less capital invested. I have studied technical analysis, fundamental analysis, forensic accounting and options over the last 30 years and believe they all play a role in finding the best stock, timing the entry/exit and gaining exposure through options to reduce volatility and risk. I look forward to hearing your results. Best,
I Won't Give Up On Freeport McMoRan, Option Trade On Western Digital [View article]
Absolutely on the dividend premium kicker. The free cash flow indicates we can count on that and if you like the underlying security plus earn some option premium for waiting. Well, that is why I won't give up on FCX.
I Won't Give Up On Freeport McMoRan, Option Trade On Western Digital [View article]
My apologies MilkChaser. You are exactly right that I meant call.
It is only human nature to look back on trades and wonder "what if" but after 25 years of study I can attest to the fact that you are doing the right thing when you settle on the price you will be happy being called away at. You can always roll that call forward by buying to close the call when it gets close to expiration (probably for less than $2.20 if WDC hasn't run too high and sell a forward month call for more premium.
It's More Than A Feeling To Go Long Aflac, July Options Review [View article]
Thanks Nightjoe, A good pattern on a value stock is what I look for with good option premiums. In AFL case, it has all the underlying fundamentals of a value stock and has built a nice pattern that I believe we are catching on the rise. Best to you.
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
For anyone who has followed the Apple trade in this post I would Sell to close the Feb $500 put protection purchased at $62.13. I am still evaluating rolling options on the Call and put but feel that $425 is a technical bottom that should hold for the time being.
Best,
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Options are a great investment tool when used properly. I don't understand why SA made such a decision and perhaps will realize the mistake soon. Likely they confuse option strategies that buy options with lots of risk. My use of options is to limit risk and create an additional yield while holding fundamentally sounds companies. Until such time I will always publish on http://bit.ly/YdvO62 and always anwser any and all questions at sbrown@sabrient.com or in my inbox on SA.
Best to you and you are on the right path with learning how to use options to your advantage.
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
I made 4 attempts to resolve the editor misunderstanding but was unsuccessful. It is apparent that SA no longer wishes to have articles such as Dark Horse Trader's Hedge on their site. Anyone wishing to contact me or read the posts can find them at http://bit.ly/YdvO62 . I will continue to monitor my inbox for a while on SA so feel free to contact me here or my email of sbrown@sabrient.com.
I apologize again but don't have any control over the decisions made at SA.
Best,
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
I agree that the intraday support is at $505 and remains to be seen if we have a close below $529 (which appears likely at this point in the day but had the same set up on 11/16/12 intraday).
I would love to see your charts so please do post. If we break the close level of $529 I will look to take a profit and roll the Feb $500 put bought in this trade to capture profit on the down draft but still believe the long case will play out in January.
I always appreciate discussion on all sides of positions so thanks for the dialogue.
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
Best and Happy Holidays,
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
I like KKR quite a bit and wish you the best on the trade.
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
I am sorry cash and lack of debt aren't a part of your program. I believe that balance sheet analysis is key and comparing accounting based earnings to cash flow. It is a starting point in my analysis but no an ending point. The market share, margin extraction or contraction, forward P/E, growth in EPS, etc. all play a role.
Best,
Scott
It's Been A Long Way Down, 1 New Trade And 2 Positions To Open [View article]
There are a multitude of option strategies that can be used depending on the investor belief for the underlying security. I believe that $529 is providing solid support for Apple and so my objective is to set up a trade with limited cash, reduced margin over simply selling a put and a trade that has incrementally positive returns as Apple moves higher.
All down-drafts are one upward break out away from being an up-draft :). I believe (all things being equal in Washington) that Apple is going to go higher from here. Therefore the purchase of the call provides participation in that up-draft. Obviously, if I am wrong and Apple trades lower or even sideways then I made a bad recommendation.
Best,
Scott
Riding The Storm Out With Freeport-McMoRan: Option Review [View article]
The acquisitions yesterday certainly came out of left field. I have discussed it with many on Wall Street and it is a divided bunch. Some think there is great value and some think it smells from here to China.
Those who argue it is a "bargain" on these Gulf oil properties lose me when I compare it to Apple deciding there is a "bargain" on some Ralph Lauren brand assets in the clothing business and making the acquisition because it is a "good deal".
I have always considered FCX equivalent to an ETF that is a proxy for exposure to Copper.
I am still undecided on the Oil additions. There is definite arbitrage going on just over the deal so now isn't necessarily the time to sell. For Dark Horse Traders' Hedge we have sold calls and puts which will provide some income while this is digested.
Best and I will keep you updated on my thoughts as things develop.
Scott
Riding The Storm Out With Freeport-McMoRan: Option Review [View article]
I very appreciate your comments and clearly you are well versed in the technical studies of equities. I have studied them for 20+ years and believe they are quite valid for choosing entry and exit. My ideas start based on valuation and growth with a dash of cash flow analysis. Once I like the stock on that basis I study the charts recognizing that it is nearly impossible to pick the exact high or low. I agree 100% with you that SELLING premium on both sides is a key to successful investing.
I see the underlying assets of FCX improving with Copper and Gold without consideration for the technical stock chart. In theory, growing earnings and cash flow will trump technical support and resistance lines. I see that the 200 day MA has been holding recently as support since 9/7.
My recommendations are based on the idea that I felt FCX was undervalued in March 2012 and feel that way today. You may be correct in that we may not have hit the bottom yet. My point is that I was willing to own the shares at $40 (less premium) in March. That hasn't happened by rolling put positions and earning premiums. I am still willing to hold the other 1/2 of the position at $40 (less premiums) in January but feel it is unlikely given the rise in Copper fundamentals especially.
I believe your system of technical analysis works for you because you obviously have a disciplined approach and rules you follow. I just put more weight into value and growth which is what makes all trading systems unique.
Best to you and always appreciate the dialogue,
Scott
Houston American Energy Corp. Provides The Reason To Take Profit, Option Review For March [View article]
You may find QCOR and interesting study :)
Market Moves Into The Great Wide Open, Option Review September [View article]
Best,
Scott
I Won't Give Up On Freeport McMoRan, Option Trade On Western Digital [View article]
I Won't Give Up On Freeport McMoRan, Option Trade On Western Digital [View article]
It is only human nature to look back on trades and wonder "what if" but after 25 years of study I can attest to the fact that you are doing the right thing when you settle on the price you will be happy being called away at. You can always roll that call forward by buying to close the call when it gets close to expiration (probably for less than $2.20 if WDC hasn't run too high and sell a forward month call for more premium.
Best
It's More Than A Feeling To Go Long Aflac, July Options Review [View article]