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Mike Phillips
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MIKE PHILLIPS Mike Phillips is a seven-year employee of Power Financial Group, Inc. He is involved in the support and development of PowerOptions, an award winning Internet site for searching for stock option strategies and PowerOptionsApplied, an Internet site providing an option-trading... More
My company:
PowerOptions
My blog:
PowerOptions WeBlog
My book:
Iron Condor: Neutral Strategy for Uncommon Profit
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  • Visa 2.5% Potential Return with 8.6% Maximum Loss in 23 Days
    Visa (V) is in the credit/debit card business and has been in stuck in a quagmire with uncertainty regarding the U.S. regulatory environment.

    In its most recent earnings conference call, the company indicated they have received the U.S. Federal Reserves final rules with regard to their business operations and can move forward with executing their business strategy.

    As an example, the company is implementing a new fixed acquirer fee known as a network participation fee.  The network participation fee will apply to all Visa products and is based upon both the size of the merchant and the number of merchant locations.

    The company indicated it will continue its co-branding strategy with Disney and will also continue to emphasize and target growth for business located in Brazil, Russia, Japan, GCC, Mexico and Sub Sararan Africa.

    Visa also indicated it is repurchasing its stock.

    Using PowerOptions search tool, an attractive stock options collar position was identified.  The position has a potential return of 2.5% and a maximum loss of 8.6% with the potential profit realized in 23 days.  A collar has limited upside and limited downsie and may be entered by purchasing a stock, selling a call option against the stock and purchasing a put option for protection or insurance.

    A profit/loss graph for the Visa collar position is shown below:



    With Visa able to implement its business strategy going forward, now looks like an attractive time to enter a position for Visa, especially, as the company's stock has had a recent pull-back along with the rest of the market as shown below:



    The nice thing about the collar, is if the Visa doesn't do very well and/or the market does not do very well, the put option protects the investment from a large loss.




    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Sep 29 12:28 PM | Link | Comment!
  • Gilead Sciences (GILD) 2% Potential Profit with Maximum Risk of 9% in 25 Days
    Gilead Sciences (GILD) is a biopharmaceutical company involved in developing and commercializing pharmaceuticals.  Gilead's products include Atripla, Truvada, Viread, Emtriva for treating HIV.  Gilead also makets products in other areas such as for hepatitis, for example.

    In its most recent conference call, the company indicated one of its partners, Tibotec Pharmaceuticals, announced approval of Rilpivirine for treating HIV.

    The company also indicated its drug Elvitegravir currently in Phase III clinical trials had some positive news.

    The company recorded record revenues in the most recent quarter, has been repurchasing stock and plans to continue to repurchase shares of stock.

    Using PowerOptions collar search tool, an attractive postion was found for Gilead with a potential return of 2% and a maximum risk of 9%, and the potential return may be realized on only 25 days.

    A Collar involves selling a call option against a purchased stock or an existing stock and using some of the proceeds from selling the call option to purchase a put option for protection or insurance.

    The Collar for Gilead involves selling an October 39 call option and purchaseing an October 35 put option.

    Gilead's stock price is in an attractive position, as it has taken a dip, as most stock of late, as shown below:



    A profit/loss diagram, courtesy of PowerOptions, is shown below:



    In addition, Gilead has a very attractive P/E of around 12.
    Sep 27 10:25 AM | Link | Comment!
  • Baidu.com (BIDU) Potential Return of 2.3% in 4 Days with Maximum Risk of 9.5%
    Baidu.com (BIDU) is the Google of China providing Internet search, map, news, etc.  Baidu.com has the largest market share for internet-search in China with 63%.  In 2007, Baidu.com became the first Chinese company to be included in the NASDAQ-100 index.

    Even with the price of Baidu.com's stock price retreating over the last couple of months, the company's stock is very pricey with a trailing P/E of 52 and a forward P/E of 26.  Purchasing an expensive stock like this can have very negative results if there were to be some bad news associated with the company.

    But, there is a way to take advantage of an investment in Baidu.com without having to also take on a large amount of risk by using stock options.  A Collar position is basically a Covered Call investment where a portion of the income generated from selling the call option for the Covered Call position is used to purchase insurance in the form of put options. 

    Using PowerOptions Collar search we were able to find a Collar position for Baidu.com with a potential return of 2.3% and a maximum risk of 9.5%, and best of all, the potential return may be realized in only four days!

    To enter the position, the BIDU stock is purchased at $118.73, a 2011 sep 120 call option is sold for $3.90 and a 2011 sep 105 put is purchased for $1.20.

    A profit/loss diagram for the Baidu.com Collar position is shown below:



    With Baidu.com's stock price having taking a recent dip and near its previous support level around $119, the Collar position looks attractive as shown below:



    As long as BIDU is at 118.73 at expiration in four days, the position returns 2.3%.  If BIDU drops, the maximum loss is 9.5%.
    Sep 26 10:44 AM | Link | Comment!
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