Paul Price

'Take Off' with Boeing Option Combination Plays

'Long-term' is for trades that have a holding period of greater than one year.

Short sales have no 'holding period' as such. You can be short a LEAP for two years but the trade still counts as 'short term' for tax purposes.

'Take Off' with Boeing Option Combination Plays

If you strictly sell naked puts you'll never get the chance at paying long-term capital gains [now 15%] as you can with stock you buy and write calls on.

No matter what period of time you are short an option there is no holding period so all eventual gains are treated as short-term.

I like to sell naked puts by themselves also. These write-ups are just examples of what I think look like good moderate to low-risk combinations.

'Take Off' with Boeing Option Combination Plays

If you sell a put that goes on to expire worthless:

You will have collected the full premium [less commission], earned interest on the cash for the full time period until expiration and never have had to lay out any cash [if you wrote the puts against marginable securities that were already in your account].

'Take Off' with Boeing Option Combination Plays

Margin requirments ARE NOT cash outlays. I write all positions against paid-up marginable securities so all cash-on-cash returns are 100% accurate.

Option sellers actually earn money on premiums received. There is no 'cost of capital' on option sales. There is an 'opportunity cost' in terms of tying up buying power.

'Take Off' with Boeing Option Combination Plays

The cash outlay is exactly as indicated.

I fully disclosed you may end up with a double position but if the stock does as is indicated [stays above the put's strike price] in the examples you will not ever lay out any additional cash.

Thoughts on Individual Stock Selection

not should have read 'now' - sorry.

Thoughts on Individual Stock Selection

I'm not sure what you mean by 'ranges'. I look for lower than normalized P/Es, P/CFs, P/BVs [compared with the same company's historical levels] and a higher than typical yield [on dividend paying stocks.

If a stock usually trades at 15x EPS I might be very interested if it's not at 9 - 12X. If it typically yielded 2% I'd like it much better with a 3 - 4% yield at the present time.

Thoughts on Individual Stock Selection

I use Value Line and Standard and Poors reports. Value Line gives data back around 15 - 16 years on most stocks.

They show all company data for a particular year directly under that same year's stock chart which is quite useful.

I hate VL's rating system but love their data presentation.