Amazon.com Earnings Preview And Investment Thesis [View article]
Well thanks for your little table in this article! It helped me to by a tight strangle today, thinking the stock could jump either way enough for a little profit, say from a 4-5% move. Best overnight trade ever.
Why Stocks Are Still Attractive Despite Dearth Of Optimism [View article]
I read this sentence half a dozen times, and i still don't understand it: "The 6.8% annualized trend lines that I've drawn translate into a total return of over 8% a year when you included reinvested dividends, and this trend is consistent with the 11.1% annualized total return of the S&P 500 since the end of 1949." If the 6.8% a.t. shown on the chart includes reinvested dividends, where does the 11.1% a.t. come from?
Will Windows 8 Threaten The iPad's Dominance? [View article]
Then clue us in, oh wise one, LambrettaMike.
This is a good article. Apple invented the tablet in its current and popular form, but they left a huge amount of space for rivals at the low and middle price points. While the iPad was built mainly for entertainment and passive activities, so as not to devour the laptop space, Android competitors don't cared about that and have made tablets that are more functional. On a Samsung tablet, for example one can run multiple apps at once, so that one can cut and paste from one app to another, or take notes while reading something, etc -- that is, you can do things that are essential for the simple tasks of work and creativity, as with a laptop. You can't do such things on an iPad. If the Windows 8 tablet has such functionality, and falls into the middle price range, it will be a great convenience for anyone who is tied to a Windows PC at work or at home. This would also make a Windows 8 tablet much preferable to an Android. This would cut into laptop sales for sure, a conundrum for Dell and HP, but it would help Softey because more tablets would be sold than laptops displaced. And the future of computing is to have smaller devices (tablets vs. laptops) with more functionality, not less. I would rather have a top-end iPad for entertainment, but owning an iPad wouldn't stop me from also getting a less expensive Windows 8 tablet that let me do my Win-PC-related work on it.
Dogworth: Look it up anywhere that options are explained, and you'll find that it's true. Here is a simple example, using Friday's closing prices: INTC stock, 27.88; July 28 call, 1.20; July 28 put, 1.52. With a covered call, you get the stock for 27.88 - 1.20 = 26.68. If the stock rises above 28 and gets called away, your profit is 1.32. If the stock falls, well you own it for 26.68. Now with selling the put, if the stock rises above 28, you just pocket the premium, for a profit of 1.52. If the stock stays below 28 or falls, well you own it for 28 - 1.52 = 26.48. So yes, if the stock falls you might lose money, but in both cases you got in at a lower entry point than if you'd just bought the stock. Now why do we seem to get a better deal by selling the put, better by 20 cents than doing a covered call? Well it isn't better, because that 20 cents is roughly the quarterly dividend that you'd get by July with the covered call. For stocks that don't pay dividends, you won't see a difference like this (unless the option prices are distorted.) Cool, eh? There is a rather simple explanation for this equivalency, if you're interested. And by the way, most brokerages nowadays allow level I accounts to sell "cash-secured puts", ie with cash set aside in case the puts are exercised. This uses exactly the same margin as would a covered call. There is really no difference at all.
Goalkick9: I know that feeling. I felt exactly that way with AAPL at 390. What I did was to write a put, which is a chicken's way of getting into a stock sometimes, because it allows you to get in at a discount. If you're unfamiliar with options, selling a put is, for any practical consideration, identical to writing a covered call -- that is, buying the stock and selling calls for an equivalent number of shares. I used the 450 strike price, meaning that i profited all the way up to 450. Then having had that fun, i continued to stay in it in other ways. Had the stock stayed where it was or dipped, I would have pocketed the premium. I did the same with Intel recently, selling the Apr 26 put when INTC was around 26. It was a chicken's way in, and as such, I won't own the stock come Apr 20 unless it dips below 26. So if it dips, I'll buy it outright this time, and if it doesn't, i'll sell puts again at a higher strike.
Why Apple's Buyback And Dividend Plan Is A Disappointing Drop In The Bucket [View article]
Well, two things. First, the tax issue so many have mentioned. Second, the dividend can be raised going forward. I'm pretty sure that Cook and co. understand that a company needs for its dividend to be stable or increasing going forward. So this should signal confidence for the long term re. earnings. I don't see how this can be disappointing.
You might want to point out that the fourth alternative, selling a put, is identical to writing a covered call using the same strike and expiration, in so far as risk, potential gains, and required margin. For people unfamiliar with selling options, the covered call (ie, selling calls equal to the number of shares owned) is easy to visualize, and it's also allowed in level I accounts, such as IRAs.
Apple Options All 'Skewed Up': Watch Out For High Call Premiums [View article]
Well, when will the first dividend be paid? Second, wouldn't a dividend prior to expiration add to the put's premium relative to the call's? Yet the put IV seems to have just plummeted relative to the call IV.
Well, the parabolic move is partly the stock catching up to the performance of the company. Of course it's also fund managers' panic buying and program traders piling in and pushing. But sentiment has changed dramatically for the market as a whole, too. Might a forward p/e of 13-15 be the new normal, especially for dividend payers, instead of 8-10?
But hedge fund managers and 15-yr-olds who own just one share are all staring at the same parabolic chart, so it won't run past 800 by June. I don't even think it will get too far ahead of the median analyst price target, which right now is ~610, the highest being 730. I expect a trading range, with extremes of perhaps 520 and 620, for weeks to months. Unless we get some negative news or a general market sell-off though, AAPL should find strong support on dips, I think.
How To Trade Apple With Weekly Options [View article]
The concept of risk management? No one, I dare to speculate, would ignore the risk with this sort of bet. By "risk management" do you mean, you watch it like a hawk and bail before it's too late?
This reminds me of long ago when people would sell the "teenies", far-OTM options worth a nickle on the day of expiration. If they ever lost, they'd get creamed, but what were the odds of that? Well, eventually a stock jumped by 20% after hours and a player was bankrupted.
It isn't easy placing hedged bets with any high degree of success. I had not thought of using a condor to hedge a spread. Kudos for making it work. I would have just bailed on the spread at a loss.
At first I was a bit puzzled as to the use of weekly RICs. But had you set up a RIC with the same expiration as the bear spread and the stock stayed flat all the way to expiration, the loss on the RIC would have been greater than the gain on the spread. Not clear to me that it would have been any better with the weeklies, though, had the stock gone mostly sideways.
To set up the iron condor now, starting with the 605-600 bear call spread, looks attractive. Of course, so did the 525-500, at the time. In a little over a week, Aapl could release sales numbers for the first week of new iPad. Yes, a bear call spread "should" be a good bet right now, but... I'm wondering if tight weekly RICs could be the best bet right now. I, too, expect AAPL to trade in a range over the next few weeks, but a few percentage points up and down might be enough for the weekly RICs.
I appreciate your articles. Thanks for posting. I don't quite get why some people who don't appreciate, or say they don't learn anything, from an article need to waste their own time and everyone else's by posting grumpiness.
It isn't easy placing hedged bets with any high degree of success. I had not thought of using a condor to hedge a spread. The RICs paid off against the loss of the bear spread in this case because Aapl moved quite a bit, and it didn't reach profitability until the fourth RIC, due to the big loss on the bear spread (why i don't like spreads.) Well, kudos for making it work. I would have just bailed on the spread at a loss.
At first I was a bit puzzled as to the use of weekly RICs. But had you set up a RIC with the same expiration as the bear spread and the stock stayed flat all the way to expiration, the loss on the RIC would have been greater than the gain on the spread. Not clear to me that it would have been any better with the weeklies, though, had the stock gone mostly sideways.
I do like the idea of an iron condor about now.
I appreciate your articles. Thanks for posting. I don't quite get why some people who don't appreciate, or say they don't learn anything, from an article need to waste their own time and everyone else's by posting grumpiness.
Amazon.com Earnings Preview And Investment Thesis [View article]
Amazon.com Earnings Preview And Investment Thesis [View article]
Why Stocks Are Still Attractive Despite Dearth Of Optimism [View article]
"The 6.8% annualized trend lines that I've drawn translate into a total return of over 8% a year when you included reinvested dividends, and this trend is consistent with the 11.1% annualized total return of the S&P 500 since the end of 1949."
If the 6.8% a.t. shown on the chart includes reinvested dividends, where does the 11.1% a.t. come from?
Will Windows 8 Threaten The iPad's Dominance? [View article]
This is a good article. Apple invented the tablet in its current and popular form, but they left a huge amount of space for rivals at the low and middle price points. While the iPad was built mainly for entertainment and passive activities, so as not to devour the laptop space, Android competitors don't cared about that and have made tablets that are more functional. On a Samsung tablet, for example one can run multiple apps at once, so that one can cut and paste from one app to another, or take notes while reading something, etc -- that is, you can do things that are essential for the simple tasks of work and creativity, as with a laptop. You can't do such things on an iPad. If the Windows 8 tablet has such functionality, and falls into the middle price range, it will be a great convenience for anyone who is tied to a Windows PC at work or at home. This would also make a Windows 8 tablet much preferable to an Android. This would cut into laptop sales for sure, a conundrum for Dell and HP, but it would help Softey because more tablets would be sold than laptops displaced. And the future of computing is to have smaller devices (tablets vs. laptops) with more functionality, not less. I would rather have a top-end iPad for entertainment, but owning an iPad wouldn't stop me from also getting a less expensive Windows 8 tablet that let me do my Win-PC-related work on it.
Analyst Revisions For Apple: Growth And More Growth [View article]
Oh, woe to Apple shareholders!
Why Intel Has Even More Upside [View article]
INTC stock, 27.88; July 28 call, 1.20; July 28 put, 1.52.
With a covered call, you get the stock for 27.88 - 1.20 = 26.68. If the stock rises above 28 and gets called away, your profit is 1.32. If the stock falls, well you own it for 26.68.
Now with selling the put, if the stock rises above 28, you just pocket the premium, for a profit of 1.52. If the stock stays below 28 or falls, well you own it for 28 - 1.52 = 26.48.
So yes, if the stock falls you might lose money, but in both cases you got in at a lower entry point than if you'd just bought the stock. Now why do we seem to get a better deal by selling the put, better by 20 cents than doing a covered call? Well it isn't better, because that 20 cents is roughly the quarterly dividend that you'd get by July with the covered call. For stocks that don't pay dividends, you won't see a difference like this (unless the option prices are distorted.) Cool, eh?
There is a rather simple explanation for this equivalency, if you're interested. And by the way, most brokerages nowadays allow level I accounts to sell "cash-secured puts", ie with cash set aside in case the puts are exercised. This uses exactly the same margin as would a covered call. There is really no difference at all.
Why Intel Has Even More Upside [View article]
I did the same with Intel recently, selling the Apr 26 put when INTC was around 26. It was a chicken's way in, and as such, I won't own the stock come Apr 20 unless it dips below 26. So if it dips, I'll buy it outright this time, and if it doesn't, i'll sell puts again at a higher strike.
Why Apple's Buyback And Dividend Plan Is A Disappointing Drop In The Bucket [View article]
Apple Options All 'Skewed Up': Watch Out For High Call Premiums [View article]
How To Play A Legit Apple Pullback [View article]
Apple Options All 'Skewed Up': Watch Out For High Call Premiums [View article]
An Apple Bubble Is Forming [View article]
But hedge fund managers and 15-yr-olds who own just one share are all staring at the same parabolic chart, so it won't run past 800 by June. I don't even think it will get too far ahead of the median analyst price target, which right now is ~610, the highest being 730. I expect a trading range, with extremes of perhaps 520 and 620, for weeks to months. Unless we get some negative news or a general market sell-off though, AAPL should find strong support on dips, I think.
How To Trade Apple With Weekly Options [View article]
This reminds me of long ago when people would sell the "teenies", far-OTM options worth a nickle on the day of expiration. If they ever lost, they'd get creamed, but what were the odds of that? Well, eventually a stock jumped by 20% after hours and a player was bankrupted.
How I Played Apple's 'Pullback' [View article]
At first I was a bit puzzled as to the use of weekly RICs. But had you set up a RIC with the same expiration as the bear spread and the stock stayed flat all the way to expiration, the loss on the RIC would have been greater than the gain on the spread. Not clear to me that it would have been any better with the weeklies, though, had the stock gone mostly sideways.
To set up the iron condor now, starting with the 605-600 bear call spread, looks attractive. Of course, so did the 525-500, at the time. In a little over a week, Aapl could release sales numbers for the first week of new iPad. Yes, a bear call spread "should" be a good bet right now, but... I'm wondering if tight weekly RICs could be the best bet right now. I, too, expect AAPL to trade in a range over the next few weeks, but a few percentage points up and down might be enough for the weekly RICs.
I appreciate your articles. Thanks for posting. I don't quite get why some people who don't appreciate, or say they don't learn anything, from an article need to waste their own time and everyone else's by posting grumpiness.
How I Played Apple's 'Pullback' [View article]
At first I was a bit puzzled as to the use of weekly RICs. But had you set up a RIC with the same expiration as the bear spread and the stock stayed flat all the way to expiration, the loss on the RIC would have been greater than the gain on the spread. Not clear to me that it would have been any better with the weeklies, though, had the stock gone mostly sideways.
I do like the idea of an iron condor about now.
I appreciate your articles. Thanks for posting. I don't quite get why some people who don't appreciate, or say they don't learn anything, from an article need to waste their own time and everyone else's by posting grumpiness.