An Apple Update And Other Thoughts On Selling Puts [View article]
hi reel, thx for your article. for many of your readers selling puts will not be a feasible option.
1. cash secured puts for apple are ummm, expensive. 2. naked sale puts require margin accounts and a dip can make some people go bankrupt. 3. selling puts (assuming they expire out of the money) conservatively may only generate a 3% - 15% annual return (if doing cash secured put).
An alternative strategy for your readers if you want some leverage, but are worried about "time decay" - buy calls - 1-2 month out expiration's on apple, but anywhere between 15% to 20% in the money.
apple at 544.47 after close, so this would currently be strikes between 435 and 460. @April 21 Expiration’s the: 435 Strike = ask price of 116.45 460 Strike = ask price of 88.15
Let’s assume buyer choose the 460 strike till expiration - Break even = 460 + 88.15 = 548.15
Now let’s pretend apple hit our price target with a smooth appreciation. if we can all agree that an 18th month target price = 675 is conservative. This would be a 23.97% total stock price appreciation over 18 months. This would be a monthly return average of ((675 - 544.47 ) / 544.47) / 18) = 1.33% monthly return. Calculate this out to daily (547.5 days) = .0438% daily return. Between now and expiration we have a cool 51 days, which would project to an anticipated return of 51 * .0438% = 2.23%
This would project to apple closing on 4/21 at -> 544.47 * 1.0223% = 556.61
Profit = 556.61 – 460 – 88.15 = 8.46 On 51 day investment this would = $846 / $8,815 = 9.6% return. If you were to compound this same return based on your initial investment it would = ~$21,000. This would be a total 18 month return of ($21,000 – $8,815 / $8,815) = 138% return. I would love to see a model under the same apple stock price appreciations targets listed that will produce an 138% return selling cash secured puts. The ITM call vs cash secured put -> 1. Has greater upside % 2. Less risk -> It is easier to exit a long position (buyer call) by selling than to exit a short position (seller put) by buying.
Halliburton: A Short Term Income Options Play [View article]
John, I like your conclusions and the "idea" behind your proposed trade.
I've spent about half of my investment research time these past 2 weeks doing a deep dive on HAL.
My opinion is that the short-term macro-economic picture is very bullish. High oil prices lead to increased margins for E&P companies, which leads to their follow through on their capital expenditures planned, if not increased.
Additionally - high oil prices also lead to energy consumers searching for alternatives. i.e. nat gas showing a small rebound.
Interesting article posted right here on HAL page shows how HAL has consistently outperformed its peers in the month of march.
finally, look at stock price movements around quarter reporting for HAL, specifically first quarter april. they are one of the first services companies in the market to report (before bhi and SLB) - so their stock price is more elastic to their reports.
Their Y-o-Y Q1 will be a nice story, .61 vs projected .89. While probably deserving b/c of the reasons you stated, generally their lower margins to their competitors, they are still valued at about half the price SLB is.
finally, as a wild card - they are obviously exposed more to north American services, but this could flip-flop and turn out to be a good thing for them. think of Devon. like 1 month after they sold their offshore deep drilling assets for 10 billion - there is that tiny little oil spill by BP. devon probably wouldn't have gotten half of that, if they tried to sell after that deal.
now for HAL - we have a small problem called Iran. in addition to that, it turns out NA is in energy boom. many e&p companies are reporting "stealth" plays in their recent updates. they are stealth b/c they can't make them public yet, b/c they are trying to acquire land cheaply. so who knows by May / June - it may be really, super cool to be a NA focused services company, since iran tensions might lead to scary words such as "energy independence".
Now - if we get past end of july with no crazy israel strikes / or iran testing some neat new missiles with nuc's attached to them, both countries will probably go into a cooldown before the US elections.
oil tumbles, and so does all other energy plays. so with some small up and downs, i am bullish through at least june. aug - oct could be another identical repeat of 2011 when libya eased, oil crashed, PIGS came running.
i would wait till may / june and do your exact trade on october expiration.
let me know if at least gave you a consideration to change your mind :) you give facts, i give theories, that is why you are the author.
hi rickevan - please do not take this official accounting advice, but yes, KMI is a corporation and pays dividends like the majority of other companies. you would get a 1099-DIV form at the beginning of the subsequent year.
now to the author. the technical analysis was absolutely fantastic, but you just simply came to the wrong conclusion. Kinder Morgan's growth prospects and its balance sheet's are rock solid.
You do all that amazing technical analysis, and then you skim over the IDR topic - and most readers really don't even understand how it works. everyone still talks about KMP, even cramer who talks about KMP all the time, never even brings up KMI.
The IDR will long term greatly benefit KMI dividend growth % - which will ultimately lead to ever increasing stock price appreciation. Eventually at some point (3 years, 7 years, 12 years?) i have no idea, but i am sure the Kinder people do, KMI will cross KMP in stock price (33$ vs 90$) - maybe they cross at $150, $250? I am sure this all projected very nicely in some secret kinder spreadsheets. However, an actual stock price cross would be very "sensistive" to mr. kinder - so i am sure at some point KMP will just do a 3 for 1 or 4 for 1 split.
but at the end of the day, all the great things you say about kinder, and how IDR will weight KMI. umm, you can OWN kmi, over 4,081,003 shares were just sold today. and you know the secret that most people haven't figured out yet (IDR money flow$), so why do you throw it away as an investment option?
the other companies you picked are absolutely fantastic, but i still think you should reconsider KMI or cough.... KMP in your portfolio.
Apple LEAPS: The Gift That Keeps On Giving [View article]
nice comeback author, i do agree that Apple will be 800 before S&P hits 800 :).
the discussion in 2013 will be "apple" first trillion dollar company by when?
i would say leaps are good, but your % change in your investment is not as elastic to apple stock prices.
albeit, if you do july, may calls at 575, 550, 535 - you have the chance to make bigger money. on days like today, those options lost anywhere between 15% - 35%, but if apple hits 535 by end of march, you can easily make 100-150% return on those options, where as your leaps you mentioned would only gain 20-30%.
i agree with cincinnatus - maybe buy a 3 month put if you want to make some money on any downside movement. selling covered call also good idea. however, intel is going to be an amazing stock in 24 month window. two words that don't get discussed enough: IVY BRIDGE . potentially the invention of the decade.
Kinder Morgan, Inc.: The Positives and the Negatives [View article]
HI Todd, fantastic article on Kinder Morgan. For this company (kmp, kmi, and kmr) I have been blown away by the coverage from the seeking alpha authors.
some initial thoughts - it sorta feels that KMP is going to become the poor man stock. The man who is so deep in on the stock, and has such a deep basis, that the tax consequences of selling their monster will not let them exit.
Meanwhile the "rich man" (aka richard kinder, aka investment banks that took it private and public) have deep positions in KMI, with the understanding that every 1% growth increase in dividends from KMP, KMI will get a 2% growth increase.
Take a look at insider buying on KMI. Kinder pumped another 3 million of his own money. additional insiders followed suit.
If you look at the timing of when they took KMI private, the incentive distribution units scale was on the much lower end (kmi was cheap for them). Now they bring KMI public when they have their growth scale on the IDR maxed out. they will make hundreds of millions on KMI, b/c the increasing growth percent on the dividend will push the KMI stock price up. KMI will soon be yielding 6--7%.
KMP on the other hand, will still be a cash cow for dividends, but don't expect to get the stock price appreciation, b/c their dividends will grow slower.
I guess if you were a billionaire it would be cool to play these little company games.
A must read article for everyone who follows KMP / KMI is a fantastic article from morningstar. I even saved the article locally, b/c i don't want to every not have it.
look at page 2 of the article, last table chart, and you will see how every 1% growth in dividend cash increases for KMP will be a ~2% or more for KMI.
im less bullish on export LNG - it hasn't been touched yet by companies because there is so much macroeconomic risk.
For instance, hypothetically if something like HR 1380 is passed, then national consumption for natural gas will increase, which will increase the price of natural gas off it's current historic lows, which in turns destroys the LNG export market.
Can Natural Gas Ignite Your Portfolio? [View article]
This was a great article.
JJMC - i would also look at FSYS - Fuel Sytems. They own IMPCO which has both a play on natural gas - cng vehicles and auto gas (propane engines).
as a super micro company, I've also been following OMTK. there conversion systems just got approved by EPA. So far their entire business (6000 conversion kits) have been shipped to international markets. hence their 3x gains in the last 2 weeks.
also, i would wait at least 30 days before initiating any new long positions on any companies mentioned in this article and post. Oil will probably show additional weakness for at least the next 30 days. Lower oil prices move everyone of these companies (alternative fuels get less interest with low oil prices.).
Can Natural Gas Ignite Your Portfolio? [View article]
an incredible microstock that has some movement and recent approval from EPA on it's conversion systems. OMTK.
Also, look at fuel systems (fsys) - owner of IMPCO. Finally, Westport Innovations (WPRT) is one of the lead engine providers as noted by the author to UPS cng fleet. President Obama visited them in april and their stock skyrocketed.
I would wait another 30 days before executing on any stocks in the authors post. All have downward trends as Oil moves lower (the demand for alternatives weakens).
I am long WPRT. Plan to be long CLNE, DVN, KMP, by end of June.
An Apple Update And Other Thoughts On Selling Puts [View article]
1. cash secured puts for apple are ummm, expensive.
2. naked sale puts require margin accounts and a dip can make some people go bankrupt.
3. selling puts (assuming they expire out of the money) conservatively may only generate a 3% - 15% annual return (if doing cash secured put).
An alternative strategy for your readers if you want some leverage, but are worried about "time decay" - buy calls - 1-2 month out expiration's on apple, but anywhere between 15% to 20% in the money.
apple at 544.47 after close, so this would currently be strikes between 435 and 460. @April 21 Expiration’s the:
435 Strike = ask price of 116.45
460 Strike = ask price of 88.15
Let’s assume buyer choose the 460 strike till expiration - Break even =
460 + 88.15 = 548.15
Now let’s pretend apple hit our price target with a smooth appreciation. if we can all agree that an 18th month target price = 675 is conservative.
This would be a 23.97% total stock price appreciation over 18 months.
This would be a monthly return average of ((675 - 544.47 ) / 544.47) / 18) = 1.33% monthly return.
Calculate this out to daily (547.5 days) = .0438% daily return.
Between now and expiration we have a cool 51 days, which would project to an anticipated return of 51 * .0438% = 2.23%
This would project to apple closing on 4/21 at -> 544.47 * 1.0223% = 556.61
Profit = 556.61 – 460 – 88.15 = 8.46
On 51 day investment this would = $846 / $8,815 = 9.6% return. If you were to compound this same return based on your initial investment it would = ~$21,000.
This would be a total 18 month return of ($21,000 – $8,815 / $8,815) = 138% return.
I would love to see a model under the same apple stock price appreciations targets listed that will produce an 138% return selling cash secured puts.
The ITM call vs cash secured put ->
1. Has greater upside %
2. Less risk -> It is easier to exit a long position (buyer call) by selling than to exit a short position (seller put) by buying.
Halliburton: A Short Term Income Options Play [View article]
I've spent about half of my investment research time these past 2 weeks doing a deep dive on HAL.
My opinion is that the short-term macro-economic picture is very bullish. High oil prices lead to increased margins for E&P companies, which leads to their follow through on their capital expenditures planned, if not increased.
Additionally - high oil prices also lead to energy consumers searching for alternatives. i.e. nat gas showing a small rebound.
Interesting article posted right here on HAL page shows how HAL has consistently outperformed its peers in the month of march.
finally, look at stock price movements around quarter reporting for HAL, specifically first quarter april. they are one of the first services companies in the market to report (before bhi and SLB) - so their stock price is more elastic to their reports.
Their Y-o-Y Q1 will be a nice story, .61 vs projected .89. While probably deserving b/c of the reasons you stated, generally their lower margins to their competitors, they are still valued at about half the price SLB is.
finally, as a wild card - they are obviously exposed more to north American services, but this could flip-flop and turn out to be a good thing for them. think of Devon. like 1 month after they sold their offshore deep drilling assets for 10 billion - there is that tiny little oil spill by BP. devon probably wouldn't have gotten half of that, if they tried to sell after that deal.
now for HAL - we have a small problem called Iran. in addition to that, it turns out NA is in energy boom. many e&p companies are reporting "stealth" plays in their recent updates. they are stealth b/c they can't make them public yet, b/c they are trying to acquire land cheaply. so who knows by May / June - it may be really, super cool to be a NA focused services company, since iran tensions might lead to scary words such as "energy independence".
Now - if we get past end of july with no crazy israel strikes / or iran testing some neat new missiles with nuc's attached to them, both countries will probably go into a cooldown before the US elections.
oil tumbles, and so does all other energy plays. so with some small up and downs, i am bullish through at least june. aug - oct could be another identical repeat of 2011 when libya eased, oil crashed, PIGS came running.
i would wait till may / june and do your exact trade on october expiration.
let me know if at least gave you a consideration to change your mind :) you give facts, i give theories, that is why you are the author.
2 MLP Dividends To Buy, 3 To Avoid [View article]
now to the author. the technical analysis was absolutely fantastic, but you just simply came to the wrong conclusion. Kinder Morgan's growth prospects and its balance sheet's are rock solid.
You do all that amazing technical analysis, and then you skim over the IDR topic - and most readers really don't even understand how it works. everyone still talks about KMP, even cramer who talks about KMP all the time, never even brings up KMI.
The IDR will long term greatly benefit KMI dividend growth % - which will ultimately lead to ever increasing stock price appreciation. Eventually at some point (3 years, 7 years, 12 years?) i have no idea, but i am sure the Kinder people do, KMI will cross KMP in stock price (33$ vs 90$) - maybe they cross at $150, $250? I am sure this all projected very nicely in some secret kinder spreadsheets. However, an actual stock price cross would be very "sensistive" to mr. kinder - so i am sure at some point KMP will just do a 3 for 1 or 4 for 1 split.
but at the end of the day, all the great things you say about kinder, and how IDR will weight KMI. umm, you can OWN kmi, over 4,081,003 shares were just sold today. and you know the secret that most people haven't figured out yet (IDR money flow$), so why do you throw it away as an investment option?
the other companies you picked are absolutely fantastic, but i still think you should reconsider KMI or cough.... KMP in your portfolio.
Apple LEAPS: The Gift That Keeps On Giving [View article]
Apple LEAPS: The Gift That Keeps On Giving [View article]
the discussion in 2013 will be "apple" first trillion dollar company by when?
i would say leaps are good, but your % change in your investment is not as elastic to apple stock prices.
albeit, if you do july, may calls at 575, 550, 535 - you have the chance to make bigger money. on days like today, those options lost anywhere between 15% - 35%, but if apple hits 535 by end of march, you can easily make 100-150% return on those options, where as your leaps you mentioned would only gain 20-30%.
Intel's Revenue Is Falling [View article]
http://bit.ly/x4xMEU
i.e. see new deal with motorola, tip of the iceberg.
Kinder Morgan, Inc.: The Positives and the Negatives [View article]
some initial thoughts - it sorta feels that KMP is going to become the poor man stock. The man who is so deep in on the stock, and has such a deep basis, that the tax consequences of selling their monster will not let them exit.
Meanwhile the "rich man" (aka richard kinder, aka investment banks that took it private and public) have deep positions in KMI, with the understanding that every 1% growth increase in dividends from KMP, KMI will get a 2% growth increase.
Take a look at insider buying on KMI. Kinder pumped another 3 million of his own money. additional insiders followed suit.
If you look at the timing of when they took KMI private, the incentive distribution units scale was on the much lower end (kmi was cheap for them). Now they bring KMI public when they have their growth scale on the IDR maxed out. they will make hundreds of millions on KMI, b/c the increasing growth percent on the dividend will push the KMI stock price up. KMI will soon be yielding 6--7%.
KMP on the other hand, will still be a cash cow for dividends, but don't expect to get the stock price appreciation, b/c their dividends will grow slower.
I guess if you were a billionaire it would be cool to play these little company games.
A must read article for everyone who follows KMP / KMI is a fantastic article from morningstar. I even saved the article locally, b/c i don't want to every not have it.
advisor.morningstar.co...
look at page 2 of the article, last table chart, and you will see how every 1% growth in dividend cash increases for KMP will be a ~2% or more for KMI.
Can Natural Gas Ignite Your Portfolio? [View article]
some quick research found these companies as well: lngisthefuture.com/faq...
www.freeportlng.com/
im less bullish on export LNG - it hasn't been touched yet by companies because there is so much macroeconomic risk.
For instance, hypothetically if something like HR 1380 is passed, then national consumption for natural gas will increase, which will increase the price of natural gas off it's current historic lows, which in turns destroys the LNG export market.
Can Natural Gas Ignite Your Portfolio? [View article]
JJMC - i would also look at FSYS - Fuel Sytems. They own IMPCO which has both a play on natural gas - cng vehicles and auto gas (propane engines).
as a super micro company, I've also been following OMTK. there conversion systems just got approved by EPA. So far their entire business (6000 conversion kits) have been shipped to international markets. hence their 3x gains in the last 2 weeks.
also, i would wait at least 30 days before initiating any new long positions on any companies mentioned in this article and post. Oil will probably show additional weakness for at least the next 30 days. Lower oil prices move everyone of these companies (alternative fuels get less interest with low oil prices.).
Can Natural Gas Ignite Your Portfolio? [View article]
Also, look at fuel systems (fsys) - owner of IMPCO. Finally, Westport Innovations (WPRT) is one of the lead engine providers as noted by the author to UPS cng fleet. President Obama visited them in april and their stock skyrocketed.
I would wait another 30 days before executing on any stocks in the authors post. All have downward trends as Oil moves lower (the demand for alternatives weakens).
I am long WPRT. Plan to be long CLNE, DVN, KMP, by end of June.