My 1st Quarter 2013 Apple Double Income Stream Strategy [View article]
The problem here is that although your article is bullish, your positions disclosed are not. With ATM calls and long puts you clearly expect AAPL to drop after earnings. When if at all do you expect AAPL to move higher after earnings?
What If Apple Weren't A Tech Stock? [View article]
As much as your statistics and rhetoric are accurate, perception is reality and if nobody is willing to pay more than 12-13x then that's what you get. If AAPL were to do a 10:1 split the price would go to $100 within weeks. Its all about perception.
Apple Is Ripening And So Is Its Stock [View article]
"Apple will continue to come out with innovative products and expand globally in the future (that is a given)".
Not to anger the wild bulls here (read to the end), but WHY is it a given. There have been many wildly successful companies that have lost their way with innovation and been punished. Take MSFT for example, after Windows they kept bring out new versions of Windows that have all dominated but the stock has done relatively little over the last 10 years. Let's face it, AAPL has 4 products (ipod, iphone, ipad and mac) that are all basically some variation on the same product with different size screens - except the MAC which sells relatively few in the world of computing. The author does not explain WHY innovation is assumed, especially with Jobs gone - what truly NEW product has Cook developed?
That said I agree AAPL is well valued here and am expecting to be long when my naked puts expire ITM but between now and then I will make money selling puts to those Bears until I'm ready to own at a price I like.
4 Reasons To Buy Microsoft On The Recent Dip [View article]
All you have to do is look at support and resistance on the charts to see MSFT is likely to retest the $25-27 range. Although I also believe MSFT is a good company (I actually hold shares and have sold puts to get more at better prices) I don't believe any of the argument here are a good reason to outright buy shares at present values.
This is simple minded Obama bashing. This is an investment website not a soapbox. Your emotion based arguments are simply not valid. The facts point to an administration that has reduced the size of government and done what it can to fix the previous 8 years.Obama didn't cause these companies to go offshore and there's no guarantee they would spend any of their fortunes here if they were given tax free repatriation. Just like the banks that received Bush bailouts (that's right - Bush, not Obama created TARP) didn't do anything but line their pockets. Obama is smart enough to know if the US public don't receive some of this money from these huge corporations now we'll never see it. Yes, tax policy for small US centric exporting business could do with being reduced but don't confuse multinational cash hoarding companies paying less than 20% tax with those that need help.
Remember the other thing Warren Buffet is known for - buying when everybody else is running scared.
We don't know the inner dealings of Berhshire - they may have sold INTC because they saw it getting overbought and wanted to raise capital for some other project. It doesn't mean INTC is about to fall to the floor. They made a good profit and so did the author. Happy for all of them.
For me, I plan to make money whichever way it goes. When you have shares, look for overbought conditions and sell covered calls. When you want to buy again, look for a price you like and sell puts at that price. I have juiced my long shares that way for years, earning generally double what the dividend is paying over a year, which is important with the fed causing inflation and making a 4% dividend worth about 2% in real $$. Just bought shares this morning @ $23 for a quick day or two trade (when everybody else was scared), plus still holding Oct $22 puts. Technicals tell the story in between earnings.
The one thing I haven't heard in either the article or the comments is any review of the technicals. Intel has good support at $23 (which is why it keeps bouncing around here but hasn't dropped below but once) and has even stronger support @ $22. Its very unlikely that it will go below $22. For some excellent articles on INTC check out fully informed.com. Its a free site that a Canadian woman writes and it is excellent. While MCD is a good stock it is more overbought right now and INTC is more oversold. The author is right about one thing - selling put options and being paid to get in at a great price is very effective. The Oct $22 puts would be a great sell today. I am short a variety of INTC puts out through Jan '13.
Why not sell put options and get paid to wait for it to get to a valuation you like better. I have Jan '13 $22.50 puts for which I was paid $1.10 which would make my entry point $21.40 if assigned. Intel is still the most solid of the chip manufacturers and a great buy at $22 or less. Food for thought.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
Joseph, It would be good if you would revisit this article in December to see the results. I expect we will be lower than today but not the 7%+ your thesis requires. For anyone who placed the trade I would be inclined to sell the calls soon based on when we see this pop start to fade and close the puts now with the possibility of rebuying at the money put when you see the top occurring in the technicals - ie: MACD, momentum, stochastics, ultimate oscillator showing overbought. Just my 2c.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
I agree with your market direction call, I just don't agree with the magnitude. I prefer to sell options to capture the premium (decent on well chosen stocks like INTC right now) rather than take the risk of time decay which is guaranteed to lose you money. I agree the fundamentals suggest this market is not sustainable but I also believe in not fighting the Fed, as can be seen by the 1.5% pop today. That said, I also think it's unlikely to go up much more due to upcoming negatives (fiscal cliff, etc). That's why I use technicals to support the trades. Even though the market "should" go down does not mean it will and in the meantime I will capture premium and roll where necessary where I am wrong, whether it be on call or puts. Options written with a solid understanding of the company/ETF and it's technical charts will limit risk significantly. For example: today I rolled my INTC 9/22 $24 puts to Jan '13 $22.50 Puts for a decent credit. If it gets to $22.50 by Jan I will be happy to accept the shares and write covered calls and get the 4% dividend as well. That's the benefit of put option writing on dividend paying stocks and ETF's - far lower risk if done properly.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
In retrospect, I agree you clearly mentioned the risks. However, most new traders, particularly in options, look only at the huge upside potential and discount or completely ignore the time value decay which is the largest risk in this trade.
A loss is a loss, whether it is a small amount of your portfolio or not. Selling puts or put spreads on solid dividend paying companies that are at or near support is far less risky in this or any market. If people are going to get into options, a covered call strategy is also a good way to get into it, or even buying a solid stock, selling covered calls and buying puts for downside risk too if they want. For example, right now INTC is near support. Selling the Oct $22 or Nov or Dec $21 provides little risk. Even if it drops to that level rolling the option is easy or at $22 or below accepting the stock, receiving a near 4% dividend and selling covered calls is a great strategy. The money may not seem as fast but over 10% per year is pretty easy. Using your thesis of a move through December, an alternative would be bear put spreads on the SPY, selling for example the Dec 138 (heavy support at 139) for $3.10 and buying the $135 for $2.38 provides an immediate cash infusion of $0.72 with risk of $3 maximum, with theta decay mostly on your side instead of against you. Immediately after the Fed announcement, depending on the result, you could sell the bought put depending on the result to make even more.
My main point is there are many option strategies but buying OTM puts and calls is in my opinion one of the least effective due to the fact that you are guaranteed to lose at least one side and theta decay will get you nearly every time. Most options expire worthless.
Disclosure: I am short INTC puts and short SPY calls and puts.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
You're logic is lacking and you omit to allow that an upside move will likely be followed by a further reduction in volatility. Through all the Euro and US drama we have been in a relatively small range (up about 13% so far in the last 9 months. The cost of this trade is not worth the risk of a less than 7% move and to advise people not.familiar with options is irresponsible. Although I agree its likely we'll see a significant move before year end I believe there are far less risky ways to play it - spreads would be my choice if I had t make a choice
Top 10 Reasons Microsoft Surface Is DOA [View article]
This product doesn't need to be an ipad killer to be successful. I'd be more concerned about Dell and HP if MSFT finds success and decides to cut OEMs out for good. They are extending an ecosystem around W8 with the billion the plus users they already have. If you watched the presentation properly you would have noticed there will be 2 products - one more of a tablet (priced similarly) and another with specs like an ultrabook. Ivybridge 3 specs are pretty good.
I just wasted an hour of my life watching the first episode of Lilyhammer. It was below average at best. I have the NFLX service because it was a gift. I certainly wont be paying for it when it runs out and I have to think I'm not the only one. If it drops below about $117 its well worth puts or even shorting. Its all about to cave in for them - again!
Make A Prudent And Profitable Bet On Netflix With Options Trades [View article]
Simon,
I agree generally with your analysis however not with your options strategies. Selling covered calls for long positions works well on a stable dividend play that even in a crash may only drop a couple of dollars. On a growth stock however, selling $0.72 calls is laughable. NFLX moves $5 - $10 on a normal day and as was seen on Thu evening, easily drops $20 on any bad news. Covered calls are worthless in providing any significant protection. A better strategy for long positions would be buying out of the money puts about two months out at a price you would be comfortable selling. The downside protection is full and you can lock in a profit with minimal cost. As for being short, I prefer selling out of the money naked calls, also month after current month - Oct 22 right now gives best premium. If the stock goes up and against you, you can then decide to accept assignment, thereby going short, roll forward - often at a credit if the stock is moving against you -, or simply buy back your calls for a loss that you decide on before opening the position. Simplifying options can be a big mistake on high P/E growth stocks.
Disclosure: I hold naked calls on NFLX and will likely sell more next week once I see what Europe is doing. I am a trader, not a long term investor.
My 1st Quarter 2013 Apple Double Income Stream Strategy [View article]
What If Apple Weren't A Tech Stock? [View article]
Apple Is Ripening And So Is Its Stock [View article]
Not to anger the wild bulls here (read to the end), but WHY is it a given. There have been many wildly successful companies that have lost their way with innovation and been punished. Take MSFT for example, after Windows they kept bring out new versions of Windows that have all dominated but the stock has done relatively little over the last 10 years. Let's face it, AAPL has 4 products (ipod, iphone, ipad and mac) that are all basically some variation on the same product with different size screens - except the MAC which sells relatively few in the world of computing. The author does not explain WHY innovation is assumed, especially with Jobs gone - what truly NEW product has Cook developed?
That said I agree AAPL is well valued here and am expecting to be long when my naked puts expire ITM but between now and then I will make money selling puts to those Bears until I'm ready to own at a price I like.
4 Reasons To Buy Microsoft On The Recent Dip [View article]
'It's The Economy, Stupid!' [View article]
Why I Sold My Stake In Intel [View article]
We don't know the inner dealings of Berhshire - they may have sold INTC because they saw it getting overbought and wanted to raise capital for some other project. It doesn't mean INTC is about to fall to the floor. They made a good profit and so did the author. Happy for all of them.
For me, I plan to make money whichever way it goes. When you have shares, look for overbought conditions and sell covered calls. When you want to buy again, look for a price you like and sell puts at that price. I have juiced my long shares that way for years, earning generally double what the dividend is paying over a year, which is important with the fed causing inflation and making a 4% dividend worth about 2% in real $$. Just bought shares this morning @ $23 for a quick day or two trade (when everybody else was scared), plus still holding Oct $22 puts. Technicals tell the story in between earnings.
Why I Sold My Stake In Intel [View article]
Intel Is Terrified Of ARM [View article]
Intel is still the most solid of the chip manufacturers and a great buy at $22 or less. Food for thought.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
It would be good if you would revisit this article in December to see the results. I expect we will be lower than today but not the 7%+ your thesis requires.
For anyone who placed the trade I would be inclined to sell the calls soon based on when we see this pop start to fade and close the puts now with the possibility of rebuying at the money put when you see the top occurring in the technicals - ie: MACD, momentum, stochastics, ultimate oscillator showing overbought. Just my 2c.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
I agree the fundamentals suggest this market is not sustainable but I also believe in not fighting the Fed, as can be seen by the 1.5% pop today. That said, I also think it's unlikely to go up much more due to upcoming negatives (fiscal cliff, etc). That's why I use technicals to support the trades. Even though the market "should" go down does not mean it will and in the meantime I will capture premium and roll where necessary where I am wrong, whether it be on call or puts.
Options written with a solid understanding of the company/ETF and it's technical charts will limit risk significantly. For example: today I rolled my INTC 9/22 $24 puts to Jan '13 $22.50 Puts for a decent credit. If it gets to $22.50 by Jan I will be happy to accept the shares and write covered calls and get the 4% dividend as well. That's the benefit of put option writing on dividend paying stocks and ETF's - far lower risk if done properly.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
A loss is a loss, whether it is a small amount of your portfolio or not. Selling puts or put spreads on solid dividend paying companies that are at or near support is far less risky in this or any market. If people are going to get into options, a covered call strategy is also a good way to get into it, or even buying a solid stock, selling covered calls and buying puts for downside risk too if they want. For example, right now INTC is near support. Selling the Oct $22 or Nov or Dec $21 provides little risk. Even if it drops to that level rolling the option is easy or at $22 or below accepting the stock, receiving a near 4% dividend and selling covered calls is a great strategy. The money may not seem as fast but over 10% per year is pretty easy.
Using your thesis of a move through December, an alternative would be bear put spreads on the SPY, selling for example the Dec 138 (heavy support at 139) for $3.10 and buying the $135 for $2.38 provides an immediate cash infusion of $0.72 with risk of $3 maximum, with theta decay mostly on your side instead of against you. Immediately after the Fed announcement, depending on the result, you could sell the bought put depending on the result to make even more.
My main point is there are many option strategies but buying OTM puts and calls is in my opinion one of the least effective due to the fact that you are guaranteed to lose at least one side and theta decay will get you nearly every time. Most options expire worthless.
Disclosure: I am short INTC puts and short SPY calls and puts.
High Risk/Low Volatility Anomaly Sets Up A 2 Way Option Play [View article]
Top 10 Reasons Microsoft Surface Is DOA [View article]
Netflix's Contract Obligations Mountain [View article]
Make A Prudent And Profitable Bet On Netflix With Options Trades [View article]
I agree generally with your analysis however not with your options strategies. Selling covered calls for long positions works well on a stable dividend play that even in a crash may only drop a couple of dollars. On a growth stock however, selling $0.72 calls is laughable. NFLX moves $5 - $10 on a normal day and as was seen on Thu evening, easily drops $20 on any bad news. Covered calls are worthless in providing any significant protection. A better strategy for long positions would be buying out of the money puts about two months out at a price you would be comfortable selling. The downside protection is full and you can lock in a profit with minimal cost.
As for being short, I prefer selling out of the money naked calls, also month after current month - Oct 22 right now gives best premium. If the stock goes up and against you, you can then decide to accept assignment, thereby going short, roll forward - often at a credit if the stock is moving against you -, or simply buy back your calls for a loss that you decide on before opening the position.
Simplifying options can be a big mistake on high P/E growth stocks.
Disclosure: I hold naked calls on NFLX and will likely sell more next week once I see what Europe is doing. I am a trader, not a long term investor.