Posts Tagged ‘Cash-Secured Put’

Bullish and Neutral Options Strategies for Amazon.com (AMZN)

Wednesday, December 8th, 2010

Options strategies for Amazon.com Amazon.com (NASDAQ:AMZN) is in the business of selling Kindle e-readers, books, housewares, and just about everything in between (including the kitchen sink). In addition to its peddling of tangible goods, the retailing giant also generates revenue through credit-card services and marketing agreements.

The online business has dominated the e-business space for years, and this has been reflected in the share price. AMZN shares have gained more than 250% in the past five years and are up roughly 30% on a year-to-date basis.

Earlier this week, Credit Suisse upped its price target on the shares to $165 from $145 while maintaining a “neutral” rating on the stock. Perhaps the firm was playing a bit of catch-up with the stock bearing down on the $180 level. In a note to clients, Credit Suisse noted that Amazon has a strong gross and operation margins outlook. (more…)

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Verizon Communications (NYSE:VZ) Sentiment is Mixed Before Earnings

Tuesday, October 19th, 2010

Last week, a number of financial pundits offered their revised opinions on Verizon Wireless (NYSE:VZ) and the message was decidedly mixed.  On one hand, Sanford Bernstein downgraded its rating to underperform from market perform.  The covering analyst noted that shares have run sharply higher since September 1, gaining about 12%. The firm feels this growth may be unsustainable and even worries that the company faces a challenging dividend environment.

On the other hand, Ji m Cramer made bullish remarks on his Mad Money program and Argus upped its rating to buy from hold. Argus did provide a caveat, however, that failure to synch up with Apple (NASDAQ:AAPL) could mean a negative surprise for the communications giant.

(more…)

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Bullish and Bearish Plays in Microsoft (NASDAQ:MSFT)

Thursday, September 23rd, 2010

Microsoft Options Strategies Is a company’s fundamental strength enough to power a stock higher? It’s an age-old rhetorical question and one that blue-chip names like Wal-Mart (NYSE:WMT) and Microsoft (NASDAQ:MSFT) have confronted for years. MSFT said earlier this week that it was upping its quarterly dividend to 16 cents per share from 13 cents, marking its first dividend increase in two years.

Is this boost a sign that MSFT executives have renewed confidence in the company and perhaps in the economy as a whole? The company is now set to pay out $5.6 billion to shareholders each year, making the software giant “one of the [world's] largest aggregate returns of cash to shareholders,” according to Jefferies & Co. (more…)

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Will Investors Return to BP (NYSE:BP)?

Tuesday, September 14th, 2010



The hope when setting low expectations, of course, is that the eventual result will be better than everyone feared. We see this with earnings guidance figures, sales numbers, and all measures of financial forecasts. BP is currently seeing a version of this phenomenon take shape. The oil giant now says the $20 billion it earmarked for legal claims related to the Deepwater Horizon disaster may be more than sufficient.

Some analysts believe BP, which is under the new executive leadership of Robert Dudley come October 1, may resume paying a reduced dividend in the fourth quarter after three periods of non-payment. Other BP watchers believe dividends won’t begin again until the first quarter. (more…)

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Starbucks (SBUX) options strategies for bulls and bears

Friday, August 20th, 2010

Starbucks options strategies It’s not enough for Starbucks (NASDAQ:SBUX) to be on every street corner in every metropolitan area; they now want to take over your grocery shelves! Thursday’s Wall Street Journal reported that the company is hard at work on plans to bring more of its products into the nation’s grocers.

Specifically, the chain wants to try selling in stores some of the same products that are available in its retail locations, including Via instant coffee and Tazo tea. (The Via brand alone could add about six cents per share to the company’s earnings, according to one analyst).

SBUX could use a fresh new idea to inspire investors; a year-long rally in the shares petered out in June and the shares have been drifting sideways ever since.  What’s more, the shares are still a far cry from their all-time high of $40.01, notched in November 2006.

For investors interested in option strategies, we’ve outlined one moderately bullish and one bearish strategy below.  Review the one that seems most appealing, depending on your opinion of SBUX stock and the company’s new strategy. These are not trading recommendations, merely examples of various strategies for educational purposes. The prices are taken as of Thursday’s close, when SBUX shares were trading at $24.04, down $0.46 on the day. For a full dissection of the strategies including profit/loss information, read on. (more…)

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Bullish and Neutral Options Strategies for Intercontinental Exchange (ICE)

Friday, July 23rd, 2010

Earlier this week, shares of Intercontinental Exchange (NYSE:ICE) were upgraded to outperform (essentially a “buy”) from market perform (a “hold” rating) at BMO Capital. The firm established a 12-month price target of $125, allowing for roughly 18% of upside.

The covering analyst noted that changes resulting from FINREG will be “at worst neutral for ICE and more likely opening up some new opportunities.” Earnings estimates for the exchange operator were left unchanged at $5.65 for 2010 and $6.58 for 2011.

While this analyst is optimistic for the stock’s future, the technical picture isn’t as cheerful.  The shares are fresh from a six-month low and are staring up at trendline resistance.  For these reasons, there are likely investors on either side of the trading fence.

We’ve outlined two option trading strategies below – one for the bulls and one for investors who think the shares could trade in a short-term range.  These are meant to serve as examples and do not constitute buy/sell/hold recommendations.  Always take your risk/reward parameters into account before entering any new trades. Prices are given as of Wednesday’s close, when ICE was trading at $104.38, down $3.16 on the day.

(more…)

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Options Trading Ideas in GameStop (GME): a Cash-Secured Put and a Long Strangle

Monday, April 19th, 2010

GameStop (NYSE: GME) scored an upgrade Friday morning at BB&T Capital Markets. The firm set a 12-month price target of $32, citing decreased competition in the high-margin market of used game sales. BB&T also noted the retailer’s better-than-expected fourth-quarter results as a positive catalyst. The stock is currently trading near $24.90.

From a technical perspective, GME bottomed out in late February and has rallied 42% in the past seven weeks. It is now approaching the top of its range, so it could be at a critical point. Will the stock break into new-high territory or be rejected at this level? Additionally, earnings are due before the open on May 20 and in three of the past four quarters, the stock has reacted dramatically.  Last quarter, the shares jumped 6.5% higher the day earnings were released. In the August quarter, the stock dropped 7%, and last May, the shares plunged 15.5%.

Analysts and stock traders are limited to buying, selling, and holding. Option traders, on the other hand, have multiple strategies to choose from when it comes to planning and executing a trade. Certain option trades benefit from heightened volatility (such as what can transpire surrounding earnings) and others might act at a hedge.

Whether your outlook on GME matches that of BB&T or opposes it, there may be option strategies that can work for the stock. Below are two hypothetical strategies that are not buy-sell-hold recommendations, just educational examples of how one can play the market with options. (more…)

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Proactive Investment Strategies for eBay (EBAY): a Cash-Secured Put and an Iron Condor

Monday, April 12th, 2010

eBay stock (NASDAQ: EBAY) experienced a recent downgrade to “hold” from “buy” by a pair of analysts with Kaufman Bros. who listed a number of concerns including lack of rapid growth in the company’s U.S. “gross merchandise volume,” a drop in traffic for the auction site during the first quarter, and possibility of negative repercussions due to global currency fluctuations.

The stock is currently trading at $26.40. EBAY shares have gained about 12% so far in 2010 but have been battling the $27 level overhead for the past few weeks.

Unfortunately, a stock investor can’t be terribly proactive should he want to follow this new “hold” rating. In fact, there isn’t much stock investors can do anytime when they have a neutral attitude. Similarly, if they are only slightly bullish, they can’t exactly buy shares in a half-hearted manner.

Options strategies, however, can be used in a number of scenarios to take a long, short, or neutral position in a security. Unlike stocks, which depend solely on the price action of the security itself, options trades have an element of time as well as the volatility factor to consider.

Below are just two potential options strategies for EBAY – these are not buy-sell-hold recommendations, just hypothetical examples of two trades – one bullish and one neutral, depending on whether you agree with Kaufman’s insight or expect continued strength in EBAY shares. (more…)

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Healthcare Reform and Wellpoint (WLP): Options Strategies for the Bullish and Bearish

Monday, April 5th, 2010

Bronze statue of a bull located in Romerberg, Frankfurt, GermanyWellPoint Inc. (NYSE: WLP) has gained ground over the past several months after a sharp plunge from its early-2008 highs. With the healthcare legislation overhaul in its final stages in Washington, we’ve seen a bit of the “buy the rumor, sell the news” phenomenon … in reverse.

Following months, if not years, of pessimism and selling pressure in the healthcare and biotech sectors, investors have begun to return to these names, as the healthcare reform news out of Washington isn’t as dramatic as many were expecting. The increase in WLP is just one example.

This trend hasn’t gone unnoticed by Wall Street – BMO Capital Markets upgraded the stock this week to “outperform” (buy) from “market perform” (hold) and kept its 12-month price target at $74. BMO said that WLP stands to increase its “commercial profitability” thanks to a stabilizing member base and “lower-than-expected medical costs.” After closing at $64.69 on Tuesday, WLP is little changed late Wednesday at $64.54.

By trading WLP options in lieu of, or in addition to, the stock, investors can typically commit less capital (and can sometimes limit risk). Additionally, certain option strategies can benefit from “leverage,” meaning they may be able to yield better percentage returns than the corresponding stock trade.

Depending on whether you think healthcare companies are out of the woods and ready to rally (or if you think they are due for a pullback), there may be a workable options strategy. Below are two potential options strategies – not buy-sell-hold recommendations, just hypothetical examples of two trades – one bullish and one bearish-to-neutral.

*Option prices given as of Wednesday afternoon (more…)

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