Posts Tagged ‘Covered Call’
Thursday, February 3rd, 2011
Verizon Communications Inc. (NYSE:VZ) has seen a significant increase in volume in 2011. While part of this is attributable to an overall market increase in trading activity, the impending availability of the iPhone has also sparked interest among investors.
Since the January 11 announcement that Apple’s smartphone is coming to the VZ network on February 10, VZ shares have been virtually flat after a mid-month pullback. Wall Street’s short-term outlook has been mixed on the stock. While Deutsche Bank recently downgraded the stock from buy to hold, Goldman Sachs added it to its conviction buy list, noting that the carrier’s “appeal to investors should improve over the course of the year.” (more…)
Tags: Bear Put Spread, Buy Write, Covered Call, iPhone, Verizon Communications, VZ
Posted in blog, Bulls Vs. Bears | No Comments »
Thursday, January 20th, 2011
Google (NASDAQ:GOOG) is reporting tonight after the close; analysts expect per-share results of $8.09, a 19% increase from year-ago numbers. Analysts have been hedging ahead of this report by sounding their opinions on the mega-cap shares.
ISI Group initiated coverage on the shares with a “hold” rating and a 12-month price target of $675. This target allows for just 7% in upside, in line with the 7% GOOG has gained in the past 52 weeks. (In the past six months, however, the stock has rallied 35%).
Elsewhere, Oppenheimer upped its price target on GOOG from $640 to $705 with an “outperform” rating on the stock. The firm noted that non-search revenue has improved at the search giant. (more…)
Tags: Buy Write, Covered Call, GOOG, Google, Options Strategies, Put Tree
Posted in blog, Bulls Vs. Bears | No Comments »
Friday, January 14th, 2011
Watch for falling stock prices? Goldman Sachs recently expressed bearish sentiment on Wal-Mart Stores (NYSE:WMT), downgrading shares of the retailer to neutral from buy. Reasons for the downgrade included inflationary risks in the food and apparel sectors, which could limit margin upside. Goldman analysts also opined that the sheer size of WMT limits growth potential for same-store sales.
Going back to the late 90s, WMT has been the epitome of a range-bound stock, spending nearly all of its time bouncing between 40 and 60. The stock is now trading near the upper end of this long-term range. What’s more, the stock is within a dollar of its 52-week high of $56.27.
Simply buying or selling range-bound stocks may not be the quickest way to profitability; if the stock doesn’t move, portfolios don’t either. There are, however, options strategies designed for low-volatility stocks and indices. To learn more about the pros and cons of these neutral trading strategies, join Bill Sullivan and me for our free Two Traders, One Strategy series Tuesdays after the close. Next Tuesday’s webinar strategy? Iron condors. (more…)
Tags: Buy Write, Covered Call, Options Strategies, Ratio Put Spread, Wal Mart, WMT
Posted in blog, Bulls Vs. Bears | No Comments »
Monday, December 27th, 2010
The covered call is one of the most popular options strategies used by the retail options trader. It is also often one of the first option trading strategies a stock trader will try when entering the options arena.
On days when the market is in pullback mode, we tend to see interest in covered calls increase. Traders often opt to re-evaluate existing covered-call positions when the market is headed lower.
A covered call involves owning shares of a stock or ETF and selling one call option for every 100 owned shares. Investors typically sell calls at strike prices they would not mind selling the stock at. Some opt to sell short-term calls (with 35 or fewer days until expiration) in order to collect the most amount of theta; options typically decay the fastest during the last 30 days of their life.
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Tags: Covered Call, NFLX
Posted in blog, Education | No Comments »
Tuesday, December 21st, 2010
With General Motors (NYSE:GM) available again for public trading, Ford Motor (NYSE:F) has gone back to sharing the trading spotlight. But this doesn’t take away from the stock’s impressive performance; Ford shares are up 68% year to date and have climbed nearly 470% during the past two years.
Last week, Mad Money host Jim Cramer reiterated his bullish take on Ford, noting that, “earnings power is huge and the balance sheet is getting better … it would not shock me to see Ford at $20 to $25 next year.” A move to $20 would be a 20% jump in the stock; a move to $25 would mean a gain of almost 50% from current levels. (more…)
Tags: Bear Put Spread, Buy Write, Covered Call, F, Ford Motor, Option Strategies
Posted in blog, Bulls Vs. Bears | No Comments »
Wednesday, November 17th, 2010
After a mixed earnings report, Lowe’s Companies (NYSE:LOW) investors are trying to decide their next move. Third-quarter results topped analysts’ estimates by a penny but failed to match expectations from a revenue perspective. Looking ahead, LOW issued a fourth-quarter guidance that was in line with expectations.
This ambivalence is reflected in the stock’s price; LOW shot higher out of the gate on Monday following its earnings report and declined throughout the session, ultimately closing in the red. In 2010, LOW has been vacillating in a range between 20 and 28; the stock is off about 8% year-to-date.
One thing LOW has in its favor is a decent dividend yield of about 2%. The retailer is an interesting name to consider, especially when it comes to options trading. Range-bound stocks aren’t of much use to stock traders but even the most inert of securities can potentially be a profitable investing opportunity with the right option strategy. (more…)
Tags: Buy Write, Covered Call, Long Put, LOW, Lowe's, Options Strategies
Posted in blog, Bulls Vs. Bears | No Comments »
Friday, October 1st, 2010
On CNBC this week, Bill Gross – managing director at Pimco – said the new normal for investing means saying goodbye to double-digit returns. His basis for thinking this is the new, expanding regulatory environment, which will likely curtail the use of leverage.
What this means to his investment outlook, he wrote in his monthly investment outlook, is that future investment returns will be “far lower” than the historical averages. With bond yields at 2.5% and the GDP growing between 2-3%, he does not see stock returns being that exciting in the future.
If Mr. Gross’ outlook is correct, it likely means a tough road for stock investors. Hedge funds de-leveraging and banks closing down their proprietary trading desks may mean fewer investment dollars buying stocks. There are option strategies that may be suited to lessen the impact from such a low-return environment. (more…)
Tags: Collar, Covered Call, Option Strategies
Posted in Advanced Trading, blog | No Comments »
Wednesday, July 28th, 2010
Late last week on CNBC’s Fast Money, a panelist vocalized a bullish thesis in Altria Group (NYSE:MO), the parent company of Philip Morris (NYSE:PM). The stock has been moving higher since late 2008, gaining more than 50% during this time, and recently overcame its mid-May peak to hit a new 52-week high.
While some investors may agree with the Fast Money participant and conclude that the trend is their friend, others could be expecting a reversal. For both bulls and bears, we’ve outlined a couple of options strategies below. These are just examples, not recommendations, and you must always be mindful of your own risk/reward profile before placing any new trades.
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Tags: Altria Group, Bear Put Spread, Buy Write, Covered Call, MO
Posted in blog, Bulls Vs. Bears | No Comments »
Deutsche Bank upgraded AT&T (NYSE:T) Monday morning to a “buy” rating from “hold” and lifted its 12-month price target by $1 to $31, essentially calling for about 20% of upside over the next year. The firm argued that Ma Bell should be able to sustain double-digit core earnings growth into next year. Potential near-term catalysts for continued growth include a buyback and a dividend increase. Additionally, the firm thinks concerns about the potential loss of the iPhone exclusivity contract may be overblown (or already priced into the shares).
Technically speaking, T shares have been range-bound for the past year or so, with little movement below 23 or above 26. Last Thursday, the stock gapped higher, however, thanks to a positive earnings surprise. Upward momentum continued through Friday and Monday, and the shares have now moved back above their 200-day simple moving average for the first time since April.
For investors interested in adding options to their portfolio, we’ve outlined two strategies below – one for those who agree with Deutsche Bank’s positive outlook and one for AT&T bears. These strategies are examples and do not constitute buy/sell/hold recommendations. Prices are given as of Monday late afternoon, when T was trading at $25.95, up 41 cents.
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Tags: AT&T, Bear Put Spread, Buy Write, Covered Call, T
Posted in blog, Bulls Vs. Bears | No Comments »
Thursday, June 10th, 2010
For more information on how the Hotlist tool functions, refer to this article.
One name at the top of today’s OptionsHouse Hotlist is Altria Group (NYSE:MO). The stock is up 1.4% today, which is actually underperforming the 2.3% rally in the broader market. Almost 55,000 options have traded in the name already, and the most-active strike is the July 20 put, where more than 27,000 contracts have changed hands versus open interest of only 11,000.
Right out of the gate, large blocks changed hands between 68 and 70 cents per contract. In the first 90 minutes, these options were priced at 79 cents apiece. On the day, the put is down only seven cents while the stock is up 29 cents. The option’s delta suggests the puts should be lower by about 14 cents given the movement in the underlying, but buying demand seems to be inflating the price by raising the option’s implied volatility, now registering a 29% vol from the OH option chain. Put buyers can lose as much as 100% of the premium paid but have significant reward potential down to the zero mark if the stock falls below breakeven. Breakeven at expiration for the July 20 put bought at 68 cents would be $19.32. (more…)
Tags: Altria Group, Call Selling, Covered Call, Harley Davidson, HOG, MO, Option Activity, Option Volume, options trading, Put Buying
Posted in blog, What's Hot | No Comments »
