Investment Self Defense

Don’t forget that a good defense can win a game. In other words remember that using options in a defensive nature can help cushion a downturn in the market. One of the useful techniques is called a collar. In this case you sell and out of the money call and you buy a PUT.  If the stock goes down you win on both accounts, not to mention that you capture some premium to lower your cost basis.

Now the way you may want to look at this strategy is buying a PUT out further and selling calls weekly. The volatility is back and this strategy is certainly worth taking a look at. Remember that options are NOT suitable for all investors and we encourage you to seek the advice of an investment professional. People can and do lose money.

Tips: By selling calls you are receiving premium, buying Puts costs you premium.  WE look to spend the premium we receive for the call for the PUT.  Either  a zero sum game or keeping premium where possible.

Keep an Eye OUR FEYE

FEYE has been on fire lately, it has been a long time coming.  Sensi did suggest the buy at $15.30 and selling the January 19, calls.  Winner Winner

Contrarian, possibly the way to go.

When prices are low, that is when you buy protection.  As the market seems to be trading in a tight range, what will be next?  We prefer to be protected on the downside, so we are buying protection.  When you buy a PUT, you are protecting your downside and so if the market stays flat or moves up you lose.  This is the same as buying car insurane, you need an event to occur to capitalize on the benefits.  It is for this reason that we are using a collar.  That is we are buying a PUT and selling a CALL to provide the premiums for the PUT.  When one sells calls or puts you receive a premium from the sale, we are using the premiums received to pay for the cost of the put.  The outcome is flat,down, or up.  If the market stays flat we were covered but used the call premiums to cover the cost, if it goes down we make money on the call and the put.  If it goes up we miss out on the gain in the stock.  As  are pursuing any option strategy you need to be aware of it’s profit and loss potential.

Options are not suitable for all investors and people can and do lose money. Consult your advisor before investing of any kind.

Beating but not Dead

VRX has been crushed and our Sensei believes we have a great play.  WE are buying VRX at $22.25 and selling the Jan 2018 $22.50 call for $7.10.  Recently we had some prominent investors say they expect VRX to double over the next two years.   WE are being conservative by selling the calls at the money.  Your cost basis will be $15.15 per share, so you have a 32% hedge.  Thus you have a potential 32% profit for waiting 15 months. 

We like the premium and feel that this kind of spread is a great way to make money for those who can wait until the call expires.

Consult your advisor before investing of any kind, options are NOT suitable for all investors and people can and do lose money.


Learn to PRotect your ProfiTS!

As the market seems to be waiting on the outcome of  the election we suggest you learn to protect your profits. One of the ways we do this, is selling COVERED CALLS after earnings.  The covered call provides you some income and hedges your portfolio.  This morning we sold CALLS against FCX as earnings pushed the stock up 8% in early trading. We saw the stock approach $11 a share and sold calls at the money and at $11.50.  In less then 30 minutes we are up 12% on our calls.  The early morning enthusiasm was lost as people took profits and the shorts covered.  We however are lowering our cost basis with our covered calls.

As a member of optionsdojo you’ll be the first to see the trades as they happen.  We encourage hedges in this market environment.

Options are not suitable for all investors, people can and do lose money, consult your advisor before investing of any kind.

The ARt of the PUT

If you are not familiar with PUTS we suggest that you get familiar.  The PUT can be a valuable tool in managing your risk profile.  The PUT has two sides, the buy side and the sell side. The sell side requires the seller to buy the position at a stated price.  An example would be AAPL currently selling at $114 per share. If you sell a PUT at $110 you would be required to buy the shares at $110 regardless of how low the stock falls.  As the seller of the PUT you are expecting the stock to stay above your price of $110.  The PUT buyer is expecting the stock or ETF to fall and thus buys the put to protect their position or leverage their money. So for example if the buyer of the PUT paid $2.00 per share for the $110 strike and the stock goes down to $100 per share the profit breaks down as follows. The price is now $100 per share so that is a $10 gain and the PUT buyer invested $2.00 per share so they have a profit of $8.00 per share or 400%.  Now the PUT seller is buying the stock at $110 and now it’s $100 so they are down $10 per share minus the $2 they got up front for selling the PUT, or $8.00 loss per share.  The direction is the key here, if you believe the market is going down you buy PUTS to protect your positions or leverage your funds. If you believe it will trade above or at the current price you can sell PUTS. 

Now options are NOT suitable for all investors and we strongly encourage you to consult your advisor before investing of any kind. People can and do lose money.


We previously told our members to buy the December 30, 2016 $219 PUTS on the SPY.  WE are advising you to close them today with a 12% return since our call.  WE believe that you’ll have a chance to re-purchase them at a lower price.

Congrats to all of you who bought the PUTS.

As always consult your advisor before ever investing. Options are not suitable for all investors and people can and do lose money.

Back N Forth or Straight Down?

The question here is, how to take advantage of either situation. WE have discussed in previous posts the advantage of using options but the situation is such, we believe we should review it again.  As you may have noticed the market continues to try and find a direction.  It has moved up and now seems stuck at it’s new high.  We believe that you can make money in both situations. If you own the SPY, you can sell calls against your positions so that you may lower your cost basis. Our analysis says that it’s more likely the market will retreat Vs moving up to new highs.  The election is a big part of our call, as the market does not like uncertainty and as no clear winner is present, we have plenty of that.  WE have chosen to use options to try and maximize our returns.  WE can use a small amount of money to control a large number of shares. The SPY is currently selling at $218.52.  If you were to sell the $219 calls for December 30, 2016 you would collect $5.56 per share.  If you BUY the PUTS at the $219 level you’ll be paying $7.71 for share.  You need the SPY to decrease in order to make money, your breakeven point is $219 minus $7.71 or $211.29.  That is a 3.50% decline in the SPY.  For conservative investors the selling of Calls is the way to go, however the more aggressive can buy the PUTS.  The call buyers have a limited profit of the strike price plus the premium.  The PUT buyers are hoping to leverage their funds. The question for PUT buyers is how and when the move will start, and how far will it drop.  Our Sensei has bought the SPY puts and will let our members know when to get out.

Before investing of any kind, consult your financial advisor. Options are NOT suitable for all investors and people can and do lose money.

for our conservative members we are selling the Put today for 10% profits. 

The members that are still in the PUTS are now up 43.50%

NFLX update, BOO

Our Sensei got this one right!  We sold the August 26, Puts for $2.00 just two days ago.  We now are buying them back for .90 cents.  As the premium has rapidly decreased we believe this is an opportunity to take a quick profit Vs waiting for another .90 cents.  We are buying back the PUTS! 

No More Movies, Yeah Right

OK, NFLX missed earnings, what else is new. If you are a growth oriented company you will miss from time to time. The question is, who is the competition?  I don’t know who is challenging NFLX, do you?  We are therefore looking out further in the year.  We are selling the NFLX August 26, $80 PUTS for $2.00 per share.  This will put us in NFLX at $78 per share.  We believe the shorts will sell and then the stock will settle back down.  Now for those of you who want to limit the risk you can sell the $80’s and buy a $75 to limit your risk.  We have no problem owning the stock at $78 and so we cover this trade with cash.

AS always consult your advisor before investing of any kind, options are NOT suitable for all investors.