Not all brokerage firms are the same.

A number of options users have asked what brokerage platform are we using to trade options? The advice we can give without selecting a firm is to list a number of questions you want to ask before placing your account with that firm. It is important that you ask firm if they allow using options in your IRA? We like the use in IRA’s as you don’t create a taxable transaction. We also find that many investors have the majority of savings in their retirement accounts. The use of options allows you to hedge the portfolio. Another question to ask what is, what is  the cost of your transactions? Our platform allows us to trade at $1.00 per trade (most trades). The fees charged will affect your net outcomes.  If you are going to use options as a strategy, go ahead and call the prospective brokers and find the platform that fits your needs.

We also suggest using optionsdojo to get your feet wet, and learn to immerse yourself in the learning curve. As with any investment, we advise that you never invest without consulting your professional advisor, options are not suitable for all investors and people can and do lose money.

 

Often we need to be told more than once.

TThe object of investing is making money. We all want to increase the values of our portfolio’s. When markets exist that scramble the basic tenants of investing you must learn to look outside the box. This is why we teach others how to use options.   Let us revisit the idea of collars.

A collar is where we buy and sell a put and a call. Now depending on your perception of the market the collar can be turned to accommodate investors needs.

An example would be (protecting your downside), you sell a call and thus receive funds. The second part of the collar involves buying a put where you spend the funds you received from the call premium.  If the stock falls the call will depreciate in value. The put will increase in value.  This type of collar can be very effective in a falling market. We encourage you to become a member of optionsdojo, so that you will know how to setup your collar.

Keep an eye out for upcoming videos and options selections in the coming weeks.

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money. NEVER invest before consulting your professional advisor.

Fake News, Real News, take a look at CBS

As a major network we are definitely seeing more eyeballs on the news. The stock is closer to the bottom of $47.54 then the top of $61.59.  The dividend is only 1.25% that’s not much to speak of. However at it’s coming up in the next few days we may see some movement. You can get roughly 1% return in 7 days. So how’s that for upside. Remember we want just a little bit more. 

So we are buying here at $51.13 and selling the December 14,  51 call for .77.  Not a fortune but that’s .64 upside for one week. If you don’t get called away you will see a small dividend.

Our targets are designed to make just a little bit more. Nothing feels better than a profitable trade.

As always consult your advisor before investing of any kind. options are not suitable for all investors and people can and do lose money. The above is an opinion and no warranties or guarantees are given or implied. investing requires risk and each investor must due their due diligence before investing of any kind.

Can you see beyond your nose?

As we look at the volatility of this market it’s sometimes hard to see beyond today. As we know past performance is no guarantee for future performance. This being said let’s be realistic, investing requires risk be present. One of the biggest errors is entering the market when you cannot afford to and entering in an attempt to make a short term kill, time can be your best friend or worst enemy.

At optionsdojo we attempt to provide you some guidance during these volatile markets. It is with this objective in mind that we are encouraging short term in the money calls. They expire quickly and give you some downside protection. For example this morning we see the opening will be negative. As we look at NVDA we believe that long term the company is a buy. However we don’t know where the bottom will be.

We give you two plays to consider. One look at buying after you see some settling today and immediately sell an in the money call to provide yourself some downside protection and some income along the way. The second option, would be to sell a put way out of the money and see if the stock comes to you.  WE would say that 145 is a good entry spot if that occurs. Keep the expiration to the end of the week.  You won’t get a lot of premium today but you eat a large meal one bite at a time.

AS ALWAYS CONSULT YOUR ADVISOR BEFORE INVESTING OF ANY KIND. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS AND PEOPLE CAN AND DO LOSE MONEY. THE TAX IMPLICATIONS AND TRADING COSTS ALL AFFECT YOUR RESULTS.

Listen And Learn

When I was a young man I thought I had plenty to say. As I matured I realized that listening to those who have been there can be profitable. If you’ve ever tried to hang crown molding without advice you know what I’m talking about.

At Optionsdojo our mission is to educate the investor so that you have more arrows in your quiver. Let us look at a strategy that allows those of you who have concerns that the market will decline to enter the market and limit your risk.

The strategy is stock replacement. You may not want to buy AAPL at the current price, nor AMZN, or even GILD.  However if you were to sell a PUT at 10% below the current price you would have some opportunity to make money and if a pullback occurs get the stock at a lower price. This is stock replacement. Eventually the market will have a decline, the question is when. As you hear the pundits scream the market is strong, beware that confidence in one’s decision does not equate to accuracy. Using the stock replacement strategy, if nothing else provides that you can make money by waiting or get the stock at a lower price.

Options are not suitable for all investors. We strongly encourage you to seek the advice of your professional advisor before investing of any kind. Our mention of a stock or ETF does not imply an endorsement or solicitation of that investment. Options are not for the risk adverse and people can and do lose money.

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.

Make Money From Enthusiasm

The covered call does several things for the conservative investor. It first provides income that can be used to lower your cost basis, in addition the selling of the call provides some protection.  So as we discuss this topic look at the current market. We have seen a sharp rise in the market as so we are using the calls to maintain our profits.  The downside of  a covered call is that your upside is limited.

We have recently purchased AMZN and sold calls at the money.  We are seeing the calls generate 1% premium for the week.  Now the theme is the same, use the calls to generate income.  If you can trade options in your retirement accounts that is great. By using the IRA or qualified account you avoid any taxes on the trade.

Now remember that pigs get fed and hogs get slaughtered. So don’t look to make a killing but rather play the calls close to the vest.  We are also using the stock replacement method of selling PUTS when we are going to have a position called away.

As always consult your advisor before investing of any kind. options are NOT suitable for all investors. People can and do lose money!

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.

NEWS HAS SPREAD THAT VRX WILL SELL SALIX, THE STOCK IS POPPING. 11/1/16

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.