Will August Be Hot Or Cold?

In terms of temperature it will be hot, however we believe the S&P 500 will be cold.  Over the last four years we’ve seen a loss of 6.26% and a gain of 3.77% in the S&P 500  for the high and low during the month of August.  We believe the volume will slow due to the Olympics and as the election gets closer we see uncertainty and the market does not like uncertainty.  Now you can play several ways.  For those of you who own the ETF SPY you can sell calls against your holdings.  For an more aggressive approach you may buy PUTS with the CALL proceeds.  You can also buy PUTS against the S&P and capitalize if the market does come down.

If you would like to be conservative on the PUT approach, you would buy a higher strike PUT and SELL a lower strike PUT to limit your exposure.  Either way, consult your advisor before investing of any kind.  WE have bought the August 26, $217 PUTS for  $2.29 per share.  Our breakeven is $214.71 per share.  This implies a 1% move downward. If you see a steep decline like 6%, that would be a price of $204 from it’s current level.  That would be a 10.71 gain or a 500% return.  BEWARE you can lose all of your premium.  WE stay abreast of the direction and can always jump ship earlier if deemed necessary. 

WE are up 17.90% on the PUTS we sold. As of 9:54 August 2nd.

Brexit snap-back

As you have noticed the Brexit selloff has snapped back.  We have recovered about 80% of the drop on the dow. So what does this mean? It means that markets continue to be volatile and political decisions can and will affect your overall investment performance. It is for this reason that we look to stagger our call writing and take advantage of these large swings. Here is of example of what we mean by staggering.  If you own 400 shares of AAPL, we would sell calls at the following pace. We sell a weekly call, (100) shares, a month out (100) shares, two months out (100) shares and the last 100 we would look 6 months out.  This allows us to have the ability to re-sell the calls as the market moves. When we see a very dramatic moves like we did in Brexit we would buy the long term calls back and allow the stocks time to move back up.  In the case of Brexit you need to be aware that this is a long term process and so on a day to day basis trade continues.  We believe in hedging and sell calls is a great strategy. 

Where am I ? In other words search for me!

GOOG is the number one search engine and we believe it is one of the best money makers in tech. GOOG is down $32 in five trading sessions and sometimes we like to use spreads to leverage our risks and maximize our returns. I think that many investors are thinking about BREXIT, or the possible British exit from the EU.  No matter what happens here we think Long term that GOOG is a good company to hold and sell calls against.  We are using a spread in this case, we are playing both sides.  WE are selling a CALL out of the money and BUYING a call at the money. We are buying the July 1, 690 call for $14.70 and selling the July 1 $702.50 for $8.60 this means we have a total of $6.10 invested in the call and our maximum profit is $12.50 – $6.10 or $6.40 that’s 100%+ if called away.  Our break even is $$696.40

We like to buy GOOG at a lower price and hold long term, so we are selling th $July 1, $680 PUTS for 9.60 and buying the July 1, 665 puts for $5.30.  Our breakeven here is $9.60 minus 5.30 or 4.30 to the plus, from $680 that’s 675.70. anything below that we are losing money and will own the stock.  This is a risky trade because you can be deep in the hole if GOOG collapses, as you will get put the stock at the lower price. 

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

Hit The Target TGT

This morning we see TGT pulling back based on revised but stable forecast after beating earnings but predicting that the next quarter will be slower. Now we believe that pullbacks are opportunities.  This morning we sold the Jan 60 PUTS for $2.95.  Now this is not a killing with a yield of 4.90%, however we believe that you may get half the return in the first month as TGT rebounds.  We also believe that if TGT is put to us, our cost basis will be $57.05 or 10.7 times earnings Vs the 13,8 at the start of today.

As always consult your advisor before investing of any kind. Options are NOT suitable for all investors.

Pressure Pressure on AAPL

As many saw Warren Buffet purchase AAPL they too joined in and pushed AAPL up beyond $94.00 and we believed this was an opportunity as the investment community continues to place pressure on AAPL with large sales. Now we are a fan of AAPL and hold it as well as have sold long term calls against our positions. WE did see the pressure and bought PUTS yesterday at $94 strike price.  WE sold those PUTS this morning for a 31% return.  This is where you leverage your money by using options. BY buying the PUT we had a limited investment but were able to turn a great profit.

Learning to buy and sell PUTS can help you protect your portfolio as well as make money when the market moves down.  As always consult your advisor before investing of any kind.

The 30 Day Portfolio

As we put this portfolio together we wanted to have what we consider conservative opportunities and some aggressive plays. It is important to know your risk tolerance.   We believe that quite a bit of volatility will be present over the next 30 days and we are using that volatility to create returns for this portfolio.  Our first selection is AAPL (selling the April 29. 100 PUTS for $1.80 a share), we believe that long term AAPL is a great company and if this stock is PUT to US we are in for $98.20.   Our second and slightly more aggressive play is GOOG.  As you have seen from previous write-ups our Sensei like GOOG long term.  We are buying GOOG at the present price of $739.25 and selling the April 29, 750 calls for $20.50. If called away we are looking at $770.50 or $30.75 profit per share. Now GOOG is reporting earnings  4/28/16.   Our next pick is more speculative VRX has had all kinds of trouble and is down 70%+, so watch your play closely.  WE are buying VRX at the $29.50 range and selling the April 29, 29.50 calls for $6.00+.  We believe that long term this stock has value in excess of the current price.  Our last pick is LNKD, we are selling the April 29, 103 PUT for $2.25 per share.  This place us in the stock roughly 14% below its current price.  They do have earnings scheduled for 5/5/16. 

Keep in mind that selling puts means you have to back-up your PUT with cash or another put at a lower price, you can play it either way.  In addition you must feel comfortable owning the stock before you ever enter in to a PUT contract.  Consult your advisor before investing of any kind. Options are not suitable for all investors and people CAN and DO lose money.

Walmart Up 300%+, NOT THE STOCK

If you learn to use options you can leverage your investments. If you bought the WMT Dec 24, 60 Calls this week, you paid .42 cents per share. A $42.00 investment is now worth $168+ as of this morning. The expiration is tomorrow. Now you have all of your money at risk when you BUY a call.  However this one would have been a winner if you chose to close today. 

The buying of calls is about seeing opportunity. The market does not go down everyday, nor does it go up everyday, however we look for days when the market may be oversold.  We then buy short term calls very close or in the money and expect to turn them quickly.  If we don’t see the turn we sell out, keeping some of our investment.

Watch for opportunities from the Sensei.

Options are NOT suitable for all investors, people can and do lose money. Seek advice from your advisor before investing of any kind.

Ouch That Hurt

The market had a bad week and now investors are waiting on the FED.  WE at optionsdojo have take the approach that the market is oversold. Yes, oil is down substantially, however in many ways that is good for the common house-hold.  As more and more people use the NET we are seeing greater traffic and search.  I still see GOOG as the king of search.  The Christmas season brings lots of searches as many are looking for the best prices.  IN addition FB has been slapped around this week and more and more people are using FB, as well as expansion into India. Here is the CALL.  WE usually like to take the other side and SELL calls, HOWEVER we have taken an aggressive approach today and bought CALLS on DIS,FB, GOOD, and the SPY.  We believe next week will be a rebound week and profits are likely.  WE caution you NOT to play in this arena if you cannot afford to lose the premium.  We used calls as to limit our downside if we’ve got it wrong and to maximize our profits if right.

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

P.S we bought at the money calls to take advantage of any movement upward.

Monday, February 1, 2016 and GOOG beats earnings expectations, it is up 7% after market close.  Our Sensei has called this one right!!!!!

You’ve Heard The Best Offense Is A Good Defense

Using options for a defensive purpose can be beneficial.  Here is one of the ways we would look at doing this.  If you own a stock and are concerned that the stock may move down you can create a collar.  A collar is where you would SELL a CALL and BUY a PUT.  For example you can SELL a CALL slightly above the current price thus receiving funds, then use those funds to purchase the PUT to protect your downside.  The amount of premium you receive for the CALL will give you an indication of the census on that stock. If you are getting much more premium for the CALL then you are being asked for the PUT, the options market believes the stock is more likely to go up. 

The heads up here is to check the downside of your position.  You want to look at the annual lows and see where it is in comparison to that price. For example if the stock is at $100 and the high is $110 and the low is 70, you have a lot more to lose if the market corrects.  If you see that the stock has moved to $85 several times and continues to rally after that price you have support at $85.  You may want to buy your PUT at a lower price to save some premiums.

If you use a taxable account be aware of this trade. Options can cause some taxable income and this strategy is used well with retirement accounts.  Our Sensei suggests that you always have a coach when developing a strategy.

options are NOT suitable for all investors and people can and do lose money!

Oh My OIL, Will It ever GO uP?

Ok, here is our view on the present scenario.  WE are buying WLL with regularity.  We are also selling at the money calls immediately after the purchase.  For example we bought some today at 16.10 and sold the November 20, 16’s for $1.00.  This is a 5%+ return if called away.   We have expressed our feelings that WLL is going to survive and prosper when OIL goes up.  The turmoil in the world should lead to some instability in the price of OIL and when it does we will take advantage of it.  If you are not called away we look to sell calls above our cost basis of $15.00 after the current calls expire.  The key here is patience and consistent investment to dollar cost average when the situation arises.

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

WLL closes at $17.41. WE are therefore making money, another winner for our Sensei. Wednesday, 11/18/2015 at 4:17 p.m

Thursday closed at $17.01, went as low as $16.22, we bought some at $16.25 and $16.28 and sold them during the day, as well as bought some in that range and sold the November 20, 16 calls.  We are about making a profit. The stock would have to be in the $15 range for us to be flat.