What’s your outlook?

If you are positive you can look at buying long term calls, also known as LEAPS. These are options that expire at least a year later. The other option, no pun intended is to be cautious and sell a put that is 10-15% below the current price.

Our idea today is to sell a Jan 17,20 PUT, the premium is roughly $13.50.  That gives you a basis of $106.50 if the stock is put to you.  based on having to have $12,000 available in case the stock is put to you the annual return of $13.50 is 11.25% yield. All this is assuming that the stock is never PUT to you. 

As always, consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money. optionsdojo gives no warranties or guarantees regarding our opinions. Invest at your own risk.

Are you spending? Are you buying that latte?

The market can be a very emotional ride. If you are not looking at your surroundings to determine what is working, you are missing a sign. The government shutdown will not put us in recession. What are the stimulants? The price of oil is a clear sign. We don’t see inflation in the oil prices, in fact we have seen the price of fuel come down. That is a plus for most truckers, airlines,federal express and many more.

The suggestion here is to dollar cost average over the coming months. If you like a stock like AAPL, GOOG, AMZN, FB, you can sell puts 10-15% off the current price and let the stock come to you. We are using weekly options based on the current market conditions. Give yourself enough room to make a profit.

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

Catch this knife, no thanks.

As you can see the market is trying to find a bottom. If you jump in it’s like trying to catch a falling knife. We are looking for support and unfortunately we may not find it anytime soon. Of course we could have a Santa Claus rally, that is a jump up based on the retail sales over the holidays and the lowering of oil prices. So going out 6 months what do you expect?

I expect that optionsdojo and our staff will be doing everything we can to provide you with winners, that is option picks that we believe will make you a profit. Our philosophy is a little at a time, so we are not dragon slayers. Watch for us to use the stock replacement theory and sells puts way out of the money so that if we see continued declines we will enter a position where we feel, long term we would like to own that stock.

I would encourage you to sign up for our platform in the coming year. WE are working on some technical issues so for now enjoy our posts.

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money. Investing involves risk, we make no warranties or guarantees regarding our suggestions.

Stock Replacement Strategy

If you have gotten out of the market and are going to try and time your reentry you may want to consider the following strategy. The stock replacement strategy is for stocks that you want to look at for a long term hold, or simply find them attractive at a much lower price. Let me give you an example. AMZN has dropped from $2000 to $1375.  That is a drop in excess of 30%. We don’t see this point as a good entry until we see some stabilization. That being said we would find it much more attractive at $1100 per share, that is another 20% drop from it’s current price.

The strategy would be to sell a put at $1100 strike price. This means that 20% down, and the premium you will receive will place you in the stock below $1100 per share. That is 45% off the high.  The beauty is that you are letting the stock come to you. If the stock is put to you, we believe it is a good price, if not you have collected the premium.   We would encourage you to buy out of the put if we have an outstanding rush to the upside. Keep an eye on our suggestions.

As always consult your financial advisor before investing of any kind. Options are not suitable for all investors, people can and do lose money. All investing involves risk, so having professional advice is key. Optionsdojo makes no warranties or guarantees regarding specific performance. Invest at your own risk.

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.

 

Cramer says look at FCX, We did a long time ago!

The Sensei bought FCX at $9.41 and sold the Jan 10 calls for $2.27, so that is .59 if called away plus $2.27 for a total of $2.86 on anything above $10.00.  The stock is now trading at $11.05.  That is a 30% + return if called away. Now FCX has a lot of debt on the books and this is not for the faint of heart.  We do however want to point out that we have been on this trade and a breakout would not hurt our feelings.

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

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.