Options for Week #11

In these posts we will be looking at four assets that we could sell call or put options on to create some extra income. These suggestions are just some ideas to consider. Do your own research and make your own decisions!

In the previous post we looked at technology stocks, Delta Airlines, Apple, Prudential Financial and Royal Dutch Shell. CLICK HERE to read about last weeks options.

The way I select the candidates is based on multiple factors:

-Price/earnings valuation;
-Trading range and/or 52 week high/low;
-Market sentiment;
-A contrarian view.

Short calls

Whenever you sell a call option it counts as a short position, you take on the obligation to deliver shares at a certain price and preferably the stock won’t go higher than the strike so that you can keep the premium without having to deliver any shares.

Company #1: TECH!

We had a few rough weeks, however most technology stocks have held their head high, at least much higher than other sectors. And what do you know, the last 30 minutes of Friday’s trading, where we skyrocket, what sector goes highest? Tech! To me this offers a great short setup. Think about companies like: Apple, Applied Materials, Intel, AMD, Nvidia, Microsoft, Google, Netflix and Facebook.

Remind yourself that bull markets don’t go up 8/9% a day, this is solely a bear market feature.

Company #2: Disney

Parks are starting to close, movies are not being watched, cruises are not done and new movies aren’t being shot and editted. This will have impact on the earnings in the short term. The last 30 minutes of Friday’s trading gives us a perfect set up for a short term short position.

I have to say that Disney is an incredible company going forward and most definitely will come out strong out of this virus/economic breakdown.

Current price: $102,52
P/E: 17.28 (Forward 16.72)
52 week range: $91,64 – $153,41

Short puts

Whenever you sell a put option it counts as a long position, you take on the obligation to buy shares at a certain price and preferably the stock won’t go lower than the strike. This way you are able to keep the option premium without having to buy any shares.

Company #1: VanEck Gold Miners

Something slightly different, this is the first time I put an ETF in this series. I am normally not such a gold oriented person, however this setup is too beautiful not to share.

GDX is the VanEck Gold Miners ETF. Gold prices have gone up considerably and have recently been squashed due to forced selling by other parties that needed cash to stay solvent when all their other position hit the rocks.

GDX has everything going for it. Oil prices are crazy low, gold prices are already high, and poised to go higher with central banks over the entire world intervening and devaluaing their currencies.

GDX has even sold off way more than the oil price itself, which is understandable due to corona virus fears, however if we manage to look over this 1/2 month term, there are some serious profits to be made.

Current price: $19,00
P/E: – (Forward -)
52 week range: $19,00 – $31,84

Company #2: Royal Dutch Shell

Steady Shell makes yet another appearance, I’ve been buying hard and have a lot of sold puts outstanding. Why? Because it’s one of the biggest companies, with one of the steadiest managements, with one of the highest dividends and one of the most impressive dividend histories. Shell hit a bump with temporarily low gas and oil prices, however these prices won’t stay here forever. Also Shell is heavily diversifying and is working everyday to be more profitable with lower commodity prices.

Current price: $30,08
P/E: 7.72 (Forward 5.67)
52 week range: $28,60 – $66,48

What I usually do

I usually play these kinds of situations with a margin of safety of at least 10% and a medium to long term option.

Note that I’m merely pointing out some interesting names to look at. You should ALWAYS do your own research!

To find more information about options CLICK HERE.

To see my own option trades CLICK HERE.

To see the option trades I do for other people CLICK HERE.

For any questions regarding options, leave them down below in the comment section or simply hit me up on any of my social media channels!

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