Options for Week #12

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 the following stocks and/or sectors, Technology, Disney, VanEck Gold Miners 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: Apple

I know, I know… Apple again! Boring! The entire market has strongly corrected, and sure, Apple has corrected too. However when you come from unreasonable all time highs, you don’t just correct 30%. Especially if there is a supply chain shock, and a demand shock. Combined with all the store closures that will just pressure the sales even more. There is still significant room left towards the 52 week low.

Current price: $229,24
P/E: 18.10 (Forward 14.68)
52 week range: $170,27 – $327,85

Company #2: Trouble!

To be honest, I’m having trouble here… I am not confident enough to list another name. I’ll give some idea’s and the reasoning why I won’t choose them.

Amazon remains a high flyer, but it’s possible that the e-commerce business is thriving right now. I’ve read mixed articles, Amazon would be hiring more people while also raising salaries. But I’ve also read articles that they would stop regular product shipping.

Applied Materials has corrected around 45%, there still seems room left towards at least the bottom of 2018.

Boeing has been destroyed recently, however they just cut dividends and buybacks and there still seem to be so many dark clouds over the company. I’m definitely not comfortable buying here as the government might step in and shareholders could lose everything. For this exact reason it could be an interesting option for a call.

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: Philip Morris

Philip Morris has been hit by the sell of, just like almost any other company. They are down 34% from their 52 week high and they offer a 7,66% dividend yield right now. Smoking, definitely internationally, isn’t going anywhere the next few decades. The company is also investing heavily in diversifying it’s business. This might be one of those long term opportunities you’ll look back at in ten years!

Current price: $61,09
P/E: 13.26 (Forward 10.11)
52 week range: $59,83 – $92,74

Company #2: Valero Energy

As you must know by now, the energy sector is getting hammered. Luckily for us this presents very nice long term opportunities. Valero is a broadly diversified company that is not just dependent on the oil price itself. It offers a huge dividend right now, has grown it’s dividend for years and is mightely cheap at the moment.

Current price: $38,66
P/E: 6,60 (Forward 4,85)
52 week range: $31,00 – $101,99

Other notable names:

There are so many long term (dividend) opportunities now, here are a few that seem very interesting to me.

Abbvie, AT&T, Altria, Home Depot, Prudential Financial, BlackRock, T Row Price Group, Broadcom, Qualcomm, Cisco Systems, Verizon, Union Pacific, Pepsico, Coca Cola, McDonalds, Bank of America, Wells Fargo, Caterpillar, 3M, Honeywell, United Technologies, General Dynamics, VF Corp, Pfizer, Johnson & Johnson, Abbott Laboratories, Disney, Exxon Mobil, Royal Dutch Shell, Unilever, Procter & Gamble, International Business Machines, United Parcel Services, and Amgen.

These are not in any particular order! As you can see, I think there are a lot of interesting long term plays out there right now!

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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2 Comments

  1. Always nice to read these trade ideas. I am almost out of ammunition in my trading account. I focus on the market in general with ETFs at this moment.

    • DutchIndependence

      Thank you Amber Tree! I’m happy to read you like these posts! I know how you feel about being out of ammo, I feel the same! I should stick to my original plan and focus more on ETF’s too! What ETF’s are you looking at currently?

      DI