Options for Week #39

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 Intel, Apple, Altria and Philip Morris, 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: Micron

Micron has been on a tear this year, it rose all the way from $29 to $50. In the long term I tend to think of Micron as a company with a huge opportunity, however on the short term I believe they will fall victim to a declining world wide demand.

Current price: $49,16
P/E: 5.82 (Forward 18.81)
52 week range: $28,39 – $51,39

Company #2: AT&T

AT&T has been trending upward slowly and steadily this year. It went from $28 to $38. Recently it went up quite a lot on news that activist shareholder Elliot started interfering to unlock more shareholder value. I’d speculate that on the short term, this added market capitalization will collapse back to the levels seen before the Elliot announcement.

Current price: $37,91
P/E: 16.66 (Forward 10.47)
52 week range: $26,80 – $38,75

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: FedEx

Ouch, FedEx got hit extremely hard after earnings. They guided down for the coming year due to global trade slowing down because of the Trade War between the USA and China. It went down well over 13% in two days time. Although FedEx may be in rough waters right now, in the medium to long term I’m sure this big drop is overdone and this is an opportunity to generate some income with a short put.

Current price: $148,78
P/E: 123.57 (Forward 9.13)
52 week range: $147,82 – $250,95

Company #2: PayPal

PayPal might be one of those companies that are simply in the right sector. Finance and the payment services industry used to be boring. Fast forward to the present and Visa, Mastercard and PayPal are among the favourites in the entire stock market. I think the recent pullback on PayPal stock might create a great opportunity to use the hype around these stocks to generate additional income with a short put in the medium to long term.

Current price: $104,64
P/E: 49.95 (Forward 29.66)
52 week range: $74,66 – $121,48

What I usually do

I usually play these kind of situations with a margin of safety of at least 10% and a medium to long term option. Currently I sell most of my options for either December 2019 or January 2020.

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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