Options for Week #40

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 Micron, AT&T, FedEx and PayPal, 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: ASML Holding

ASML is one of my favourite (Dutch) companies for the extreme long term. They seem to have a great moat over the rest of the chip machines industry with their EUV machines and great customer base. However I believe that the stock got way ahead of itself in a difficult enviroment for chips and electronics.

Current price: $243,81
P/E: 40.67 (Forward 26.70)
52 week range: $144,50 – $252,11

Company #2: Applied Materials

Applied Materials is one of the big competitors of ASML and thus this option trade has the same theory behind it. A great long term company yet way ahead of itself for current circumstances.

Current price: $49,43
P/E: 16.49 (Forward 14.76)
52 week range: $28,79 – $52,62

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: Pfizer

Pfizer is a solid dividend stock in the healthcare sector. The drug producer might be most known for their Viagra pills. The stock is hovering just slightly above the 52 week low while nothing has changed for the company. I believe the recent drop in stock prices across the healthcare sector has to do with uncertainty for the new presidential elections in the USA. Before the new president is elected we have a chance to use this current weakness to create some profits.

Current price: $36,22
P/E: 17,71 (Forward 12.89)
52 week range: $33,97 – $46,47

Company #2: JD.com

JD.com is a huge company over in China. Along with super advanced technology they have an amazing number of ‘offline stores’ across the country. They are spread across multiple sectors and could be compared to the Amazon/Ebay of China. There has been a lot of weakness in the stock price the previous year and most recently this has been because of White House talks of delisting Chinese companies from American stock markets.

Current price: $27,82
P/E: 48.30 (Forward 22.99)
52 week range: $19,21 – $32,28

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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