Options for Week #42

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 Applied Materials, Apple and Cisco Systems and 3M, 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: Applied Materials

AMAT is a company that has returned for a few weeks in a row now. The stock price just keeps floating around its highs while the thesis for a short play gets stronger by the day. This week every company, in particularly technology, rallied on hopes of a Trade Deal. Well… come Friday and there is no real deal nor any progression, yet the stocks are still higher. All the while in South Korea for example, export numbers are crumbling, especially the exporting of chips. Some instances like the Fed try to keep this bull market going but sometime this bubble most pop. When it does, the technology sector and semiconductors will be hit hard.

Current price: $51,75
P/E: 17.27 (Forward 15.47)
52 week range: $28,79 – $52,62

Company #2: Apple

Apple had a nice run up this week, mostly due to the meetings between China and the US. As stated above, nothing new was said and the markets rallied for the 100th time on ‘hope’. On Friday news broke out that nothing had actually changed, the stock prices however closed higher and Apple is sitting at an All Time High. A nice moment to initiate a short position for the medium term.

Current price: $236,21
P/E: 20.52 (Forward 18.56)
52 week range: $142,00 – $236,21

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: Cisco Systems

Cisco is the third company I kept in this series from last week. Although most stocks rallied and in particular the technology stocks went flying this week, Cisco was left behind. Cisco might be one of the most stable technology businesses out there and it keeps getting punished for a conservative outlook from their last earnings report. I’m suspecting Cisco to make up the lost ground to its peers in the short term.

Current price: $46,56
P/E: 16.61 (Forward 13.05)
52 week range: $40,25 – $58,26

Company #2: ExxonMobil

ExxonMobil, the first new addition for this week. This major oil company is sitting near its 52 week lows and provides some serious value. It got left behind last week while its peer in the industrial sector all rose multiple percentages and this provides me with the confidence that we could see a push back to a level higher than the $70s in the short term.

Current price: $68,98
P/E: 16.64 (Forward 15.45)
52 week range: $64,65 – $84,17

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.

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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