Options for Week #44

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 Nvidia, Boeing, Cisco Systems and Altria, 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: Qualcomm

Qualcomm has had a nice run up to the lower 80’s now, mostly based on a news of a ‘trade deal’ between the US and China. As Qualcomm has big clients in Huawei, and also Apple, a lot of their revenue has China exposure. This could shake up the stock price quite a lot when we enter the new circle of the Trade War news, where will be said that no new progress was made and stocks get set back.

Current price: $80,17
P/E: 28.24 (Forward 19.08)
52 week range: $49,10 – $90,34

Company #2: Applied Materials

Applied Materials has been in these posts quite a bit in recent weeks. Lam Research beat expectations (based on stock buybacks?) and Applied Materials got a nice boast from this news as well. I’m still bearish on the sector and think there could be significant pain ahead due to a glooming global recession and negative Trade War headlines.

Current price: $55,72
P/E: 18.59 (Forward 16.65)
52 week range: $28,79 – $55,72

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: Gilead

Gilead reported their earnings last week, they were pretty much exactly as expected. Gilead continues to be a company in a turnaround phase. This can offer huge returns on the medium to long term, if management manages to execute their plan well. For reference look at Cisco Systems or V.F. Corporation in the recent years.

Current price: $63,32
P/E: 13.68 (Forward 8.98)
52 week range: $60,32 – $72,90

Company #2: V.F. Corporation

V.F. Corporation has been through a major change in their business strategy this year. They disposed of the old jeans business and are completely focused on growth with brands that are more popular today. VFC has a superb management team and a great plan for the long term. They got hit with a 7,5% decrease in share price following their earnings, but don’t let this fool you. This company is set to reach great heights in the medium to long term.

Current price: $84,15
P/E: 27.29 (Forward 21.64)
52 week range: $63,23 – $93,88

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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