Options for Week #45

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 Qualcomm, Applied Materials, Gilead Sciences and V.F. Corporation, 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

Apple presented their earnings last week and kept climbing, even though when we look at their year over year revenue it has declined quite a bit. It’s quite safe to say that we’re in the extreme greed moments now. I see significant downside once the market realizes that the economy is not that great and Apple has delivered less YoY.

Current price: $255,82
P/E: 21.58 (Forward 17.31)
52 week range: $142,00 – $255,82

Company #2: Bank of America

Talking about bad economic forecasts… Banks stand to lose a lot of ground, especially since they trade around their 52 week highs. Just think about the Repo market issues and how much the Federal Reserve has to inject everyday to calm markets. Once this bubble pops, banks stand to lose some serious ground, much like their European colleagues.

Current price: $31,80
P/E: 11.72 (Forward 10.69)
52 week range: $22,66 – $32,23

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: Starbucks

Starbucks reported their earnings, they were solid and we’re seeing nice natural growth in revenue and profits. Nothing crazy yet the stocks got slightly punished and keeps floating around -15% from its 52 week high.

Current price: $83,21
P/E: 28.44 (Forward 24.23)
52 week range: $58,07 – $99,72

Company #2: McDonald’s

McDonald’s is one of those stocks. Rock solid for years, increasing dividends for investors while keeping a stable business. It has pulled back from its 52 week high recently and could offer a nice opportunity for the medium term.

Current price: $193,94
P/E: 25.35 (Forward 22.86)
52 week range: $169,04 – $221,93

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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4 Comments

    • DutchIndependence

      Hi DividendMill, thank you for letting me know! I recently have struggled somewhat for time and motivation. I’ll try and publish my thoughts about options again this weekend!

      DI

        • DutchIndependence

          Awesome to hear! Hope you’re doing well! Should you have any questions, hit me up here or via Twitter!

          DI

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