Options for Week #48

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 Netflix, Apple, 3M and Starbucks. 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: United Parcel Services

UPS hasn’t moved all too much this year, however the most notable peer FedEx has been hit hard. Both businesses seem fine for the extreme long term. However recession fears has struck in the delivery scene, FedEx got punished for it, UPS not really. To me there seems to be downside to both companies in the short to medium term.

Current price: $119,73
P/E: 20.82 (Forward 14.80)
52 week range: $89,89 – $125,31

Company #2: Apple

Like last week Apple makes another appearance, simply because the stock price is exactly what happened to this entire market in the past few months. I’m expecting it to run out of steam (which it already slightly did) and to go down fast and heavy, much like what happened in the beginning of the year.

Current price: $267,25
P/E: 22.55 (Forward 17.98)
52 week range: $142,00 – $268,00

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: Tanger Factory Outlet Centers

Tanger has been hit hard since 2016, going down from around $43 to $15. This play is a contrarian view, I strongly believe the stock got hit way to hard for general ‘Amazon Fears’. Tanger kept a strong occupancy rate for years and is a buy-and-hold investors dream. Punishment seems way overdone. This doesn’t mean they couldn’t go down further (in a recession), but it does provide a huge margin of safety.

Current price: $15.22
P/E: 12.09 (Forward 19.00) however REIT’s should be calculated by Funds From Operations
52 week range: $13,61 – $24,65

Company #2: Exxon Mobil

Exxon has a huge free cashflow and the business stays solid and reliable. Resource prices have put a limit on their upside, however for the long term investors this should not be a problem. This seems like a nice price point to sell long term puts. I must say that for the international investors, Royal Dutch Shell seems like an even bigger opportunity for the long term. Their P/E for example, is way lower and management seems more focused on growth.

Current price: $68,13
P/E: 19.88 (Forward 17.86)
52 week range: $64,65 – $83,49

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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