Options for Week #49

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 United Parcel Services, Apple, Tanger Outlets and ExxonMobil. 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: Caterpillar

Caterpillar, a beautiful company, especially in times of great and growing global trade. Unfortunately we’re not in these times, all you need to do to double check that, is go back to the recent earnings they released. Although the numbers were down from expectations and the outlook was horrid, the stock quickly reversed initial losses and we’re still at a higher pricepoint than pre-earnings. I’m expecting to see a quick reversal soon, especially if additional tariffs will be placed on China on the 15th of December.

Current price: $142,72
P/E: 13.85 (Forward 13.21)
52 week range: $111,75 – $148,47

Company #2: Netflix

Netflix keeps getting new competitors by the week, it also continues burning cash as if there is no tomorrow. Not to say that long term their business might not work out, however in the short term, with a possible recession on the horizon, there might be significant negative price action in a stock that is priced expensively and that burns cash like Netflix.

Current price: $307,75
P/E: 97.60 (Forward 55.84)
52 week range: $231,23 – $385,99

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: Walgreens Boots Alliance

Walgreens Boots Alliance has hit rough terrain ever since they merged together. Recent takeover rumors have put a bottom under the stock price, while their daily activities keep providing them with a nice positive cashflow and recession proof business. We could see a nice rebound in the stock price in the medium to long term.

Current price: $58,63
P/E: 13.64 (Forward 9.52)
52 week range: $49,83 – $83,57

Company #2: AT&T

AT&T has seen a recent run up in price as investors realize it’s not the end of the world for AT&T. They’ve seen a huge cashflow that’s been dedicated to paying dividends and debts. AT&T continues to expand their business and management has shown that it can handle huge debtloads. There might be huge upside in the long term.

Current price: $38,20
P/E: 17.91 (Forward 10.62)
52 week range: $26,80 – $39,70

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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